President Donald Trump signed legislation that repeals major clean energy provisions from the Inflation Reduction Act, marking a substantial shift in federal energy policy three years after the original bill's passage.
According to a Washington Examiner report, Republicans used the One Big Beautiful Bill Act to eliminate over $500 billion in clean energy tax credits and programs, offsetting costs for tax cuts and increased spending on immigration and defense. This move directly counters the IRA's focus on combating climate change through incentives for electric vehicles, solar, and wind energy.
The IRA, signed by President Joe Biden on Aug. 16, 2022, was promoted as a response to high inflation but primarily funded Democratic priorities like clean energy and healthcare. It included tax hikes on corporations and investors to finance these initiatives, though not all elements have been altered under the current administration.
The One Big Beautiful Bill Act ends tax credits of up to $7,500 for new electric vehicles and $4,000 for used ones, with the incentives set to expire at the end of September. This policy aligns with the Trump administration's opposition to promoting the EV industry, favoring instead traditional energy sources.
Tax credits for solar and wind energy are being phased out, requiring projects to start construction within one year or be operational by 2027 to qualify. The Treasury Department recently issued strict regulations to enforce this termination, following directives from the administration last month.
While fiscal conservatives pushed for a full repeal, credits for nuclear, geothermal, and hydropower remain intact or have extended phase-outs due to their reliable baseload power. The bill also boosts subsidies for biofuels and mandates lease sales for oil and gas development on federal lands, including two in the Gulf of Mexico and quarterly onshore sales in Alaska.
The IRA's Medicare Drug Price Negotiation Program, which allows the government to negotiate prices for expensive prescription drugs without generics, has largely survived despite opposition from the pharmaceutical industry and conservatives. The Trump administration is utilizing this authority while pursuing broader strategies to reduce costs.
Last August, the Biden administration revealed negotiated prices for 10 drugs, estimating $6 billion in annual Medicare savings, with new prices for medications like Jardiance, Eliquis, and Stelara effective Jan. 1, 2026. In January, 15 additional drugs were selected for negotiation, including Ozempic, Wegovy, and Rybelsus from Novo Nordisk, with prices slated for 2027.
Trump's CMS administrator, Dr. Mehmet Oz, affirmed during his March Senate confirmation hearing that he would defend and implement the program as required by law. The One Big Beautiful Bill Act made minor changes, fully exempting orphan drugs for rare diseases to encourage investment in such treatments.
The IRA extended enhanced Obamacare premium subsidies to prevent sharp increases for middle-income families on exchange plans, but these are now at risk of expiring. If not renewed, premiums could rise significantly, potentially increasing the uninsured population by 3.8 million and creating political challenges for Republicans.
A permanent extension would cost $383 billion over the next decade, drawing opposition from fiscal conservatives concerned about added government spending. The Trump administration has not yet signaled a clear path forward on this provision, leaving its fate tied to ongoing budget debates.
In May, President Trump issued an executive order advancing a "Most Favored Nation" policy to tie U.S. drug prices to those in other countries, aiming to end what the administration views as foreign freeloading on American innovation. White House spokesperson Kush Desai criticized the IRA's negotiations for minimal price reductions and rising Medicare premiums, emphasizing Trump's focus on more aggressive reforms.
Republicans preserved much of the IRA's tax increases, including the 15% corporate alternative minimum tax on book income, with only a small carveout for oil and gas companies worth less than $1 billion over 10 years. The 1% excise tax on corporate stock repurchases also remains untouched, surprising given GOP control of Congress and the White House.
The One Big Beautiful Bill Act extended the 2017 Trump tax cuts for individuals and added new exemptions on tips and overtime pay, but it did not repeal the IRA's $80 billion IRS funding boost. Subsequent legislation has reduced that IRS allocation to about half, reflecting piecemeal efforts to curb enforcement expansion.
Will McBride, vice president of federal tax policy at the Tax Foundation, noted that the corporate alternative tax is essentially intact despite minor tweaks. James Bowe, a partner at King & Spalding, stated via email that the bill encourages investment in fossil fuels, leading to increased development in natural gas projects, pipelines, and gas-fired facilities.
