In a historic ruling, the Supreme Court has overturned the Chevron deference doctrine in Loper Bright Enterprises v. Raimondo, a casethat could significantly alter the balance of power between federal agencies and the judiciary. The decision not only affects agency authority across various sectors but also has profound implications for clean energy taxprovisions under the Inflation Reduction Act (IRA).
The Case: Loper Bright Enterprises v. Raimondo
The case originated with Loper Bright Enterprises andother family-owned fishing companies that operate in the Atlantic herring fishery. These companies challenged a rule issued by the National Marine Fisheries Service (NMFS) under the Magnuson-Stevens Fishery Conservation and Management Act (MSA), which required them to pay for government-certifiedobservers on their vessels—an expense of up to $710 per day.
The fishing companies argued that the NMFS lacked statutory authority to impose this financial burden. However, the lower courts upheld the rule, relying on the Chevron deference doctrine, which allowed courts to defer to an agency’s reasonable interpretation of ambiguous laws.
The Supreme Court’s Decision: Overruling Chevron
In a major shift, the Supreme Court struck down Chevron deference, ruling that courts must independently interpret statutes rather than automatically defer to agency interpretations. The decision
emphasized that:
- Judicial review must be independent—agencies no longer receive special deference in interpreting ambiguous laws.
- Article III of the Constitution assigns courts, not agencies, the responsibility to interpret the law.
- The Administrative Procedure Act (APA) requires courts to decide legal questions without assuming that Congress implicitly delegated authority to agencies.
Key Impacts of the Decision
- Greater Judicial Scrutiny – Courts must now assess agency interpretations without deferring to their expertise.
- Weakened Agency Power – Agencies like the IRS, EPA, and Treasury will face more legal challenges to their rulemaking.
- More Legal Uncertainty – Businesses and taxpayers will see increased litigation over regulatory interpretations.
Implications for Clean Energy Tax Provisions in the Inflation Reduction Act (IRA)
One of the most immediate effects of the Loper Bright ruling is its impact on clean energy tax incentives under the Inflation Reduction Act (IRA). The IRA relies heavily on federal agencies—especially the IRS, Department of Treasury, and Department of Energy (DOE)—to interpret and administer its tax provisions. With courts now exercising independent judgment, clean energy companies, investors, and policymakers face uncertainty and potential delays in implementing tax credits.
1. Increased Legal Challenges to IRS and TreasuryRegulations
With Chevron gone, courts will no longerautomatically uphold IRS guidance on clean energy tax incentives. This opens the door to:
- Challenges to Eligibility Rules – Businesses may dispute IRS determinations on who qualifies for Investment Tax Credits (ITC) and Production Tax Credits (PTC).
- Disputes Over Credit Transferability – The IRA allows certain tax credits to be transferred or sold, but the lack of agency deference could lead to litigation over how these provisions are applied.
2. Uncertainty in Implementation of New Clean Energy TaxCredits
The IRA established new and complex tax incentives, including:
- Section 45V Hydrogen Production Tax Credit
- Section 45X Advanced Manufacturing Tax Credit
- Section 48E Clean Electricity Investment Credit
- Section 45Z Clean Fuel Production Credit
These credits involve technical and statutory ambiguities that agencies were expected to clarify. Now, courts—not agencies—will make those determinations, potentially delaying clean energy investments. For example:
- The Hydrogen Production Tax Credit (45V) depends on how emissions intensity is calculated. If courts reject the Treasury’s method, hydrogen projects could face eligibility uncertainty.
- The Advanced Manufacturing Tax Credit (45X) applies to specific solar and wind components. Without deference to the IRS, courts may adopt different interpretations, affecting which components qualify.
3. Domestic Content and Wage Requirements Could BeWeakened
The IRA offers bonus tax incentives for projects that:
- Use American-made materials (domestic content requirements).
- Meet prevailing wage and apprenticeship requirements.
Agencies like the IRS and the Department of Labor haddiscretion in defining compliance. Now, courts may override agencyinterpretations, leading to legal uncertainty for clean energy developers.
4. Slower Progress on Clean Energy and Climate Policy
The Biden administration has positioned the IRA as a cornerstone of U.S. climate policy, with tax credits designed to accelerate the shift to renewable energy. Without deference to agency expertise:
- Clean energy investments may slow down as companies await court rulings.
- Future administrations could weaken IRA tax incentives more easily, as courts may uphold restrictive interpretations of the law.
5. Potential Legislative Fixes?
If the Loper Bright decision leads to widespread regulatory confusion, Congress may need to amend the IRA to clarify key provisions. However, with political gridlock, legislative solutions maynot materialize anytime soon.
A New Era of Regulatory and Legal Uncertainty
The Loper Bright decision fundamentally reshapes administrative law, making it harder for federal agencies to enforce tax and environmental regulations. For the clean energy sector, this means:
- More legal challenges to tax credits and incentives.
- Uncertainty for businesses investing in renewable energy projects.
- Potential delays in achieving climate policy goals.
Without Chevron, courts now play a larger role in determining how the IRA’s tax provisions are applied. This could slow down the transition to clean energy and increase risks for companies relying on tax incentives. As legal challenges mount, the fate of many clean energy projects may now be decided in the courts rather than through agency rulemaking.