Global Project Finance > Tax Equity Telegraph > Tax Reform: Renewable Energy’s Boogey Man
05 Feb '13

The boogey man (or is it boogey person in this era?) of the U.S. renewable energy industry is tax reform.  Tax reform proposals typically follow the approach of the Tax Reform Act of 1986: lower tax rates by broadening the base.  The translation of broadening the base includes the elimination of tax credits and accelerated depreciation.  As tax credits and accelerated depreciation can constitute two-thirds of the economic value of some projects, the renewable energy industry fears for its future prospects.

For the first time, the renewable energy industry appears to have a defender from the boogey person.  Brian Deese, the Deputy Director of the President’s National Economic Council, made a public statement acknowledging that special consideration needs to be given to renewable energy during the tax reform process: “the way that corporate tax reform gets done could have a dramatic effect, long-term, [on] the incentives for investment in the United States for ... technologies and renewable technologies.  We have got to keep an eye on those things and got to make that a priority.”

It is unclear what this assurance means.  Does it mean energy tax credits and accelerated depreciation for renewable technologies would be carved out of tax reform?  Does it mean the U.S. would adopt a European-style feed-in tariff (basically, a cash subsidy) in lieu of tax credits?  Or does it mean that some new tax benefit would be enacted in place of the current ones?

With these assurances, now at least when cocktail party chatter turns to the benefits of tax reform, those who support our industry do not have to stare at their feet and pretend the conversation is inaudible.