The Inflation Reduction Act of 2022 (the “IRA”) marked a watershed moment for the IRS, providing $79.4 billion in funding to transform tax administration and enhance enforcement capabilities. In response, the U.S. Treasury Department and the IRS announced an ambitious strategic operating plan in September 2023 that shifted compliance focus toward complex areas previously under-resourced, including intricate partnership structures, large corporations and high-income individuals. However, the current administration's approach to agency restructuring has introduced changes that may fundamentally reshape the tax compliance landscape for the renewable energy sector.
In “IRS Shake-Ups Mean Uncertainty for the Renewable Industry,” authored by Shirley Chin of WTW and originally published in Tax Notes® Federal and Tax Notes® International on June 16, 2025, we examine the operational and strategic changes at the IRS and Office of Chief Counsel, the workforce reductions that threaten to undo the post-IRA hiring initiatives and the critical implications for renewable energy developers navigating an increasingly uncertain regulatory environment.
Key takeaways:
- Anticipate reduced audit activity and guidance: Prepare for an environment characterized by fewer audits and diminished regulatory guidance, creating heightened uncertainty in tax positions that previously benefited from clearer IRS direction and more robust examination resources.
- Recognize targeted audit priorities: Understand that despite overall reductions, tax credits will likely remain a prominent audit focus given their importance in IRS organizational structure, with examinations primarily targeting large developers, financial institutions claiming credits and major corporate purchasers.
- Navigate the financing uncertainty challenge: Address the reality that regulatory guidance delays, coupled with various tax provision repeals, sunsets and phaseout dates, will create substantial uncertainty for project financing.
- Leverage tax insurance strategically: Recognize that tax insurance will play an increasingly vital role in facilitating tax credit monetization and transfers during this period of regulatory uncertainty, providing assurance to investors and lenders when traditional IRS guidance may be delayed or unavailable.
Prepare your organization for this evolving landscape
The tax credit transfer market presents both significant opportunities and complex procedural challenges that demand careful upfront planning. Equipping yourself with the right knowledge is key to structuring agreements that protect your interests throughout the audit process.
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