61 RI Bar J., No. 6, Pg 7. The Present and Future of Energy Tax Credits.

• Author: Elliot Taubman, Esq.

Rhode Island Bar Journal

Volume 61.

61 RI Bar J., No. 6, Pg 7.

The Present and Future of Energy Tax Credits

Rhode Island Bar Journal61 RI Bar J., No. 6, Pg 7May/June 2013The Present and Future of Energy Tax CreditsElliot Taubman, Esq.On January 1, 2013 Congress passed a new fiscal cliff tax law.(fn1) For the energy sector, there was not much change, except extensions of time for promotional tax incentives and changes in tax rates. There are also non-tax changes in the law affecting energy decisions. The major points are: * Most tax credits for renewable energy are continued, at least until the end of 2013. * The deadline for beginning construction was liberalized, but ends on December 31, 2013, at least for wind power projects. * Residential energy efficiency credits are continued but at a lower level. * Bio-fuel credit still exists, but is cut back. * The credits for conventional fuel are continued. * The domestic production (9%) deduction for construction is continued. * The relationship between state and federal law is not directly affected, but is indirectly affected, by the increase in tax rates and limitation of deductions for the wealthiest. Credits may be more valuable since they are not limited by income, but other tax provisions may affect them.

Renewables

While low cost(fn2) natural gas from fracking(fn3) has recently changed the overall economics of energy, most state and federal energy plans provide for increased renewables, both for energy independence and for reduced global warming. The basic law has changed some in the last few years since the Federal Energy Regulatory Commission (FERC) has included "externalities"(fn4) in "avoided cost"(fn5) calculations. While not a tax, the monetary flows act like a tax, since the price for "distributed site"(fn6) electricity is increased for less line loss. Conversely, the reduction in pollution from non-fossil fuel is credited by the higher overall price of a renewable.

In the Northeast, there is a regional pollution control compact that also subsidizes energy efficiency and there is also a Renewable Energy Credit program in Rhode Island. In the original stimulus law in 2009, a user could stack benefits. Now there is some inability to do this. Instead, if there is a tax credit, there may be a requirement to make a basis adjustment so there are not two bites at...