WASHINGTON – The sprawling tax and policy bill that passed Congress repeals a multibillion-dollar green bank for financing climate-friendly projects, and the Trump administration should be allowed to freeze its funding and cancel related contracts with nonprofits, federal officials said in a court filing.

Climate United Fund and other nonprofits in March sued the Environmental Protection Agency, its administrator Lee Zeldin and Citibank, which held the program’s money. The lawsuit argued the defendants had illegally denied the groups access to billions awarded last year through the Greenhouse Gas Reduction Fund, commonly referred to as a “green bank.” The program was created by the 2022 Inflation Reduction Act.

But the bill that passed Congress on Thursday would repeal the part of the 2022 law that established the green bank and rescind money that hadn’t already been obligated to its recipients.

The EPA said the bill should hand them a victory in their court fight that is being heard by a federal appeals court in Washington. Now that Congress has rescinded funding, an earlier federal judge’s decision forcing the EPA to release money to the groups should be reversed, the agency said in its Thursday court filing.

Climate United Fund disagrees. It acknowledges that the bill in Congress is a “significant policy setback” but argues that most of the money had been disbursed and is unaffected by the bill. And if the EPA wanted to take the money back, there’s a different process the agency would need to follow.

“Our funds have already been obligated and disbursed. Any effort to claim otherwise is simply a lie to justify illegal attempts to claw back funds intended to benefit communities across the country,” CEO Beth Bafford said in a statement.

According to the EPA, when the agency terminated the grants the funds “became unobligated.”

“Grantees have desperately performed legal gymnastics to hold tens of billions of taxpayer dollars hostage. In the passage of the One Big Beautiful Bill, Congress made their intent crystal clear in repealing the program entirely and returning those billions in unobligated funds to the U.S. Treasury,” EPA spokesperson Brigit Hirsch said in a statement.

The green bank’s goals run counter to the Trump administration’s opposition to policies that address climate change and its embrace of fossil fuels. Zeldin quickly made the bank a target, characterizing the $20 billion in grants as a scheme marred by conflicts of interest and potential fraud.

In February, Zeldin told Fox News that he suspected the green bank “was a clear cut case of waste and abuse” that “in my opinion, is criminal.” The following month, Zeldin terminated the grants.

U.S. District Judge Tanya Chutkan has previously said that when the federal government was asked for evidence of fraud, the agency didn’t provide it and shifted its position. Chutkan decided the government can’t terminate the contracts and that the groups should have access to some of their frozen money.

That order was put on hold during the EPA’s appeal.

The agency argues the nonprofits are making constitutional and statutory arguments that don’t apply in what it sees as a simple contract fight.

If the government successfully argues the case is a contract dispute, then the EPA says it should be heard by a different court that can only award a lump sum – not force the government to keep the grants in place. Federal officials argue there is no law or provision in the Constitution that compels the EPA to make these grants to these groups.

In its court filing, the EPA also pointed to comments by Republican Sen. Shelley Moore Capito of West Virginia, chair of the Senate Committee on Environment and Public Works, as supportive of the agency’s position. Capito said previously the bill intended to rescind billions in funding that had been frozen.

“This action reflects not only Congress’s deep concern with reducing the deficit, but EPA’s administration of the (green bank) under the Biden administration, the agency’s selection of grant recipients, and the absence of meaningful program oversight,” the agency quotes the senator as saying.

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