top of page

Impact of Executive Order "Unleashing American Energy" on Local Government Agencies and Schools

Updated: Jan 26



On January 20, 2025, President Donald Trump issued the executive order titled "Unleashing American Energy", which mandates a pause on the disbursement of funds appropriated under the Inflation Reduction Act of 2022 (IRA) and the Infrastructure Investment and Jobs Act of 2021 (IIJA). This pause allows federal agencies to review their funding processes for alignment with the administration's energy policies. The Office of Management and Budget (OMB) issued a corresponding Memo M-25-11 on January 21, 2025, providing detailed guidance on the implementation of Section 7 of the executive order.


Key Provisions of the Executive Order

  • Section 2(e): Aims to eliminate the perceived "electric vehicle (EV) mandate" and promote consumer choice by removing regulatory barriers and considering the elimination of subsidies favoring EVs.

  • Section 7: Directs all agencies to immediately pause the disbursement of funds appropriated through the IRA and IIJA, particularly those supporting programs that may conflict with the administration's energy policies.


Clarifications from OMB Memo M-25-11

The memo specifies:

  • The pause applies to funds supporting programs, projects, or activities that may be implicated by the policy established in Section 2 of the executive order.

  • Agency heads may disburse funds as they deem necessary after consulting with the OMB.

Potential Impact on Tax Credits

Tax credits, which constitute a significant portion of federal support under the IRA, are unlikely to be directly impacted by the executive order or the OMB memo. Unlike grants, loans, and contracts, tax credits operate through statutory provisions and generally require an act of Congress to modify or revoke. Notably:

  • Many IRA tax credits, such as those for renewable energy projects and electric vehicles, are already embedded in the tax code and are available to eligible entities, including local governments and schools, as direct pay credits.

  • The pause focuses on discretionary funding, meaning tax credits should remain accessible unless specifically targeted by legislative action.

However, delays in grant or loan programs tied to these tax credits (e.g., for projects relying on both direct funding and tax incentives) may indirectly impact the timeline or feasibility of certain initiatives.

Implications for Local Government Agencies and Schools

  1. Potential Funding Delays: Programs reliant on federal grants, loans, or contracts under the IRA and IIJA may experience delays. This includes initiatives related to clean energy, infrastructure development, and EV adoption.

  2. Review of Energy-Related Projects: Projects promoting renewable energy sources or energy efficiency may face additional scrutiny. Agencies should prepare for possible reassessments and explore alternative funding sources.

  3. Impact on Electric Vehicle Initiatives: Programs aimed at expanding EV infrastructure or incentivizing EV adoption may face funding challenges. Entities should monitor developments and assess the viability of continuing such projects.

  4. Indirect Effects on Tax Credit Utilization: While tax credits are unaffected, delays in complementary funding mechanisms could hinder their effective use.

Legal Considerations

The pause on disbursements raises questions regarding compliance with the Impoundment Control Act of 1974, which limits the executive branch's authority to withhold funds appropriated by Congress. While the administration can implement interim review processes, any prolonged withholding of funds without congressional approval may face legal challenges.


Key Considerations

  • Adhere to Existing Rules and Guidelines: Given the legal and broader uncertainties tied to the Executive Order, clarity may take time to emerge. Meanwhile, municipalities, school districts and community organizations utilizing IRA funding—whether through grants or tax incentives—should focus on meeting all applicable regulatory and filing obligations. While the landscape is likely to evolve, ensuring access to funding under grant agreements or the tax code will rely on diligent compliance with existing rules and guidelines.

  • Stay Informed: Regularly monitor communications from federal agencies and the OMB for updates on the status of paused funds and any changes in policy that may affect funding availability.

  • Assess Project Portfolios: Evaluate current and planned projects to identify those potentially impacted by the funding pause. Prioritize initiatives less likely to be affected and consider contingency plans for those at risk.

  • Maximize Tax Credit Opportunities: Focus on leveraging tax credits, which remain available under current law, to fund eligible projects. Engage tax and legal professionals to ensure compliance and optimize benefits.

  • Explore Alternative Funding: Investigate state, local, or private funding opportunities to support critical projects, reducing reliance on federal funds that may be delayed or rescinded.

  • Engage in Advocacy: Collaborate with professional associations and advocacy groups to communicate the importance of continued funding for local government and school projects, emphasizing their benefits to communities and economies.


Ongoing Monitoring and Support

We are continuing to monitor developments closely. Check back for more information in the coming weeks as to how this executive order may affect specific projects or timelines. By staying proactive, local government agencies and schools can better navigate these uncertainties while pursuing impactful initiatives.

126 views0 comments

Comments


bottom of page