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.
Senate Finance Committee Chairman Orrin Hatch recently released his Chairman’s Mark of the Tax Cuts and Jobs Act (Senate Proposal) in advance of the Senate Finance Committee markup scheduled to begin today. The Senate Proposal differs from the House version of the Tax Cuts and Jobs Act (House Proposal), which we discussed in our blog post here.
Key Points of the Senate Proposal:
- The Senate Proposal is silent on renewable energy credits, preserving the current 2.4¢/kWh PTC for wind and the PTC and ITC expiration dates and phase-out schedules agreed to at the end of 2015 under the “Protecting Americans from Tax Hikes Act.” The House Proposal slashes the PTC to 1.5¢/kWh, removes the inflation adjustment and imposes a statutory continuous construction requirement that may eliminate the four year safe harbor that wind developers rely on under IRS guidance. The Senate Proposal would also keep in place the permanent 10% solar ITC that applies to projects that begin construction after 2021 or are placed in service after 2023.
On November 3rd, House Ways and Means Committee Chairman Kevin Brady (R. Tex.) released the “chairman’s mark” to H.R. 1, the “Tax Cuts and Jobs Act” (TCJA). The TCJA represents the most extensive rewrite of the Internal Revenue Code in the last 30 years. The Ways and Means Committee is expected to begin reviewing the TCJA in the coming days with the intention of sending it to the House for a vote before the Thanksgiving recess. The Senate Finance Committee is expected to release its draft of tax reform legislation during the coming week.
While we believe it is unlikely that the TCJA will become law in its current form, the proposed legislation certainly creates both concerns and relief for the renewable energy industry. We note the following:
After hearing days of arguments and considering dozens of filings from solar companies both opposed to and in support of trade action, the U.S. International Trade Commission (ITC) today recommended tariffs on imported solar modules of as much as 35 percent. After unanimously voting on Sept. 22 that the U.S. domestic industry was seriously injured by the imports, each commissioner today offered different remedy proposals to be included in a final report to President Trump. The report will be made public “promptly” after its submission, according to Section 201 of the Trade Act of 1974. President Trump will then make a decision on the form and extent of remedies to impose.
While safeguard investigations such as the present case are not country-specific and can lead to a ban on all imports of crystalline silicon photovoltaic cells and modules for up to four years, the ITC’s recommendations fell short of what the petitioners, Suniva and SolarWorld, requested.
Federal Energy Regulatory Commission (“FERC”) has issued a declaratory order confirming that no approval under Section 203 of the Federal Power Act (“FPA”) is required in connection with the transfer or issuance of passive tax equity interests in public utilities or public utility holding companies.
Under Section 203, FERC’s prior authorization is required “if a public utility wishes to sell, lease or otherwise dispose of jurisdictional facilities,” which, as FERC previously ruled, includes a transfer of control over such facilities. FERC has now confirmed that passive tax equity interests do not constitute voting securities, and thus do not grant their holder control, for the purposes of Section 203 analysis.