Law360 and Greentech Media Quote Greg Jenner on How Renewables Might Fare Under House Tax Reform Bill

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“There is a lot of hyperbole that goes into these discussions, and you have to weed through it to get to the reality,” said Jenner. “Will this be the end of the renewable energy industry? No. Will it have an effect? Yes, it will.” —Greg Jenner in Greentech Media article.
Tax attorney Greg Jenner was quoted in Law360 in an article titled “4 Energy Sector Takeaways From House Tax Reform Bill,” published November 3, 2017, and in Greentech Media in an article titled “How the House Tax Bill Would Impact Wind, Solar, Electric Vehicles and Utilities,” published November 8, 2017. The articles discuss implications for the energy industry in the recently released U.S. House tax reform bill.

Oil and gas companies will see the benefits of lower tax rates for both corporations and master limited partnerships along with the preservation of beneficial tax credits. However, the renewable energy industry is facing future and retroactive reductions, and other changes, in tax credits it relies on—the Production Tax Credit (PTC) for wind and Investment Tax Credit (ITC) for solar—and a negative impact on a popular form of financing from the lower corporate tax rate.

In the Law360 article, Jenner described the House tax proposal on the PTC as a “pure revenue grab”—it would eliminate the inflation adjustment for new wind projects that qualify for the PTC, currently at 2.4 cents per kilowatt-hour of electricity produced,  and restore the credit to a base amount of 1.5 cents per kilowatt-hour. “That's the [House Ways and Means Committee] simply trying to pull in revenue wherever it can, there's no policy basis for it,” he said.

The second proposal in the plan that would have a negative effect on wind developers is a change to the PTC requirements for “continuous construction,” which if enacted would mean that unless developers can prove continuous construction of a project, many that began construction in 2016 or earlier would no longer qualify for the full 2.4-cent credit.

Jenner doesn’t expect the proposed change will be included in the Senate tax plan, because U.S. law frowns upon retroactive changes in legislation. “Retroactive changes are offensive, from a policy standpoint, especially without any notice,” he said. 

The tax plan doesn’t make extensive changes to the solar ITC, except that instead of phasing the ITC down to its lowest level by 2022, where it would remain, it repeals it completely by 2027. However, the large proposed reduction of the corporate tax rate could reduce the appeal of tax equity financing, which is popular in the renewables industry and currently estimated at between 50 and 60 percent of the total capital investment in wind projects and between 40 and 50 percent of the total capital investment in solar projects.

“The value of the tax equity doesn't change, but the amount they need to shelter changes, therefore the amount they may be willing to invest in projects in order to shelter that tax liability may change," Jenner said. "It's going to depend on what their overall tax liability is, which is a function of rates, a function of depreciation income, as well as a cap on interest income.”

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