Some Republicans are reconsidering the tax bill's attack on renewable energy

Vox

Lawmakers from states where wind and solar energy are booming want to preserve tax breaks for these industries.

Both the House and Senate versions of the Republican tax bill include provisions that threaten the wind and solar industries that are booming not just in California, but in red states like Texas, Wyoming, Kansas, and Iowa.

And as the Senate gets closer to a final vote, some Republicans are becoming squeamish about allowing those provisions through as they weigh their desire to cut taxes against wind and solar jobs for their constituents.

Texas, Wyoming, Kansas, and Colorado have become leaders in renewable energy and also benefit from federal incentives for electric cars and home efficiency upgrades.

But the GOP has to find ways to pay for its promised tax cuts — estimates price the current bills above $1 trillion. And so Republicans are scrambling to fill the void with ideas ranging from drilling in the Arctic National Wildlife Refuge to undoing tax breaks for renewable power.

At the same time, this hemming and hawing over clean energy incentives has stalled more than $20 billion in investment.

The tax cut bills raise taxes on renewable energy

The Senate version of the Republican tax bill undermines investment in wind and solar power, which now generate 7 percent of our electricity, while preserving billions in tax subsidies for fossil energy.

The main issue for renewables is a provision in the Senate bill called the Base Erosion Anti-Abuse Tax (BEAT). The measure is aimed at companies that move money offshore to lower their tax liability in the United States. The BEAT adds a 10 percent minimum tax on businesses that don’t include cross-border payments in their income calculations.

How does this affect renewables? In the United States, the main incentive for erecting wind turbines and mounting solar farms is a tax credit (wind developers use the production tax credit and solar uses the investment tax credit). By invoking these credits, renewable energy developers can drive their corporate tax rate below 10 percent.

For smaller companies that don’t have a large enough tax liability, they can market their excess credits to tax equity investors.

However, renewable energy projects often have multinational backers, so companies looking to bring in foreign financing may end up with a higher tax bill as they pay off creditors abroad, in some cases canceling out the tax subsidies altogether.

As the law firm McDermott Will & Emery put it, “Multinational tax equity investors reducing their US tax liability from cross-border affiliate payments may therefore find that investments in ITC and PTC eligible projects after enactment of the BEAT are much less attractive.”

Or as Sen. Ed Markey (D-MA) put it at a press conference on Wednesday, “it would kneecap clean energy.”

He added that the uncertainty of this provision has put investments in limbo, hampering an industry that would employ 500,000 Americans by 2020. The coal industry, by contrast, currently employs 50,000 people.

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https://www.vox.com/energy-and-environment/2017/12/13/16768074/tax-bill-renewable-energy-wind-solar-credits