President Trump Signs Tax Cuts and Jobs Act into Law

Today, President Trump signed the $1.5 trillion Tax Cuts and Jobs Act (TCJA) into law, marking the first major overhaul of the U.S. tax code in over 30 years.

As we discussed in our prior blog post here, the TJCA is a mixed bag for the renewable energy industry. On one hand, it cuts the tax rate and provides for 100% expensing for both new and used property. However, on the other hand, it limits interest deductions and includes a complicated new base erosion anti-abuse tax (BEAT) that could claw back tax credits from multinational tax equity investors.

BREAKING NEWS: Congress Sends Tax Cuts and Jobs Act to President Trump’s Desk for Signing

The Tax Cuts and Jobs Act (TCJA) has been passed by both houses of Congress and is now set to be signed into law by President Trump. The vote was 224-201 in the House with all the Democrats joined by twelve Republicans voting “no” and 51-48 in the Senate along party lines. Although the TCJA isn’t exactly great news for the renewable energy industry, it is far better than what was originally proposed in the House and Senate bills. Here are the main takeaways:

  • PTC Inflation Adjustment – The TCJA preserves the current 2.4¢/kWh PTC amount for wind with an annual inflation adjustment. The House bill would have reduced the PTC to 1.5¢/kWh with no annual inflation adjustment.
  • ITC Phase-out Schedule – The TCJA does not eliminate the permanent 10% solar ITC beginning 2023.
  • Continuous Construction Requirement – The TCJA does not include the statutory continuous construction requirement that was included in the House bill. Despite clarification from the House, which we blogged about here, there was some concern as to whether the House bill would eliminate the four-year safe harbor that wind developers rely on under IRS guidance.

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Senate GOP Pass Tax Bill

Senate Republicans passed along party lines the most sweeping rewrite of the tax code in decades early Saturday morning. A copy of the bill, which was unveiled just hours before the vote, is available here.

The House will vote today on a motion to go to conference with the Senate to iron out the differences between the Senate’s bill and the bill that the House passed last month. A resulting conference report must then be passed by each chamber before putting the final bill on President Trump’s desk, which GOP leaders hope to do before Christmas. Republicans in the House and Senate are confident that the differences between the two bills are not irreconcilable. However, there are some notable differences: how the estate tax will be handled, when certain tax cuts will expire, repealing the individual mandate under Obamacare, the treatment of pass-through businesses, education incentives and medical expenses, just to name a few. There are also differences with respect to renewable energy incentives, which we discussed in our prior blog post here.

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House Passes Tax Cuts and Jobs Act

Yesterday, the House passed the Tax Cuts and Jobs Act (TCJA) along party lines. As we discussed in our prior blog post here, the TCJA extends the ITC with respect to certain “orphaned” technologies (e.g., fiber optic solar, fuel cell, small wind, micro turbine, CHP, and thermal energy) but it slashes the PTC down to 1.5¢/kWh with no annual inflation adjustment. The ball is now in the Senate’s court where the Senate Finance Committee voted its version of the bill, which does not impact the PTC, onto the floor late last night. (Our blog post on that bill is available here). Senate Republicans have a much slimmer majority to work with; just three defections will torpedo the bill. Assuming the Senate approves the bill, a conference committee will meet after Thanksgiving to hammer out the differences between the two versions of the legislation and that’s when the fate of the PTC will ultimately be decided.

Ways and Means Clarifies Wind Can Rely on Start of Construction Safe Harbors

Last week we wrote in our blog that the House Tax Cuts and Job’s Act (TCJA) appeared to override IRS guidance that wind developers relied on to show that they started construction on a wind farm in order to take advantage of the PTC. In response to industry groups, the Ways and Means Committee clarified yesterday in their report (see page 296) that the statutory “continuous construction” requirement in the TCJA is intended to codify prior IRS guidance including the safe harbors.