The Trump administration has been rapidly backing away from the various green energy incentives offered under the Biden administration, starting with a pair of executive actions that President Trump signed on the day of his inauguration, and continuing through sweeping deregulatory changes announced by the Environmental Protection Agency this week.

Trump signed the Unleashing American Energy executive order on his first day in office, ordering federal agencies to pause all disbursements under the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. That same day, he signed another executive order, Regulatory Freeze Pending Review, suspending the development of new regulations and preventing the publication of any pending regulations until they are reviewed for compliance with the new administration’s energy policy.

Since that time, the Senate confirmed former New York Republican congressman Lee Zeldin in January as EPA administrator, and on Wednesday he announced what he called “the greatest day of deregulation our nation has seen,” saying he was “driving a dagger straight into the heart of the climate change religion” while rolling back trillions in regulatory costs and “hidden taxes.”

However, tax professionals are wondering about what is going to happen with all the various tax incentives their clients had counted on from the Inflation Reduction Act and other sources.

“Obviously we anticipated different energy policy goals under this incoming administration than we had under the Biden administration, so we’ve been bracing to see what happens,” said Jess LeDonne, director of tax technical, policy and legislative affairs at the Bonadio Group in Rochester, New York, during an interview in late February. “And this executive order is certainly a signal of what to expect going forward, but I would say we’re still in a little bit of a wait and see [period], because this executive order is really just a pause right now on the disbursement of funds under the Inflation Reduction Act and also the bipartisan infrastructure law as well.”

She noted that one of the executive orders directs the agency to pause disbursement of funds under those laws for 90 days, and in those 90 days to create a report and submit a report to the White House Budget Office, essentially demonstrating that the spending aligns with the new administration’s energy policies. 

“In this 90-day hold period, there’s no disbursements of funds under those laws,” said LeDonne. “What this means long term right now is just a pause. Those laws are still the law. The Inflation Reduction Act has not been repealed. That would require either congressional action or judicial action stating that the law is unconstitutional. That law cannot be undone by executive order.”

However, this is still creating uncertainty for clients who have invested in green energy sources at their businesses and homes.

“What we are seeing with our clients is certainly uncertainty around what this means, if this is an indication of a broader intention under the new administration to roll back green energy incentives,” said LeDonne. “There is objective uncertainty for them for long-term planning.”

Some clients have already embarked on projects and are wondering whether they will be able to claim the tax benefits they were promised under the Biden administration.

“We certainly have clients who have already completed projects,” said LeDonne. “We have clients who have projects underway. There’s all different points in this life cycle, and if and when anything does change other than this pause, my first question will be, what’s the effective date of that change? If something does happen congressionally that would undo these incentives, when does that change take effect? Is it 60 days after that law passes? Are they going to try to go retroactive to the beginning of this year? We have conversations with our clients about when they invested in these projects, when the projects went online, what those dates are, so that we can monitor the legislation and see if any changes actually impact that.”

The biggest uncertainty for clients right now is longer-term planning. “If you’re maybe a developer or someone in the construction industry, and part of the project is planning for a geothermal or solar energy offset for the project cost, that’s where right now there’s maybe a hesitation, given these changes under the new administration, that might give pause to spending that money,” said LeDonne. “In the past, you may have been able to more confidently rely on some investment offset from the government.” 

Clients are unsure if they will be able to recoup the costs they have invested in green energy projects, even though the political lines aren’t always so clear, as many Republican-leaning states also have large-scale projects underway. Around 80% of the manufacturing investments from the Inflation Reduction Act are in Republican congressional districts, according to The New York Times.

“It’s tempting to think about these green energy incentives as a really partisan issue down party lines, and I would say it’s really not that clean because there are certainly Republican lawmakers and Republican states and Republican districts that utilize Inflation Reduction Act incentives very heavily,” said LeDonne. “There are some Republican lawmakers that have constituents that utilize these programs, and therefore maintaining these green energy incentives is actually a really important policy for a lot of Republican lawmakers.”

