Attorney General Bonta Rejects Trump Administration’s Tax Policy Limiting Clean Energy Projects and Increasing Costs

OAKLAND — California Attorney General Rob Bonta joined a coalition of 17 attorneys general in filing an amicus brief in the U.S. District Court for the District of Columbia opposing an Internal Revenue Service (IRS) notice (Notice 2025-42) that limits the eligibility of wind and solar projects to receive certain IRS tax credits. Wind and solar projects usually qualify for certain tax credits once they have begun construction, but this notice arbitrarily narrows the threshold for what is considered the beginning of construction for the purposes of claiming the tax credit. In the amicus brief, Attorney General Bonta and the coalition assert that this proposed tax policy will stymie projects, exacerbate the negative effects of climate change, and decrease the supply of clean energy while increasing costs to ratepayers precisely at a time when our nation needs more clean energy, not less. 

“At a time when the demand for energy is increasing, we should be ramping up clean energy projects, not slowing them down. The Trump Administration's policy represents a step backward that will decrease the supply of clean energy — and clean energy jobs — and increase costs for consumers,” said Attorney General Bonta. “It’s bad tax policy, and it’s illegal, plain and simple. I urge the court to vacate this unlawful action, which harms communities and ratepayers across the country.”  

Current projections demonstrate that the nationwide demand for electricity is increasing with the advent of new data centers, cloud-based services, artificial intelligence, and more. To meet this demand and incentivize the development of clean energy, the 2022 Inflation Reduction Act created the Clean Electricity Production Tax Credit and the Clean Electricity Investment Tax Credit. These tax credits — designed to be accessible to any type of clean electricity facility with zero greenhouse gas emissions — were projected to save consumers $16 to $34 billion in annual electric costs by 2035. The tax credits were also projected to reduce air pollutants by 20% and deliver 300 to 400 million tons in greenhouse gas reductions compared to no tax credits by 2035.  

However, in July 2025, the One Big Beautiful Bill Act was signed into law and phased out the tax credits for wind and solar facilities that would be placed into service after December 31, 2027, with an exception for facilities that begin construction on or before July 4, 2026. In August 2025, the IRS issued Notice 2025-42, which restricted the criteria for determining when certain wind and solar facilities began construction for the purposes of claiming the tax credit. Under the new policy, the previous safe harbor that required certain developers to incur 5% of the total project cost by July 4, 2026, is no longer sufficient to qualify for the tax credit. As a result, many wind and solar projects may be abandoned, along with the jobs they would have created, or cost substantially more to build — costs that would be passed on to ratepayers once the project is up and running. In December 2026, a coalition of non-governmental organizations, industry participants, and public entities responded by filing a complaint against the IRS alleging that the notice violates the Administrative Procedure Act (APA).

In the amicus brief, Attorney General Bonta and the coalition assert that Notice 2025-42: 

• Decreases the supply of clean energy available in the long term and increases electricity costs. 
• Results in a variety of harms, including damage to prior economic investments in renewable energy development, the ability to plan for and obtain reliable affordable energy, and the ability to protect land and residents from severe environmental and public health harms caused by pollution from fossil fuel energy sources.
• Is arbitrary and capricious without reasonable justification that explains why the IRS wants to discourage wind and solar development.  

Attorney General Bonta is committed to fighting federal actions that attack reliable, affordable, and sustainable power. Just last week, he filed a lawsuit against the Trump Administration for illegally rolling back funding for clean energy and infrastructure programs, including the $1.2 billion ARCHES clean hydrogen. He also filed an amicus brief opposing separate federal efforts to obstruct wind and solar energy development. Late last year, he claimed victory after a court order invalidated the Trump Administration’s effort to halt wind energy development following prior litigation on the matter. 

In filing the amicus brief, Attorney General Bonta joins the attorneys general of Oregon, Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, New Jersey, Rhode Island, Washington, and the District of Columbia.