Alternative Energy World Applauds Tax Breaks

From: AJC

Earlier this month, as Congress argued over tax cuts, Georgia’s energy industry quietly kept its fingers crossed.

Energy-related tax benefits were also in the tax deal that Congress eventually approved, said Stephen Smith, director of the Southern Alliance for Clean Energy.

“They got slipped into the grand tax deal,” he said. “Right below the surface were 10 or 15 really good tax programs for energy.”

The list included extended tax credits for buyers of energy efficient homes, and the revival of a Bush-era tax credit for makers of bio-fuel, which had expired at the end of last year.

More traditional energy players also got breaks. The tax deal extended tax credits for coal-to-liquid facilities and for corn ethanol.

The most surprising renewable energy measure was the extension of a temporary economic stimulus program that had replaced renewable energy tax credits with cash. The industry had been so sure that program was going to expire as planned that companies were scrambling to get projects started before New Year's Day.

The cash program was intended to fill a financing hole left by the recession. Historically, renewable energy companies had been able to leverage their federal tax credits to get financing by hooking up with highly profitable companies that have big tax liabilities.

“They would go into partnerships with companies like Goldman Sachs and trade off the tax benefit,” Smith said.

Then the recession hit.

“Everybody got hammered,” Smith said. “A lot of companies no longer had tax liabilities they needed to offset.”

The 2009 stimulus package addressed that by allowing renewable energy companies to get cash instead of the tax credits they couldn't trade anymore. The benefit was simplicity. The alternative energy companies no longer had to seek out investment bank partners.

Grant money helped them attract private investment, said Lee Peterson, a manager with the Reznick Group accounting firm, who works with renewable energy firms.

"It affects investors' ability to get comfortable with the investment," Peterson said.

Like most in the industry, Peterson expected the program to revert to a tax-credit system in 2011, now that profits and the need to offset tax liabilities have returned to big banks.

“It was a stimulus program,” he said. “Theoretically, it had no further reason to exist, not that the wind and solar folks see it that way.”