Groups urge lawmakers to reject proposed book minimum tax in Build Back Better plan
One provision under consideration in the reconciliation bill currently being haggled over on Capitol Hill could impede strong clean energy and renewable development and cost billions in lost investment and thousands of jobs, say power industry sources.
The adoption of a proposed book minimum tax on corporations, which is the amount of income corporations publicly report on their financial statements so shareholders can assess the company’s financial health, could undermine the renewable tax incentives being considered.
“A book minimum tax also could result in a significant reduction in the amount of new renewables built and essentially could negate some of the carbon reduction benefits gained through any extension or expansion of the clean energy tax credits,” said the Edison Electric Institute (EEI), which represents all of the nation’s investor-owned electric utilities.
The American Clean Power Association (ACPA) also released a statement on Tuesday saying the group “has significant concerns about the impact of a book minimum tax on renewable energy deployment.”
Garret Watson, senior policy analyst with the nonprofit, independent Tax Foundation, explained in an Oct. 25 blog that the tax treatment of stock-based compensation has received attention for contributing to the gap between corporate taxable income and book income reported on financial statements.
President Biden has proposed targeting book income with a new 15 percent minimum tax on the book income of certain corporations to narrow the gaps, Watson writes.
The Tax Foundation estimates that the proposed minimum book tax would raise roughly $110 billion over a decade “when combined with Biden’s other corporate tax proposals.” Much of that revenue would come from penalizing stock-based compensation, which may make up about 30 percent of book-tax differences, writes Watson.
According to ACPA, current tax incentives and industry innovation have supported a vast expansion of renewable energy in the United States, but significantly more investment is required to meet President Biden’s 2030 goals.
“We encourage Congress to continue the progress and pass a plan with a full complement of renewable tax incentives and direct pay,” said ACPA, which represents renewable energy companies working to advance clean energy. “A tax proposal that undermines existing incentives with new asset depreciation requirements will increase credit costs and slow the clean energy deployment our country needs for the future.”
Likewise, EEI urged lawmakers “to reject the book minimum tax” and said it remains “committed to working with Congress to advance the Build Back Better plan.”
EEI generally thinks the reconciliation bill should protect the value and customer benefits of any tax credits used for the deployment of clean energy technologies, according to its statement.
“EEI and our member companies — America’s investor-owned electric companies — are encouraged by reports that lawmakers are making progress on the budget reconciliation bill,” said the group. “We remain hopeful that Congress can reach agreement and pass a bill that includes a robust clean energy tax package.
EEI pointed out that the suite of tax incentives currently under consideration will benefit electricity customers, provide long-term certainty to the entire renewable energy industry, and create a level playing field that recognizes the role of electric companies in deploying more clean energy.
“They also will create jobs,” EEI said.
