Although it initially appeared that the U.S. solar industry would remain relatively unharmed by Congress’ major tax overhaul efforts, the Solar Energy Industries Association (SEIA) and other energy groups have joined forces against obscure provisions found in the Senate tax bill.
On Wednesday, SEIA, the American Council on Renewable Energy (ACORE), the American Wind Energy Association (AWEA), and Citizens for Responsible Energy Solutions submitted a joint letter to the U.S. Senate raising urgent concerns about the Base Erosion Anti-Abuse Tax (BEAT) provisions in the Senate Tax Cuts and Jobs Act. According to these industry groups, the BEAT program, as currently drafted, would have a devastating impact on renewable energy investment and deployment.
As previously reported, the House of Representatives’ GOP tax bill, which passed earlier in November, took aim at the wind industry’s coveted production tax credit (PTC) but did little to change the current phase-down schedule of the solar industry’s investment tax credit (ITC). When the Senate GOP first released its own version of tax reform, both the solar and wind industries were relieved that the Senate bill left intact the phase-down extension deals brokered in 2015 for both the ITC and the PTC.
However, the aforementioned energy groups claim the BEAT provisions in the Senate bill could still greatly undermine renewable energy growth and incentives. As of press time, the Senate bill has advanced to a floor debate and could be voted on as early as today or Friday. Meanwhile, the energy groups are making their major concerns about the BEAT provisions known.
In a press release, ACORE CEO Gregory Wetstone explains, “Renewable tax credits, which are already phasing down, would be subject to a new 100 percent tax under the Senate bill, while the array of tax benefits for fossil fuels, in some cases more than 100 years old, remain untouched.
“If this bill passes as drafted, major financial institutions would no longer participate in tax equity financing, which is the principal mechanism for monetizing credits. Almost overnight, you would see a devastating reduction in wind and solar energy investment and development.”
Christopher Mansour, SEIA’s vice president of federal affairs, says in a statement, “As the letter states, the solar industry is deeply concerned about the BEAT provisions in the Senate tax bill. This could have far-reaching financial impacts for our industry and many others. For the sake of the continued growth of the solar industry here in America, we’re advocating – alongside several other organizations – for positive changes to be made before the bill leaves the Senate.”
SEIA says it is not offering additional comment at this time. However, the energy groups’ full joint letter to the Senate can be read below:
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.