Federal Tax Reform Underway Could Be Strong Threat to Renewables

December 4, 2017

 

“We applaud the reduction in the corporate tax rate and preserving frameworks that support the clean energy sector. However, we are concerned about provisions that will have a negative impact on clean energy investments, including Base Erosion Anti-Abuse Tax (BEAT) provision and the impact of the corporate Alternative Minimum Tax (AMT) on investment tools that have been critical to the growth of the clean energy sector,” a statement, signed by six groups including American Wind Energy Association and Citizens for Responsible Energy Solutions, said Monday.

 

The proposed tax bill under review by Congress threatens a critical but esoteric source of wind and solar finance: tax equity.

In tax-equity deals, renewable-energy developers sell portions of their projects’ tax credits to corporations — often banks and some insurance companies — that can apply the credits to their own tax bills, Bloomberg reports.

That market is expected to total $12 billion this year, according to Bloomberg New Energy Finance.

“Most tax-equity investors are multinational companies and the issue now is that the Senate version includes a provision that imposes a minimum tax on these companies’ foreign transactions.

“If they have to pay a minimum tax, they may no longer have any need for the credits acquired through tax-equity deals.”

“It literally will grind our industry to a halt,” said John Marciano, co-head of project finance at Akin Gump Strauss Hauer & Feld LLP.

“Developers would be fighting for the few remaining investors.”

And there are others who are unhappy with the bill.

Ken Kimmell, president of the Union of Concerned Scientists, said Monday that “[It] would threaten the climate by leaving billions of dollars of fossil fuel subsidies intact while changing the tax code in ways that would jeopardize the financing of numerous clean energy projects under construction and discourage future clean energy investments in wind and solar,”