Quantcast

Senate Tax Bill Could Be 'Devastating' to Wind and Solar Power

Renewable Energy
Black Rock Solar photovoltaic array. BlackRockSolar / Flickr

The tax bill barreling towards a vote in the Senate already includes a worrisome rider that would open up the pristine Arctic National Wildlife Refuge to oil and natural gas drilling.

Now, renewable energy trade associations are raising the alarm about an eleventh-hour provision called the Base Erosion Anti-Abuse Tax (BEAT) program that "would have a devastating, if unintended, impact on wind and solar energy investment and deployment," according to a letter addressed to the Senate.


The BEAT provisions "undermine our capacity to use renewable energy tax credits, which have value only if they can be monetized," a letter, signed by the Solar Energy Industries Association, the American Council on Renewable Energy, American Wind Energy Association and Citizens for Responsible Energy Solutions, warned.

As Utility Dive explained, while the BEAT provision is meant to make it harder for corporations to dodge taxes, it also renders impractical the monetization of the Production Tax Credit (PTC) for wind power projects and the Investment Tax Credit (ITC) for solar projects.

Tax credits have fueled the renewable energy industry's boom. The current PTC and ITC allows developers to deduct 30 percent of the cost of installing a solar or wind energy system from their federal taxes.

Greg Wetstone, president and CEO of the American Council on Renewable Energy, told Utility Dive that the BEAT provision would affect $50 billion in annual investment in renewable energy projects.

"This should not be happening now," he said. "It came out of nowhere." Apparently, the provision was inserted on Thanksgiving eve during a last-minute markup of the tax bill in the Senate finance committee.

Greentech Media delved further:

That problem is the Base Erosion Anti-Abuse Tax (BEAT) provision, which targets "earnings strippings," where large companies with foreign operations reduce their tax bills through cross-border payments they can then deduct in the U.S. The BEAT provision aims to circumvent that stripping with a minimum tax of 10 percent of taxable income.

BEAT would require every company to do two calculations: one quantifying 10 percent of a company's taxable income, including cross-border payments, and another quantifying the corporation's tax liability, excluding any tax credits the company received from tax equity investments.

The BEAT provision applies to all but R&D credits. If a company has invested in renewables, the second number could be lower than the first. If that's the case, the company would have to pay the difference in taxes.

"This is Defcon One," Wetstone also told TIME. "It would simply undermine the financial structure that is critical for renewable energy and bring a booming sector to a halt."

Environmental groups have also spoken out against the heavily contested tax bill.

Michael Brune, executive director of the Sierra Club, condemned the House version "for [gutting] incentives for renewable energy and electric cars while ignoring the tens of billions of dollars the government hands out to fossil fuel corporations (which, of course, would also see their taxes slashed)."

Here's the letter from the renewable energy trade groups in full:

We are writing on behalf of the thousands of leading investors, developers, manufacturers, and corporate energy consumers in the U.S. renewable energy sector to alert you to urgent concerns with the Base Erosion Anti-Abuse Tax (BEAT) provisions in the Senate Tax Cuts and Jobs Act. As drafted, the BEAT program would have a devastating, if unintended, impact on wind and solar energy investment and deployment.

While we are grateful that the Senate tax proposal leaves the current phase-down schedules for wind and solar energy tax credits unchanged, the bill's BEAT provisions undermine our capacity to use renewable energy tax credits, which have value only if they can be monetized. For multi-national companies covered under the BEAT provisions, the renewable tax credits would, as drafted, be subject to a new 100 percent tax. 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. The tax equity marketplace would collapse under these provisions, leading to a dramatic reduction in wind and solar energy investment and development.

It is important to note that, while the BEAT provisions are intended to promote U.S. investment and job growth, the program's treatment of renewable energy tax credits – which are generated exclusively through investment in U.S. projects – would have the opposite impact, dramatically reducing American wind and solar energy investment and job creation. These sectors are important national economic drivers, generating nearly $50 billion in annual U.S. investment.

It is also extremely problematic that the BEAT provisions apply retroactively to tax credits generated by operating, as well as new, projects, and would penalize 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. We do not believe it fair or appropriate for Congress to reduce the value of tax incentives that have been relied upon in good faith by investors and developers. Such a result is especially concerning in this case, given that the wind and solar power sectors agreed to the phase-down of their own tax credits as part of the bipartisan compromise captured in the PATH Act of 2015.

We respectfully, and urgently, ask that the BEAT program be amended to exempt the production and investment tax credits from the calculation of the base erosion tax, just as the research and development tax credit is exempted from the provision in the current draft. Please feel free to let us know if we can provide additional information regarding any aspect of this issue.

EcoWatch Daily Newsletter

Individual standing in Hurricane Harvey flooding and damage. Jill Carlson / Flickr / CC BY 2.0

By Allegra Kirkland, Jeremy Deaton, Molly Taft, Mina Lee and Josh Landis

Climate change is already here. It's not something that can simply be ignored by cable news or dismissed by sitting U.S. senators in a Twitter joke. Nor is it a fantastical scenario like The Day After Tomorrow or 2012 that starts with a single crack in the Arctic ice shelf or earthquake tearing through Los Angeles, and results, a few weeks or years later, in the end of life on Earth as we know it.

Read More Show Less
A pregnant woman works out in front of the skyline of London. SHansche / iStock / Getty Images Plus

Air pollution particles that a pregnant woman inhales have the potential to travel through the lungs and breach the fetal side of the placenta, indicating that unborn babies are exposed to black carbon from motor vehicles and fuel burning, according to a study published in the journal Nature Communications.

Read More Show Less
Sponsored

Teen activist Greta Thunberg delivered a talking-to to members of Congress Tuesday during a meeting of the Senate Climate Change Task Force after politicians praised her and other youth activists for their efforts and asked their advice on how to fight climate change.

Read More Show Less
Ten feet of water flooded 20 percent of this Minot, North Dakota neighborhood in June 2011. DVIDSHUB / CC BY 2.0

By Jared Brey

When Hurricane Michael tore through the Florida panhandle last October, it killed at least 43 people, caused an estimated $25 billion in damage and destroyed thousands of homes.

Read More Show Less
A protestor holds up her hand covered with fake oil during a demonstration on the U.C. Berkeley campus in May 2010. Justin Sullivan / Getty Images

The University of California system will dump all of its investments from fossil fuels, as the Associated Press reported. The university system controls over $84 billion between its pension fund and its endowment. However, the announcement about its investments is not aimed to please activists.

Read More Show Less
Sponsored
Forest fire continues to blaze in Indonesesia on Sept. 18. WAHYUDI / AFP / Getty Images

Nearly 200 people have been arrested in Indonesia over their possible connections to the massive wildfires raging in the nation's forest, officials said this week.

Read More Show Less

By Ngozi Okonjo-Iweala

World leaders have a formidable task: setting a course to save our future. The extreme weather made more frequent and severe by climate change is here. This spring, devastating cyclones impacted 3 million people in Mozambique, Malawi and Zimbabwe. Record heatwaves are hitting Europe and other regions — this July was the hottest month in modern record globally. Much of India is again suffering severe drought.

Read More Show Less
Covering Climate Now / YouTube screenshot

By Mark Hertsgaard

The United Nations Secretary General says that he is counting on public pressure to compel governments to take much stronger action against what he calls the climate change "emergency."

Read More Show Less