Budget reconciliation has been hectic. After disagreements between the Senate and House between which discretionary budget items should be prioritized, the Senate finally adopted its version of the topline funding levels of the reconciliation bill, and House committees began voting on the program changes they wanted to include last week. On May 18th, the House Budget Committee advanced its second budget markup, lending some more clarity to what may or may not end up in the final discretionary budget. Overarchingly, multiple building electrification and decarbonization-related programs and funding streams are at risk. At this juncture, what specifically will be affected in the reconciliation process for buildings?

The two main House committees that will impact buildings funding are the Energy & Commerce (E&C) and the Ways & Means (W&M) Committees. The Houses E&C Committee’s purview encapsulates much of the funding that would flow toward the Department of Energy (DOE) and the Environmental Protection Agency (EPA), while the W&M Committee’s authority extends over tax-writing.

Several big budget programs are on the chopping block over at E&C, the largest of which is the Greenhouse Gas Reduction Fund (GGRF) and its three sub-programs: the Clean Communities Investment Accelerator (CCIA, funded at $6 billion), the National Clean Investment Fund (NCIF, funded at $14 billion), and Solar For All (S4A, funded at $7 billion). The current markup of the reconciliation bill would rescind all of GGRF’s unobligated funding. According to the Climate Program Portal, funding from all three of the GGRF sub-programs was awarded in April 2024. EPA attempted to cancel $20 billion in funding from CCIA and NCIF, and funding from the two sub-programs remains frozen while a court case on the matter develops. Advocates have suggested that the proposed recission of unobligated funds may be an attempt to circumvent this process. More positively, the $7 billion S4A program has had its funds unfrozen according to reports from multiple states, with implementation chugging along at the state level.

E&C’s markup also includes the slashing of the $3 billion Environmental Justice (EJ) Block Grants, which is comprised of four sub-programs: the EJ Collaborative Problem-Solving Cooperative Agreement Program (with $50.7 million in tracked canceled grants), the EJ Community Change Grants ($1.7 billion), the EJ Government-to-Government program ($57.6 million), and the EJ Thriving Communities Grantmaking program ($660 million). The loss of these community-led programs via the rescission of unobligated funding will be felt acutely, especially for the historically disadvantaged communities these projects are sited in.

Further, E&C plans to rescind unobligated balances from several DOE offices, including $401.9 million from the Office of Energy Efficiency and Renewable Energy, $262.5 million from the Office of State and Community Energy Programs, $53.4 million from the Office of Federal Energy Management Programs, and $44.7 million from the Office of Indian and Energy Policy and Programs. These cuts threaten to undermine the programs these offices are charged with administering.

The final very large pot of funding at risk at E&C is the $5 billion Climate Pollution Reduction Grants (CPRG) program. The sub-programs include $4.6 billion for implementation of climate plans, $250 million for planning, and $150 million for technical assistance and program implementation. Unobligated funding from the program will be rescinded, a total of about $90 million. This rescission would undermine EPA’s implementation of funding already obligated and outlaid, slowing obligated grant funding and injuring technical assistance processes.

A variety of smaller funding pots and program offices are at risk at E&C, including 20 projects worth $112.5 million from the Low Embodied Carbon Labeling for Construction materials program, the $150 million State-Based Home Energy Efficiency Contractor Training Grants program, $34 million from the Grant Funding to Address Indoor Air Pollution at Schools program, and the entirety of DOE’s Loan Programs Office.

Looking at the W&M Committee, the House intends to eliminate the Energy Efficient Home Improvement Credit (25C) at the end of the year, while the New Energy Efficient Home Credit (45L) would be eliminated for homes purchased after the end of the year, unless construction on the home was initiated before May 12th, 2025. 25C offers tax credits of 30 percent or up to $2,000 for heat pump or heat pump water heater installation, as well as $1,200 for weatherization. 45L, on the other hand, provides incentives to home builders for constructing homes meeting ENERGY STAR or Zero-Energy Ready Home standards. Both tax credits increase the efficiency of residential buildings, decreasing bills for homeowners. Without them, fewer energy efficiency retrofits will be made due to increased homeowner expenditure, leading to a decrease in business for contractors and fewer pocketbook savings for homeowners — especially amid rising electricity prices.

In the same vein, W&M intends to phase out the Residential Clean Energy Tax Credit (25D) at the end of the year. 25D has been in effect since 2005 and provides a 30 percent tax credit for on-site renewable energy generation on residential buildings, including solar, wind, geothermal, and energy storage systems. Cutting the tax credit decreases incentives for homeowners to contribute to the larger distributed energy grid, slowing the pace of added capacity to grids nationwide and shrinking the clean energy workforce surrounding installation of these systems.

Finally, W&M is targeting direct (or elective) pay, which allows taxpayers without sufficient tax obligation to offset to claim a direct payment instead. To clarify, no W&M changes would rescind the bureaucratic system of direct pay. However, with the recission of relevant tax credits for public entities and non-profits to access, the direct pay system becomes obsolete.

As of now, both marked up versions of the budget reconciliation bill have been approved by their respective Committees. Once the House Budget Committee officializes the package and condenses it into a single bill, expected by June 10, the document will then be considered by the full House and then by the Senate. If the Senate makes any changes, they must be accepted by the House or negotiated between the two chambers before going up for a vote in both houses, expected by June 15, and then finally arriving on President Trump’s desk. Altogether, a final budget is expected by the end of June. This process will determine the future of billions of dollars’ worth of programs that help building owners save costs and reduce emissions. Buildings Hub will continue to monitor the budget reconciliation process and keep our community updated on key developments.

About the author: Katherine Shok

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