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TAX NEWS - JUNE 2010

United States Tax: Renewable Energy Tax Credits

In late April Ohio lawmakers considered two bills aimed at making the state's tangible personal property tax on generation for wind and solar projects competitive with other states. The American Wind Energy Association (AWEA) says that these bills, if adopted, could bring wind farms into production by the end of 2012.

The Hawaii Department of Taxation found in Letter Ruling 2010-05 that a company's solar photovoltaic systems would qualify for the commercial cap on the state's renewable energy technologies income tax credit (RETITC), which is higher than the cap on residential property. Letter Ruling 2010-05 further clarifies that a company may claim the credit for each distinct system installed and placed in service on company property and that each system counts separately toward the cap. The department based its ruling on three assumptions: that the company would send all energy generated by the systems directly into the local electricity provider's grid; that no energy generated by the systems would be used before it was sent to the grid; and that the company would not participate in net-metering.

In her audit of Missouri's tax credit cost controls, State Auditor Susan Montee found that the state's tax credit redemptions increased by 57 percent in eight years, compared to a net general revenue (GR) fund increase of 15.7 percent over the same time period. As a percentage of net GR fund collections, tax credit redemptions increased from 5.8 percent in 2001 to 7.8 percent in 2009. After finding that actual redemptions for 15 tax credit programs reviewed exceeded projected long-term fiscal impact by more than $1.1 billion, Montee concluded that fiscal notes accompanying legislation do not accurately project the financial impact on GR fund collections. She advised the General Assembly to consider increasing the use of alternative cost containment measures such as sunset dates and annual or cumulative limits to better control tax credit program costs. The audit also lists concerns with cost benefit analyses that state agencies submitted to the legislative committees, and further notes that agencies need to improve their information collection and verification procedures.

The Illinois Senate voted 26 to 17 on May 4 to reject a bill that would have provided tax incentives for burning tires for energy, Chicago's The Southtown Star reported. The measure was aimed at preserving jobs at a tire-fueled power plant in Ford Heights, which has a 29 percent unemployment rate. If the bill had passed, the state would have added tire-incineration to its list of renewable energy sources. Environmentalists opposed the legislation on the basis that tires are made from petroleum and should not be classified as green. They also expressed concern over the already limited pool of tax credits and grants for other renewable energy sources.

The North Dakota Housing Finance Agency (NDHFA) announced $2.4 million in conditional low-income housing tax credit (LIHTC) commitments to support the construction of 177 affordable housing units. Out of the five commitments, the largest went to Beyond Shelter Inc., which received nearly $608,000 to add 39 units to the Crossroads Senior Living Community in Fargo. NDHFA reports that it received 14 LIHTC program applications requesting more than three times the amount available for this year.
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