New Hampshire, USA — This week House Ways and Means Committee Chairman Dave Camp (R-MI) announced his version of draft legislation to simplify the U.S. tax code, dubbed the “Tax Reform Act of 2014,” which has some decidedly negative implications for renewable energy — that is, if any of it makes it through Congressional compromise.
Broader tax reform is anticipated by just about everyone, but as always the current tax-code complexity means that the devil’s in the details. Lee Peterson, senior manager at CohnReznick, offered a summary of Camp’s draft proposal, which don’t offer any warm embrace for renewables: across-the-board repeals and phaseouts of renewable energy provisions, including a nod to what it claims is the wind industry’s own admission that it can live with a 40-percent-reduced credit production tax credit. It also guts provisions and tax credits for biofuel/renewable diesel, energy efficiency, carbon sequestration — even nuclear, gas, coal, and oil. The proposal also would limit master-limited partnerships to fossil fuels only, keeping that door firmly shut to renewable energy financing options. It also clarifies the definitions around a real-estate investment trust (REIT) which partly shuts out solar and wind; the door might still be open under a “good asset” definition, but that’s not clear.
Despite all that, it’s important to keep in mind that this proposal, like the Baucus one in December, is extremely preliminary, a long way from any semblance of what might work its way through extensive Congressional compromise. (This Camp proposal especially has some especially partisan language and leanings that make it especially unlikely to sail through; even House Speaker Boehner reportedly is keeping it at arms’ length.) It’s extremely unlikely that either will gain much traction during this election year, which means a 2015 timeframe at best. By then both Baucus and Camp will have moved on and new legislative leaders will be in place likely with their own proposals and agendas.
Not surprisingly, renewable energy groups aren’t wild about having their incentives essentially erased. The solar investment tax credit’s anticipated stepdown from 30 percent down to 10 percent after 2016 will be painful, but some in industry have suggested it won’t be a death knell for some segments of the market. Nevertheless, “the enormous success of the [ITC] should be unquestioned,” responded Ken Johnson from the Solar Energy Industry Association (SEIA), noting it’s been a key factor in what has been a record-setting upswing in solar the past year and a half, providing nearly 150,000 jobs and tens of billions of dollars into the economy. “The facts speak for themselves […] Smart public policies like the solar ITC are paying huge dividends for America and should be continued.”
Without a national energy policy and emphasis on carbon reduction, production and investment incentives — and changing them to be technology neutral and performance-oriented — remain essential to creating a level playing field, stated Bob Cleaves, president/CEO of the Biomass Power Association. “The proposal released yesterday would have the unintended consequences of stifling renewable energy growth in an already challenging climate.”
Lead image: Search for direction, via Shutterstock