Wind, solar energy built on temporary tax breaks
By JIM ABRAMS, Associated Press Writer Sun Aug 31, 9:28 AM ET
WASHINGTON - Congress is putting the short-term future of renewable energy
companies in jeopardy even as the presidential candidates and most lawmakers
hail windmills, solar panels and biofuels as long-term solutions to high
gasoline prices and global warming.
Some $500 million in investment and production tax credits will expire
Dec. 31 unless Congress renews them. Without that help, solar and wind power
companies say they will reverse planned expansions and, in many cases, cut
payrolls and capital investment.
Schott Solar has visions of quadrupling its operation in Albuquerque, N.M.,
to reach 1,500 jobs and $500 million in investment. But the investment tax
credit, company spokesman Brian Lynch said, is what makes solar power
cost-competitive. Without it, expansion plans must be reconsidered.
"We don't want to build a giant factory that the market doesn't need or
want," Lynch said.
The Solar Energy Industries Association says some 20 utility-scale solar
power plants, many in California and together capable of producing power for
a million homes, are at risk because of the uncertainty in Congress.
Proponents of wind power, a nascent industry that relies on skittish
investors, are in a similar predicament. Greg Wetstone of the American Wind
Energy Association says his group is predicting a loss of 76,000 jobs and
$11.4 billion in investment if Congress allows its production tax credit to
expire.
"Investors like to know what tax policies apply when they are putting
millions of dollars down on a project. There's a pretty clear history that
these projects are less likely to go forward without a credit," he said.
Congress let the credit expire in 2000, 2002 and 2004. In those three years,
wind capacity installation dropped 93 percent, 73 percent and 77 percent,
respectively, from the previous year.
Navigant Consulting, which advises on renewable energy technology, estimated
that investments in wind and solar power in 2009 would amount to $26.6
billion with the credits; that would fall to $7 billion without them.
The credits are expected to total $334 million, according to congressional
estimates.
"These companies are shutting down projects, firing people and it's
Congress's fault," said Sen. Jeff Bingaman, D-N.M., chairman of the Senate
Energy and Natural Resources Committee.
Investment tax credits, available to homeowners and businesses that invest
in solar power equipment, and the production tax credit, based on kilowatt
hours of energy produced by wind, geothermal, biomass and other renewables,
are only two of dozens of temporary tax breaks that die out after a year or
two if Congress does not revive them.
This year Congress is considering tax-extenders worth more than $50 billion
over the next decade. The production tax credit would cost $7 billion and
two solar investment credits would cost $2.7 billion over 10 years.
In addition to breaks for renewable energy and energy conservation, several
dozen other tax breaks are targeted to businesses and individuals. They
include people paying state and local sales taxes; parents with higher
education tuition costs; and teachers with out-of-pocket expenses.
Almost all the provisions are popular. But Senate Republicans have blocked
consideration of tax-extender plans by Senate Finance Committee Chairman Max
Baucus, D-Mont. GOP lawmakers are protesting efforts to offset the costs
with other taxes or other items attached to the proposals. In the House,
conservative Democrats promise to block any extension that adds to the
deficit.
That's nothing new.
In 2006, Congress did not come together on a tax-extender deal until
December, forcing the Internal Revenue Service to delay processing returns
claiming several of the tax breaks. In 2007 Congress never agreed on
extenders and again waited until December, causing more IRS disruption, to
settle another annual tax crisis, the alternative minimum tax.
That tax was, enacted 40 years ago, was supposed to keep a tiny number of
very rich people from avoiding taxes. But it never was adjusted for
inflation and now reaches into the pockets of 4 million people, mainly upper
middle-income. Millions more are threatened every year until Congress steps
in, usually at the last possible moment. The Baucus bill has provisions to
keep those affected by the tax from growing to 25 million, at a cost of $61
billion over the next decade.
"A big part of the problem is uncertainty," said Marie Lee, a tax analyst
with the American Electronics Association. "Our companies are getting tired
of this game."
The biggest concern for high-tech companies and manufacturers is the
research and development credit, which expired at the end of last year. Some
17,700 corporations claimed $6.6 billion in credits in 2005, according to a
recent study by Ernst & Young LLP. About 70 percent of that went to pay
wages of scientists and engineers.
The credit has been allowed to expire 13 times since it was adopted in 1981.
One repercussion, said Monica McGuire, executive secretary of the R&D Credit
Coalition, is that more companies are taking their research dollars
overseas.
"It's a global race for R&D dollars," she said, and the odds are not good
when at least 20 developed nations offer tax incentives and the United
States currently has nothing.
Putting expiration dates on tax breaks is a useful budget gimmick for
lawmakers seeking to mask the growing federal budget deficit.
Because they are set to expire at a certain date by law, they do not count
as revenue losses after that date even though most people assume Congress
eventually will act to extend them. The Bush tax cuts of 2001 and 2003 are
the biggest extenders of all in this respect. Trillions of dollars will be
added to the federal debt if Congress chooses to make them permanent after
they are set to expire in 2010.
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On the Net:
Summary of the latest Senate extender bill:
http://tinyurl.com/6xm3fw
Schott Solar:
http://www.schott.com/solar
Solar Energy Industries Association:
http://www.seia.org/
American Wind Energy Association:
http://www.awea.org/
R&D Credit Coalition:
http://www.investinamericasfuture.org/
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