Week in Insights: Agency Policy Reversals Need Clear Explanation

A federal court ruling issued earlier this month underscores that agencies can change policy, but they can’t erase settled guidance without acknowledging reliance interests, explaining changes, and tailoring fixes to a clearly stated problem.

The case centered on clean energy tax credits. But the real issue was that taxpayers had structured projects, financing, and contracts around settled agency guidance that the government suddenly ripped out from under them. The question before the US District Court for the District of Columbia was whether agencies could do that with minimal explanation.

The court’s answer: a resounding no.

For years, the IRS recognized ...