Renewable energy advocates worry that the tax proposals passed by the House of Representatives in mid-November and the Senate early Saturday will make it significantly more difficult to pursue wind and solar energy projects in the United States.
(Image courtesy of tampabaysolar.com)
The version of the tax cut passed by the House proposed removing the inflation adjustment from the proposed timeline for phasing out tax credits for wind power projects, and retroactively changes the qualifications for developers to receive the credits. However, the public did not anticipate these provisions being included in the version of the tax bill that the Senate would pass.
Though the Senate proposal does not explicitly target renewable tax credits in the same way that the House proposal did, it does include the “base erosion anti-abuse tax,” BEAT for short. The purpose of the tax is purportedly to discourage large, multinational corporations from outsourcing labor and profits from the United States and moving them offshore.
The concerns of many in the renewable energy industry are that this tax effectively eliminates any profits that could be made via wind or solar energy tax credits, as these tax credits would be subject to taxation through the BEAT tax at a rate of 100% for multinational corporations. Many large multinational corporations agree to finance renewable energy projects with the provision that the company they are partnering with will give them the tax credits received for the project in return. Greg Wetstone, president and CEO of the American Council on Renewable Energy, claims that this bill “keeps the credits alive, but eliminates their value.”
Tax equity makes up between 40 and 50 percent of funds for an average solar project in the U.S. The new tax provision would make both solar and wind projects more expensive and would greatly disincentivize large companies from participating in tax equity financing and investing in renewable energy projects.
In the Senate’s proposal, an exception is made for research and development (R&D) tax credits, which are not subject to the BEAT tax. On November 29, the American Council on Renewable Energy, the American Wind Energy Association, Citizens for Responsible Energy Solutions, and the Solar Energy Industries Association submitted a joint letter to the Senate outlining their concerns with the proposed tax and the negative effects it would have on renewable energy development in the U.S. In the letter, they urge the Senate to exempt wind power tax credits (PTCs) and solar tax credits (ITCs) from BEAT in the same way that R&D credits are exempted.
The Senate did not take action in response and voted to approve the tax proposal as it was on early Saturday morning. House and Senate leadership are now working towards reconciling the differences in their legislation and passing a final tax bill.