ITC (Investment Tax Credit) Myopia knows no bounds.
House Committee on Ways and Means passes a renewable Grant Program in lieu of the ITC.
With apologies to Jeopardy!, the above headline is phrased in the quiz show’s answer and question format, and the category must be Solar and Renewable Energy Incentive Policies.
In “SOLAR AND WIND READY TO LEAD NEW CLEAN ENERGY ECONOMY”, the Solar Energy Industries Association (SEIA) and the American Wind Energy Association (AWEA) reiterated their call to make renewable tax incentives refundable. I first blogged about this in ITC Myopia: New Solar Investment Tax Credit Deficiencies Exposed!
A Refundable Tax Credit is defined by Wikipedia as follows:
Refundable or non-wastable tax credits can reduce the tax owed below zero, and result in a net payment to the taxpayer beyond their own payments into the tax system, appearing to be a moderate form of negative income tax.
Refundable tax credits have been directed towards low income families in the United States and have also been proposed for health care premiums (please see “Use of Refundable Tax Credits Has Grown in Recent Years”). Typical practice requires a tax liability to offset tax credits, and tax credits cannot reduce the tax liability below zero nor are they immediately refundable.
The House Committee on Ways and Means voted today in support of a comprehensive economic recovery package to provide tax, health and unemployment relief to families while also encouraging businesses to create new jobs. The legislation, H.R. 598, passed the Committee by a party-line vote of 24 to 13. The legislation will now be combined with other components of the recovery package from other House Committees into H.R. 1, the “American Recovery and Reinvestment Act” for consideration by the full House of Representatives next week.
The Ways and Means committee was not fooled by the refundable tax credit jargon and has passed a grant program to be administered by the Department of Energy. The grant will be paid within 60 days of application and is equivalent to 30% of the project investment as outlined in the Solar ITC. The energy property needs to be in service by 2010 and applications must be received before October 1, 2011. A dollar cap is not specified although there are many arcane references to the Internal Revenue Code of 1986.
Here is the first paragraph of the relevant section:
PART 3—GRANTS FOR SPECIFIED ENERGY
PROPERTY IN LIEU OF TAX CREDITS
SEC. 1721. GRANTS FOR SPECIFIED ENERGY PROPERTY IN
LIEU OF TAX CREDITS.
(a) IN GENERAL.—Upon application, the Secretary of Energy shall, within 60 days of the application and subject to the requirements of this section, provide a grant to each person who places in service specified energy property during 2009 or 2010 to reimburse such person for a portion of the expense of such facility as provided in subsection (b).
Please see H.R.1 American Recovery and Reinvestment Act of 2009 pp. 330-334 for the full text of the grant program. The U.S. Senate version may or may not include this same provision.
Feed-in Tariff: What is a better way to incentivize solar?
Setting an initial feed-in rate at $0.15 per kilowatt hour for 20 years for solar projects, for example, would draw out multiple breakthrough technologies and greatly advance their market penetration.
The American Recovery and Reinvestment Act of 2009 is a great platform for encouraging adoption of a national Feed-in Tariff (please see Feed-in Tariffs: Solar FiT for the USA). States unwilling to implement the incentive scheme could have been denied funds under certain provisions of the stimulus package starting with the smart grid projects.
And if photovoltaics are good enough for Iraq, “U.S. forces overseeing nearly two dozen solar projects to alleviate Iraq’s electricity crisis” by James Warden for Stars and Stripes, they are just as good for the United States.