Renewable Energy Guide
It’s an exciting time with extraordinary potential for investors in renewable energy projects. Public support has never been higher and the majority of the largest companies in the United States continue to set increasingly ambitious clean energy targets. Federal, state and local governments are also continuing to diversify their energy supplies to reduce carbon emissions
While demand for renewable energy remains high, there’s increasing uncertainty in the market. Decreasing cost structures and more efficient technologies have created new challenges—such as reduced motivation for some governmental agencies to subsidize development—along with more viable renewable energy platforms that offer substantial opportunity.
There are three particularly compelling reasons why investing in renewable energy projects and pursuing the associated tax incentives continues to be a smart financial strategy.
Private and public-sector corporate investment in renewables has never been higher. Progressive-minded corporations see investing in renewable energy projects as a tax-savvy, socially responsible initiative. Annually, more than half of all Fortune 100 companies set clean energy targets and almost half of all Fortune 500 companies do too, according to the World Wildlife Fund.
Federal, state, and local governments encourage investment in renewables to help diversify their energy supply and reduce carbon emissions. Wind and solar are the most advanced renewable energy technologies in terms of existing or near-term power generation, industry maturity, and financial incentives, so they tend to receive the most investment.
Demand for more renewable energy from the general public is also at an all-time high. The majority of Americans prioritize developing alternative energy over fossil fuels, according to studies by the Pew Research Center.
The wind and solar industries breathed a sigh of relief when President Trump signed tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (TCJA), on December 22, 2017. The TCJA reflects numerous compromises by Congress that differ from initial plans proposed by the House of Representatives, encouraging capital investment—including domestic energy development and production—in the United States.
The TCJA doesn’t affect provisions in the Protecting Americans from Tax Hikes Act (PATH Act). While the wind and solar industries welcomed this news, many forms of renewable energy were excluded from targeted incentives.
The president signed the Bipartisan Budget Act of 2018, referred to as the Budget Act, only weeks after signing the TCJA into law. The Budget Act was pushed forward to avoid government shutdown. While the PATH Act and the TCJA neglected many forms of renewable energy, the Budget Act extends some expired energy-related tax credits for many non-wind and solar renewable resources.
This guide explores how tax reform and the Budget Act compare to previous provisions as well as tax reform provisions that apply to renewable energy. On page 16, we’ve included a section that discusses some additional TCJA provisions applicable to renewable energy.
Early in 2017, the Trump administration and current Republican-controlled Congress signaled they might pursue a less friendly path for renewable energy development. Previous tax reform proposals included provisions to either terminate or phase out some wind and solar incentives that President Obama signed into law in 2015 with the PATH Act.
In previous tax reform proposals, existing wind- and solar-specific incentives were eliminated in favor of a broad—but less lucrative—renewable energy-based incentive. Factions in Congress backed these proposals, claiming that wind and solar industries had matured and no longer needed the same level of federal subsidization. They stated that the government should instead encourage all forms of renewable energy development.
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