North American Windpower: Obama's Tax Framework Proposes Permanent Renewable Energy PTC

by Laura DiMugno on Tuesday 28 February 2012

President Obama's plan for business tax reform, released jointly by the White House and the U.S. Department of the Treasury, calls for major enhancements to federal renewable energy incentives, including a permanent production tax credit (PTC) for wind energy and other renewables.

The president's tax framework recognizes that to date, the U.S. has only provided a temporary PTC for renewable energy - a practice that has led to instability in the wind and solar industries.

This market volatility has been a burden not only on the renewable energy sector, but also on the financial markets and the overall economy.

“This 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 president’s framework states.

Moreover, under the current tax structure, many companies have had no choice but to utilize tax-equity financing to fund their renewable energy projects - a method the framework says is “inefficient tax planning.” Under Obama’s proposed tax plan, a permanent PTC would resolve this problem by making the permanent PTC refundable.

Obama’s tax-reform plan also emphasizes domestic manufacturing and innovation, with a focus on clean energy technologies. Under the president’s framework, the savings garnered from a manufacturing tax deduction would be used to reduce the effective rate on manufacturing to a maximum of 25% and to encourage clean energy research and development.

“As we expand manufacturing in the United States, the tax code should encourage doing so in way that is sustainable and that puts the United States in the lead in manufacturing the clean energy technologies of the future,” the framework reads. “This will create jobs here at home and can also have important spillover benefits. Moving toward a clean energy economy will reduce air and water pollution and enhance our national security by reducing dependence on oil.”

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