Colorado’s Renewable Energy Industries Brace For Shifting Winds On Tax Policy

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<p>(Hart Van Denburg/CPR News)</p>
<p><span style="color: rgb(64, 69, 64);">Wind t</span><span style="color: rgb(64, 69, 64);">urbines i</span><span style="color: rgb(64, 69, 64);">n Lincoln County, Colorado.</span></p>
Photo: Wind turbines in Lincoln County 6
Wind turbines in Lincoln County, Colorado.

Solar and wind have been fastest growing energy sources in United States in general, and in 2015 — the most recent year for which data is available — they made up nearly 20 percent of Colorado's energy mix.

Tax policy changes that affect the industry, from investors, to engineering and manufacturing of equipment, draw close scrutiny here.

When the tax overhaul package Republicans are pushing to get to President Trump’s desk before Christmas appeared to modify popular tax credits that have fueled the sector’s growth in the state, the renewable energy industry sat up and took notice.

Renewable’s growth has been fueled by declining costs of materials, and the tax credits, which help investors recoup up to a third of a project’s cost. When the Republicans took control of Congress and the White House, wind and solar advocates like the American Wind Energy Association worried the tax credit structure might change. In the version of the bill that came out of conference committee, the credits remain intact for now.

The credits for wind will phase out by 2020 and for solar by 2022. Both industries say that they have been preparing for this eventuality for years by cutting costs, but that changing the rules so suddenly in the current tax bill would have created major disruptions for projects that are already underway.

Multinationals And Electric Vehicles

There is another part of the tax bill that renewable advocates will watch closely. Under what's called the Base Erosion Anti-Abuse Tax (BEAT) provision, multinational companies will only be able to claim up to 80 percent of wind and solar tax credits, compared to 100 percent before. That’s concerning to nonprofits like the American Council on Renewable Energy. But the Colorado Solar Energy Industries Association points out that domestic companies won’t be impacted by the BEAT provision.

An initial version of the House bill also would have scaled back a popular federal tax credit for buying electric vehicles. That’s still in the bill. It means Coloradans will continue to have some of the best tax breaks for electric cars in the country — our state tax break of $5,000 can be added to a $7,500 federal tax break.

But tax-savvy bike commuters will see changes. They’ve been able to take advantage of current tax law which allows them exclude up to $20 a month from income for expenses related to regular commuting. Those expenses are no longer allowable under new bill.

Tougher Test For Fire

As the law now stands, you can write off losses from fire — house fires or wildfires — if they exceeded 10 percent of your gross income. The write off will only be available under the new law if the president officially declares a flood or fire disaster. The proposed change takes place in an environment in which climate change will drive bigger and more frequent wildfires, and people will have no control over whether wildfires get a White House declaration.

Outside of tax policy, solar advocates have something else to worry about in the year ahead in a case that’s been winding its way through the International Trade Commission: Most solar panels are made overseas and a few U.S. manufacturers are asking the federal government to impose tariffs, or taxes, on those panels. The ITC recommended less aggressive taxes, but President Trump appears to be a supporter of tariffs, which has caused uncertainty in the sector. The trade commissions could issue a decision by late January.