Tax Reform Goes to the President: How Did Renewables Fare?
Tax Reform Goes to the President: How Did Renewables Fare?
On December 20, 2017, the U.S. House of Representatives voted to send the Tax Cuts and Jobs Act (the “Act”) to the president for his signature, which is the final step required to make the Act effective. What does the final bill mean for the renewable energy industry? The Investment Tax Credit (“ITC”) and the Production Tax Credit (“PTC”) appear to remain unchanged (for now) and the Base Erosion and Anti-Abuse Tax (aka, the BEAT or International AMT) in the final version of the Act is better for the renewables industry than in previous iterations. Nevertheless, a handful of other provisions may significantly impact the renewable energy industry.
But Investment in Renewable Projects May Soften, Especially by Multinational Banks
Assuming that the president signs the Act, the U.S. maximum federal corporate income tax rate will be reduced to 21%. This reduction will generally increase returns to investors on operating projects but will also generally reduce the value of the PTC and ITC in that investors will not need as many credits to reduce their final tax bill. In addition, the reduction may extend flip date calculations that do not assume a fixed income tax rate. While the Act will also eliminate the corporate alternative minimum tax, this change should not affect investor credit appetite.
The Act also brings back 100% bonus depreciation deductions — for a time. Although subject to certain restrictions, the new version of 100% bonus depreciation will be available for qualified property placed in service prior to 2023. Bonus depreciation will also be available at steadily reducing rates for qualified property placed in service through 2026. Like the reduced corporate income tax rate, bonus depreciation may increase returns to investors, but in the last several years, many of the larger investors have elected out of bonus depreciation, indicating that this provision may have limited effect in some portions of the renewables industry. In addition, the new limitations on net operating loss deductions may cause some investors to more carefully assess their appetite for depreciation deductions.
However, the Act also includes several provisions that may hurt some investors.
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Comment
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Comment by Robert Powers on December 23, 2017 at 3:33pm
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...and the wind companies and investors are drinking champagne and having a Hallelujah break down...this is exactly what they wanted...too bad for Maine and other states....
The people who put finance packages together are very creative and will use all of the benefits, including bonus depreciation. You will also see "corporations" being formed and making the investments in order to take advantage of the new lower corporate tax rate...
They are shrewd...the flood gates have been opened.
Maine as Third World Country:
CMP Transmission Rate Skyrockets 19.6% Due to Wind Power
Click here to read how the Maine ratepayer has been sold down the river by the Angus King cabal.
Maine Center For Public Interest Reporting – Three Part Series: A CRITICAL LOOK AT MAINE’S WIND ACT
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(excerpts) From Part 1 – On Maine’s Wind Law “Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine if the law’s goals were met." . – Maine Center for Public Interest Reporting, August 2010 https://www.pinetreewatchdog.org/wind-power-bandwagon-hits-bumps-in-the-road-3/From Part 2 – On Wind and Oil Yet using wind energy doesn’t lower dependence on imported foreign oil. That’s because the majority of imported oil in Maine is used for heating and transportation. And switching our dependence from foreign oil to Maine-produced electricity isn’t likely to happen very soon, says Bartlett. “Right now, people can’t switch to electric cars and heating – if they did, we’d be in trouble.” So was one of the fundamental premises of the task force false, or at least misleading?" https://www.pinetreewatchdog.org/wind-swept-task-force-set-the-rules/From Part 3 – On Wind-Required New Transmission Lines Finally, the building of enormous, high-voltage transmission lines that the regional electricity system operator says are required to move substantial amounts of wind power to markets south of Maine was never even discussed by the task force – an omission that Mills said will come to haunt the state.“If you try to put 2,500 or 3,000 megawatts in northern or eastern Maine – oh, my god, try to build the transmission!” said Mills. “It’s not just the towers, it’s the lines – that’s when I begin to think that the goal is a little farfetched.” https://www.pinetreewatchdog.org/flaws-in-bill-like-skating-with-dull-skates/
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Hannah Pingree on the Maine expedited wind law
Hannah Pingree - Director of Maine's Office of Innovation and the Future
"Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine."
https://pinetreewatch.org/wind-power-bandwagon-hits-bumps-in-the-road-3/
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