Congressman Tom Reed, a rare Republican member of the US House of Representatives who openly advocates for taking steps to mitigate climate change, has warned the renewables industry that the preservation of the phase-out of their key tax credits is “not a done deal” as Congress tackles tax reform.
The US renewables sector breathed a tremendous sigh of relief in January when, during his confirmation hearing, now-Treasury Secretary Steven Mnuchin indicated he supported the scheduled phase-out of the wind production tax credit (PTC) in an exchange with Republican Senator Charles Grassley of Iowa, who is an outspoken supporter of the wind industry.
Since that brief exchange, many renewables executives have expressed confidence that the planned phase-down of the PTC and solar investment tax credit (ITC) will not be tampered with, in spite President Donald Trump’s love for coal and decidedly frosty view on renewables.
The tax credits, extended in late 2015 with strong bipartisan support, offer the renewables industry substantial market visibility into the 2020s, and are expected to continue driving strong levels of new installations.
But Reed, a New York Republican who supports the tax credits, says their preservation should not be taken for granted as Congress attempts to reform the byzantine US tax code for the first time in a generation. Tax reform is expected to be the next major legislative battle taken on by the current Congress following healthcare reform.
“There are no guarantees in Washington,” Reed said Thursday at the American Council on Renewable Energy’s annual policy forum in Washington DC.
“My perspective is we’re in a good spot, a good spot of strength in order to advocate for the respect of those transition rules that are necessary to protect those credits. But I would not assume that it’s a done deal.”
“I’d definitely make sure the message is delivered and delivered strongly that this is part of the [tax reform] package going forward, and needs to be respected,” said Reed, who sits on the powerful Committee on Ways and Means, the House’s chief tax-writing body.
“I think you’ll have an audience that’s receptive to that message,” he added. “But if you don’t advocate for it, one of the things we’ve learned in DC is, it’s very quick for people to forget what happened yesterday because they’re looking at today and tomorrow.”
While many US industries are supportive of the Trump administration’s goal of reducing corporate tax rates, the planned tax-code overhaul could come with several damaging aspect for the renewables industry – including the possibility of a border-adjustment tax, which could make some renewables components more expensive, especially for wind and solar suppliers without a US manufacturing footprint.
Some in the industry are also concerned that Trump’s push for a major infrastructure investment package could reduce the supply of tax equity for renewables projects.
Reed is among a small group of House Republicans to have formally stated their concern about climate change, and signaled potential support for measures to reduce US carbon emissions.
Yet Reed acknowledged Thursday that one obvious solution – a carbon tax – is not realistic given the current state of play in Washington. In the present climate, “I don’t see that as a viable alternative,” he said.