A week after President-Elect Donald Trump swept the battleground states to take the White House, a Republican majority holds the Senate, and Republicans are close to retaining control of the House of Representatives, although several House races remain too close to call.
A Republican federal electoral sweep could set the stage for changes to tax and energy policies with, potentially, both positive and negative implications for Maryland commercial real estate interests.
The wide policy differences between the two parties over energy policy and climate mitigation are exacerbated by the looming expiration of many of the provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 which reduced tax rates and contained other provisions favorable to partnerships and pass-through entities. Unless Congress acts in 2025, expiring provisions of the TCJA will result in corporate and individual tax increases of $3.5 trillion – an event that is being called the “tax cliff.”
Rolling back provisions or redirecting spending in the Inflation Reduction Act (IRA) will be seen as a source of funds to offset the extension of the TCJA tax cuts.
The IRA appropriated $142 billion for greenhouse gas reduction activities, including more than $100 billion in grants and nearly $40 billion targeted to federal loans and loan guarantees to subsidize the development of green energy generation, electric grid improvements and emissions reductions.
The IRA expands or creates federal tax credits for building energy efficiency and decarbonization retrofits, electric vehicle purchases and charging infrastructure. The IRA also directs the Environmental Protection Agency to impose a fee on methane emissions from natural gas facilities and makes changes to how the ocean floor is leased for wind energy developments, such as those planned offshore of Ocean City.
Many of the IRA grants and tax credits are expected to at least partially fund Maryland’s emissions reduction requirements for buildings, cars and trucks. Offshore wind is seen as essential to increasing in-state renewable power generation and reducing reliance on imported electricity.
Throughout 2024, the Biden Administration has been racing to get spending and regulatory policies authorized by the IRA finalized to prevent their rollback should the Republicans win congressional majorities. Observers doubt Congress will repeal the IRA because much of the appropriated funding has been committed, but redirecting uncommitted IRA funds, reducing or eliminating tax credits and changes to the regulations that implement individual IRA elements are likely.
The Congressional Review Act (CRA) allows Congress to review agency regulations before they take effect. If Congress passes a joint resolution disapproving a regulation within 60 session days of its adoption and the resolution is signed by the President, the regulation is unenforceable, and the issuing agency is prevented from issuing a similar regulation in the future.
The exact timing of the “look back” window depends on when a regulation becomes final and when Congress adjourns for the year, but federal regulatory actions taken from May to December of 2024 could be subject to review by the new Congress when it reconvenes in 2025.
Recently enacted regulations that could be subject to review include the rules for qualifying for the bonus tax credits for energy efficiency in commercial buildings under Section 179D of the IRS code, electric vehicle purchasing incentives, fees on methane emissions from natural gas infrastructure, and provisions related to offshore wind farm leases.