Wind power a winner in Obama tax revamp

Posted by Pete Danko, EarthTechling

President Obama wants to lower the corporate tax rate while eliminating numerous loopholes.

However, reflecting his interest in promoting renewable energy, the administration's recently released "Framework for Business Tax Reform" would make permanent and enhance a key tax break that the wind power industry must now wage periodic lobbying campaigns to retain.

Wind power a winner in Obama tax revampThe proposal put forward last week by U.S. Treasury Secretary Timothy Geithner is broad but thin, leaving many details to be worked out by Congress.

And the conventional wisdom in Washington is that in this election year, chances are approximately zero that a major overhaul becomes reality.

But the plan demonstrates again that President Obama continues to see promoting clean energy production as a chief priority, and distinguishes him from his potential Republican rivals.

Under the proposal [PDF], the tax code's bias toward fossil fuels would be eliminated. "The tax code currently subsidizes oil and gas production through tax expenditures that provide preferences for these industries over others," the document reads. "The Framework would repeal tax preferences available for fossil fuels."

Meanwhile, wind would get a big boost. "The President's Framework would make permanent the tax credit for the production of renewable electricity, in order to provide a strong, consistent incentive to encourage investments in renewable energy technologies like wind and solar," reads the proposal.

The production tax credit (PTC) actually doesn't aid solar power—but it is hugely important to the wind power industry.

This 2.2-cents per kilowatt-hour subsidy for wind power production has been in effect for eight consecutive years now, but only because Congress voted several times to extend it in two-year increments.

Due to expire again at the end of this year, the wind industry - joined by other beneficiaries - is lobbying furiously to keep the PTC in place. Proponents say investment is already falling by the wayside because of uncertainty about the future. As the administration put it, the every-two-year approach "has created an uncertain investment climate, undermined the effectiveness of our tax expenditures, and hindered the development of a clean energy sector in the United States."

The Obama proposal would eliminate that uncertainty, and do even more for wind. Under its longtime format, companies can only to offset taxes owed. But the proposed reform would make the PTC refundable, meaning that if a company didn't owe taxes, the Treasury would cut it a check for 2.2 cents for every eligible kilowatt-hour of energy produced. This, the administration said, would help companies avoid "inefficient tax planning through tax equity structures."

Pete Danko, EarthTechling