When the initial House and Senate versions of tax reform were made public, the solar industry breathed a collective sigh of relief.
Despite the Trump Administration’s preference for fossil fuels and nuclear power, there appeared to be no provisions to change the step-down of the U.S. solar Investment Tax Credit (ITC) for solar substantially, at least until 2027.
It turns out that the devil was again in the details. Buried in the Senate tax bill is a provision called Base Erosion Anti-Abuse Tax (BEAT), which renewable energy trade organizations are warning could render impractical monetization of the ITC and Production Tax Credit (PTC) for wind. This in turn could have a “devastating impact on wind and solar energy investment and deployment”, according to major renewable energy trade organizations.
A letter by Solar Energy Industries Association (SEIA) American Council on Renewable Energy (ACORE), American Wind Energy Association and Citizens for Responsible Energy Solutions warns that the ITC and PTC would be subject to a new 100% tax for multi-national corporations covered under the BEAT provisions.
“Not surprisingly, major financial institutions have indicated that, under such a regime, they would no longer participate in tax equity financing, the principle mechanism for monetizing credits,” reads the letter. “The tax equity marketplace would collapse under these provisions, leading to a dramatic reduction in wind and solar energy investment and development.”
But it actually gets worse. The organizations note that the BEAT provisions would apply retroactively to tax credits on operating as well as new projects, thus punishing companies that have relied on the tax code. “Companies holding tax credits would do their best to sell them immediately, even at great discounts, a phenomenon that would flood the marketplace and further damage tax equity markets,” the letter adds.
The four organizations note that research and development tax credits are currently exempt from provisions in the current draft and are calling on the U.S. Senate to ask that the BEAT program be amended to exempt the PTC and the ITC.
There is little time to spare. The tax bill could come to a full Senate vote as early as tomorrow, following a 12-11 vote on the bill in the Senate Budget Committee, which predictably fell upon party lines.
For more information, an analysis of the effect of the BEAT provision on tax equity is provided by law firm Norton Rose Fulbright.
Read the full letter here:
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Please fight this… We cannot go backwards in our journey towards clean energy..!
Does the BEAT provision have any impact on the residential energy tax credit?
All business should be taxed equally. Renewable energy can enjoy the corporate tax rate that the rest of business pays. Doing away with the PTC and other such programs is fiscally responsible. I support the tax bill. Level there playing field.
If we wanted to “level the playing field”, we would have to eliminate all of the tax breaks enjoyed by the oil and gas industry – which this bill does not do. We would also have to eliminate the entire portion of the U.S. Department of Energy budget that pertains to nuclear power, as well as repealing the Price-Anderson Act which provides insurance for nuclear projects, underwritten by taxpayers.
We would also have to remove the legacy benefits of 60 years of nuclear industry subsidized R&D, waste disposal, development assistance, etc., as well as 100+ years of benefits to the coal, oil and gas industries. Which is impossible.
Electricity generation is both subsidized and highly regulated at many different levels. I would like to say that your comment provides a novel perspective; however it does not. It merely restates bogus free-market fundamentalist mythologies which have been an excuse for the dominance of incumbent industries and for failures to act to accelerate the best and most actionable path that we have to decarbonize electricity.