Much will depend on the timing. “It really depends on a client’s fiscal year when they’re filing, when the project took place,” said LeDonne. “But for right now, if money has been spent under the law as it currently stands, if there’s eligible spend that can be offset by tax credits, we’ll certainly help our clients claim those. If something were to change retroactively, there may be the need to amend.” 

She pointed out that even if the federal tax incentives for green energy are repealed, many states will still offer them. “It’s not that all of this money is going away and there’s not going to be any green energy incentives,” said LeDonne. “We’d certainly look to the state and other potential funding mechanisms too. We’ll keep an eye on it. But right now, there is some uncertainty. Short term, all we have right now is this pause, the 90 days, and that will be up on April 20. Thereafter, we’ll see what happens, based on the agency reports around this funding, and thereafter what occurs.”

The Inflation Reduction Act and the infrastructure law nevertheless remain in place, even if they’re amended at some point or if the Trump administration keeps refusing to pay the disbursements. 

“It is important to know that right now this is a pause. Those laws are still the laws, and those credits still exist,” said LeDonne. “It’s simply that right now they cannot be paid out. Of course, paying out federal incentives, funding anything, is not something that happens quickly anyway. Right now, this pause might not directly really impact too many people, but we’re certainly monitoring to see if this is the canary in the coalmine, so to speak, that’s really indicating a broader intention by the new administration to undo some of these green energy incentives.”

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The term “forensic audit” has become commonplace with allegations of financial impropriety. That’s too bad, because there’s actually no such thing as a forensic audit.

How is that possible, when it’s used in everything from proposals to firm advertising? The culprit is a snowball of misunderstanding, allowed to fester by clients who don’t know any better, and practitioners who probably should. 

In fact, the term forensic audit is an oxymoron, and its use is not only wrong, it’s dangerous, at least as far as our world is concerned; it sets false expectations, the bedrock of unhappy clients and future litigation. 

There are a few reasons why.

First, consider the word audit, a term defined by the American Institute of CPAs. An audit’s goal is to obtain “reasonable assurance” about whether the financial statements are free of material misstatement. It is, by nature, a broad brush.

Forensic work, however, is restricted to analyzing and evaluating specific evidential matter. In other words, it is a narrow, predefined scope. Providing any assurance is therefore incongruent. 

It’s also impractical, because audits rely on a concept of materiality. Not every dollar has to be checked, because not every dollar is important to the user of the financial statements. For instance, a cashier stealing change at a multibillion-dollar business, while concerning, is likely immaterial.

But fraud has no materiality. A cashier stealing change is fraud, whether it’s $0.10 or $10,000. Identifying every aspect of fraud ranges from impractical to impossible, which is why it’s standard for engagement agreements to disclaim that acts of fraud may not be caught.

Hearing the phrase “forensic audit,” a client might assume assurance that everything will be caught. That’s antithetical to forensic work. We offer no assurance that we’ll catch everything, or even anything. 

Forensic audit is also paradoxical in reporting. In audits, a CPA expresses an opinion. But practitioners performing forensic services are prohibited from providing formal opinions; we deal in fact only. 

That’s why the term forensic audit doesn’t appear in regulatory guidance: it doesn’t exist. 

That said, it’s easy to see why it’s used. The public knows audits as a validation exercise. A forensic audit? Performed by forensic accountants, that cool role Ben Affleck nailed in that movie? It just sounds more rigorous. Who wouldn’t do that?

But its use confuses the public, and paves the way for post-engagement disputes — and even lawsuits — if a so-called forensic audit fails to catch all fraud. So ultimately, just like a doctor correcting patients who misname procedures, it’s up to practitioners to correct misinformed clients.

If a federal, state or local agency issues a request for proposal for a forensic audit, the forensic accountants who respond, many of whom also provide assurance work, should be proposing forensic services instead and explain the reason. 

And the firms and educational institutions that actually promote forensic auditing — yes, there are a few — should adjust that language. How can we expect the public to understand misnomers, if we as practitioners are guilty of propagating it ourselves?

Some might say that worrying about nomenclature is unnecessary. That focusing on the finer details misses the bigger picture.

Those people miss the point of forensic services altogether. If we can’t manage the small details, who will rely on us for the bigger ones?

Let’s get this fixed.