Attorney General Dan Rayfield led a coalition of 15 other states today in supporting a lawsuit challenging a new Internal Revenue Service (IRS) rule that makes it harder for wind and solar energy projects to qualify for long-standing federal tax credits. The states argue the change will undermine investments in clean energy, slow economic growth, and increase costs for families and businesses.
“Oregonians are already paying a lot for electricity,” said Attorney General Rayfield. “This just makes it harder to build clean affordable energy. We are using all the tools we have to protect consumers and keep energy bills from climbing even higher.”
For years, energy developers could qualify for these tax credits by either starting significant physical construction or by investing at least five percent of a project’s total cost. The new IRS rule removes that five-percent option for most wind projects and larger solar facilities – while leaving other energy industries untouched.
The states argue the rule is unlawful, arbitrary, and harmful to consumers. At a time when electricity demand is rising rapidly due to data centers, artificial intelligence, advanced manufacturing, and population growth, limiting new energy projects risks tightening supply. When supply tightens while demand increases, prices go up – and families and businesses pay the price through higher utility bills.
Federal clean energy tax credits were created to encourage investment in new electricity generation and help lower long-term costs for consumers. Prior federal estimates projected that these credits would:
- Bring hundreds of gigawatts of new electricity generation online
- Reduce electric costs for consumers by billions of dollars annually
- Cut air pollution and greenhouse gas emissions
The states argue the agency failed to provide adequate justification for the change and did not properly consider the impact on state energy planning, consumer costs, and projects already underway.
The states are asking the court to strike down the rule and restore the previous standards that had been in place for more than a decade. The federal clean energy tax credits are set to expire on July 4, 2026.
About the Lawsuit
The underlying lawsuit was filed in the U.S. District Court for the District of Columbia by a coalition of clean energy and consumer groups, including the Oregon Environmental Council, NRDC (Natural Resources Defense Council), Public Citizen, Hopi Utilities Corporation, Woven Energy, the City and County of San Francisco, and the Maryland Office of People’s Counsel.
Oregon is the lead state in the amicus brief filed today. Joining Attorney General Rayfield in this filing are the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, New Jersey, Rhode Island, and Washington.
