San Francisco joins lawsuit against IRS over anti-solar and wind tax rules

SAN FRANCISCO, CA (December 19, 2025) — San Francsico City Attorney David Chiu announced that San Francisco has joined a broad coalition of government entities and clean energy nonprofits in a lawsuit against the Internal Revenue Service (IRS) over its tax credit rules that unfairly and illegally discriminate against wind and solar projects.

As part of a series of attacks on solar and wind, the IRS eliminated a key pathway for companies to demonstrate they have begun construction and thus qualify for federal tax credits before they expire on July 4, 2026. The Administration unjustly and arbitrarily singled out solar and wind projects for these more restrictive – and unprecedented – eligibility rules.

Plaintiffs argue the IRS guidance “unlawfully changes the tests for beginning of construction for only solar and wind facilities, without providing adequate reasons or data for treating those facilities differently from all other industries.” This change is “likely to increase power prices, resulting in higher electric rates and bills for consumers.”

“Undercutting solar and wind projects will drive up energy prices for average Americans and cities like San Francisco,” said San Francisco City Attorney David Chiu. “Clean energy developers need predictability and certainty to build projects that benefit us all. San Francisco is joining this coalition to fight for our clean energy future and keep energy costs affordable for consumers.”

Background
For more than a decade, Congress has established that a clean energy project could qualify for a tax credit if it began construction on that project before certain statutory deadlines. This provided certainty to companies that their project would qualify for the tax benefits even if they faced unforeseen delays. IRS rules have long held that starting construction could mean either spending five percent of the total project costs or beginning physical work of a significant nature.

Last year, Congress passed a law cutting tax credits for solar and wind but provided a transition period for projects that begin construction within a year.

Days after passage of the tax law, President Trump issued an Executive Order to “eliminate” clean energy incentives. The order specifically directed the agencies to revise the IRS’s guidance on the meaning “beginning of construction” for wind and solar facilities. In rules issued in August, the IRS eliminated the five percent spending standard for all wind projects and solar projects larger than 1.5 megawatts.

The coalition’s lawsuit argues IRS’s elimination of that option is arbitrary and capricious. The rules single out solar and wind as sources like nuclear, geothermal and hydropower did not face these new restrictions. It will drive up energy prices for individual energy consumers as well as municipal utilities like the San Francisco Public Utilities Commission (SFPUC).

San Francisco has made substantial commitments to promote and provide clean and affordable energy solutions for the City, businesses, and residents. SFPUC generates or procures hydroelectric, solar, wind, and other renewable energy sources to serve the City’s own power needs, as well as those of other customers. The City’s departments and services—including its transit system, general hospital, and international airport—are powered by renewable or greenhouse gas-free energy from SFPUC.

SFPUC faces upcoming increases in electricity demand from City capital improvement projects, growing commercial technology sectors, and transitions from fossil fuels to clean electricity across the City. To meet this rising demand, SFPUC is actively procuring additional renewable energy sources. By eliminating significant tax incentives to make such investments, the new IRS rules will make SFPUC’s current procurement of renewable energy sources more expensive.

The case concerns IRS rules issued on August 15 titled “Beginning of Construction Requirements for Purposes of the Termination of Clean Electricity Production Credits and Clean Electricity Investment Credits for Applicable Wind and Solar Facilities.”  Plaintiffs are asking the court to reject the new rules and restore projects’ ability to rely on the prior rules that had been in place for more than a decade.

The lawsuit was filed in U.S. District Court for the District of Columbia yesterday by a coalition of groups, led by the Oregon Environmental Council. San Francisco was joined by Natural Resources Defense Council (NRDC), Public Citizen, Hopi Utility Corporation, Woven Energy, and the Maryland Office of People’s Counsel.

“Oregon is counting on renewable energy. The Trump administration’s unfair decision to pull the rug out from under wind and solar projects will lock Oregon ratepayers into expensive, polluting energy sources,” said Jana Gastellum, executive director of Oregon Environmental Council.  “Oregonians are already paying the price through devastating wildfires, toxic air pollution, and extreme weather. We can’t afford to go backwards – not when the climate crisis is worsening, and communities are suffering.”

“The Trump administration has undertaken an illogical and illegal war on clean energy, and these arbitrary tax rules are just another salvo,” said Grace Henley, a tax attorney at NRDC. “This is bad for clean energy, bad for workers and communities, bad for the air we all breathe, and horrible for Americans squeezed by higher utility bills.”

“These new IRS rules have been a harsh blow. We have been counting on new solar projects to get electricity to those without it, help support essential services, and to create and provide jobs,” said Tim Nuvangyaoma, former Chairman of the Hopi Tribe. “The guidance has forced us to change our plans, and the Hopi Utilities Corporation is now racing to qualify for tax credits under the new guidelines. Getting the court to rectify this unjust action would give us the certainty we need.”

“In Maryland, hundreds of thousands of households live paycheck to paycheck and struggle to pay their utility bills,” said Maryland People’s Counsel David Lapp. “Adding renewable energy lowers those bills and eliminates fuel cost price volatility. The Treasury Department’s guidance is a nonsensical attack on clean energy and an assault on affordable energy at a time when Marylanders can least afford it.”

“The Trump administration’s use of the IRS to target wind and solar energy projects will result in even higher electricity prices for consumers,” said Nandan Joshi, attorney with Public Citizen’s Litigation Group. “Congress wanted to encourage investment in new, cleaner power generation without favoring any one technology. By using the tax code to wage war on wind and solar energy, the Trump administration will cause electric bills to rise, workers to lose their jobs, and older, dirtier power plants to spew more pollution into our air.”

The case is Oregon Environmental Council, et al. v. Internal Revenue Service of the United States, et al., United States District Court for the District of Columbia, Case No. 1:25-cv-04400. View the complaint.