Photo via the Oregonian
Renewable Tax Incentives Gone Wild?
As much as we tout the importance of government support for the fledgling renewable energy industries like wind and solar, recent revelations in Oregon point out how these can get out of hand, and become a mess, fast. Until now, Oregon has had a generous business energy tax credit available designed to help its renewable energy sector. But due to the program's massive popularity, curious loopholes, and apparent inefficiency, the state has voted to cut back on the credit. After all, the retail mammoth Walmart had raked in $11 million dollars by taking advantage of it--without ever touching a solar panel or a wind turbine.Clean Energy Tax Credit Abuse?
Here's what happened with Wal Mart, according to the Portland Oregonian:
Walmart took advantage of a provision in Oregon's Business Energy Tax Credit that allows third parties with no ties to the green power industry to buy the credits at a discount and reduce their state income tax bills.And guess who picked up the tab for that cool 11 mil? The state taxpayers, of course. While the move definitely spurred investment in renewable energy, it did so at a phenomenally inefficient rate--and it handed over a sizable profit to the largest retailer in the world as reward for having good lawyers.
State records show Walmart paid $22.6 million in cash last year for the right to claim $33.6 million in energy tax credits. The cash went to seven projects, including two eastern Oregon wind farms and SolarWorld's manufacturing plant in Hillsboro. In return, Walmart profits $11 million on the deal because that's the difference between what it paid for the tax credit and the amount of its tax reduction.
And this example, as well as a series of other revelations about overuse and seeming abuse (Costco was another big company to capitalize) that came to light thanks to an investigation done by the Oregonian, has led the state to reign in the tax credit. The only culprit wasn't shady tax maneuvering--part of the problem was that the program was just so popular that the state couldn't afford to pay out all the legitimate applications for renewable energy tax breaks (though closing the loopholes that divert millions to giant corporations would probably make that easier).
Will Renewables Suffer?
It does seem that the reigns may be getting drawn too tight to overcompensate for the backlash--the tax incentive for wind power, for instance, is getting axed altogether. It is too bad to see a program that had a major positive impact--many renewable companies attribute their success to the credits--getting scaled back. But some adjustment was certainly necessary--Oregon's budget is strapped (so much so that its residents actually voted for a tax increase). Let's hope lessons learned from this legislation can help streamline the shaping of future tax incentives for renewables.
H/T Green Inc.
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