Navigating IRA Clean Energy Tax Credits in a Changing Policy Landscape

As the clean energy sector continues to evolve in 2025, organizations across the United States face unprecedented opportunities—and emerging challenges—in leveraging federal tax incentives. At Giraffe Financial, we’re committed to helping tax‑exempt organizations, municipalities, educational institutions, and other eligible entities navigate the complexities of the Inflation Reduction Act (IRA) tax credits, even as the policy landscape shifts.

Understanding the Current State of IRA Tax Credits

The Inflation Reduction Act created transformative opportunities for reducing the cost of clean energy deployments through tax incentives. For the first time, tax‑exempt entities gained access via the Elective Pay (or Direct Pay) mechanism, enabling them to benefit directly from these credits.

Key credits that continue to make a significant impact include:

• Investment Tax Credit (Section 48/48E):
  This credit helps lower the upfront costs for solar, energy storage, and other qualifying technologies. Although the base rate is generally 6%, projects that meet bonus criteria—such as prevailing wage, apprenticeship, domestic content, and energy community requirements—may see an enhanced effective credit rate (often up to around 50% for many projects).
• Alternative Fuel Vehicle Refueling Property Credit (Section 30C):
  This credit offers up to a 30% credit—up to a cap of $100,000 per refueling or charging item of property for businesses—to support the build-out of electric vehicle infrastructure.
• Commercial Clean Vehicle Credit (Section 45W):
  Qualifying commercial electric vehicles may be eligible for a credit of up to $40,000, providing a strong incentive for businesses to upgrade their fleets.

Policy Uncertainty and Its Impact on Projects

Recent policy developments have added uncertainty to the future of these tax credits. Ongoing congressional discussions about potential rollbacks have accelerated project timelines and raised important questions for organizations planning clean energy investments. While the legislative process remains fluid, there are several considerations:

Critical Safe Harbor Provisions

To help projects secure their tax credit benefits despite potential policy shifts, the IRS has established two key “safe harbor” methods for determining the beginning of construction:

1. Physical Work Test:
   A project qualifies if significant physical work—beyond preliminary activities—has started on-site. This may include foundational work, mounting equipment, or excavation for underground components. In some cases, off-site manufacturing of custom components specifically for the project also qualifies.
2. Five Percent Safe Harbor:
   Alternatively, a project can qualify by incurring at least 5% of the total project cost in a given year. This safe harbor can be established by making non‑refundable deposits, paying for design and engineering services, or purchasing key components.

Both methods require that the project demonstrate “continuous progress” toward completion, and—under current guidance—the project must be placed in service within a specified time frame (typically four years from the construction start, with longer deadlines for certain projects such as offshore or federal‑land projects).

Historical Precedent for Grandfathering

There is historical precedent for protecting projects through transitions in tax policy:

• 2017 PTC/ITC Phase‑Down:
  When production tax credits were scheduled to phase down, projects that began construction before the cutoff were “grandfathered” under the old, higher rates.
• 1986 Tax Reform Act:
  Projects with binding contracts, executed power purchase agreements, or that had incurred at least 5% of total costs were protected despite the repeal of certain credits.

These examples offer guidance for organizations seeking to lock in current benefits amid evolving policy debates.

Practical Steps to Maximize Tax Credit Protection

Based on regulatory frameworks and historical precedents, consider these strategies:

• Document Everything:
  Keep detailed records of all project activities that demonstrate a clear construction start under one of the safe harbor methods.
• Plan Your Equipment Procurement:
  Purchasing and taking delivery of key components—even before full site work begins—can help meet safe harbor criteria.
• Secure Binding Contracts:
  Enter into firm agreements with developers, suppliers, and contractors that include cancellation penalties. Such contracts help support your claim to grandfathered benefits.
• Accelerate Timelines:
  Where possible, move projects from the planning stage into physical work quickly to ensure compliance with safe harbor requirements.
• Complete Tax Credit Sale Agreements Early:
  For projects planning to utilize credit transferability provisions, execute agreements promptly to bolster grandfathering claims before any legislative changes.

Projects already under construction are likely protected; historical precedent suggests that if construction began before potential legislative changes, these projects may continue to enjoy their original tax credit benefits.

Maximizing Tax Credit Value in Today’s Environment

At Giraffe Financial, our comprehensive approach helps organizations assess all potential credits and document their eligibility meticulously. Our secure platform streamlines complex documentation, supports binding contract management, and offers end‑to‑end assistance from eligibility analysis to final IRS filing.

Looking Ahead

Even amid policy uncertainty, the economic fundamentals behind renewable energy projects remain strong. Clean energy deployments continue to be economically viable due to rising electricity demand, rapid deployment capabilities, and increasingly competitive costs. At Giraffe Financial, we remain committed to monitoring legislative developments and providing our clients with timely strategic advice.

Ready to explore how your organization can maximize its IRA tax credit benefits? Contact our team today for a personalized assessment of your project’s potential.

About Giraffe Financial:
Founded in 2023, Giraffe Financial specializes in helping tax‑exempt organizations and public entities navigate federal tax credits under the Inflation Reduction Act. Our end‑to‑end platform simplifies complex documentation and filing processes, ensuring that you can capitalize on these valuable incentives with confidence.