The US House of Representatives Committee on Ways and Means has reintroduced the Growing Renewable Energy and Efficiency Now (GREEN) Act, which aims to extend tax credits for renewable energy and carbon capture projects. If passed, the GREEN Act would build upon and boost the extended tax benefits to renewables that Congress passed in the stimulus package at the end of 2020.
According to the proposed legislation from Representative Mike Thompson (D-Calif.), the GREEN Act would reinstate and extend the solar investment tax credit (ITC) to 30% for projects that begin construction after 2020 and before 2027, then phase down to 26% for projects that begin construction in 2027, 22% for projects that begin construction in 2028 and 10% thereafter. The new offshore wind ITC would also be extended one year, for projects that begin construction prior to the end of 2026. The proposed legislation also adds certain storage technologies to the list of eligible ITC property and extends the current 60% production tax credit (PTC) for wind facilities that begin construction before 2027. Importantly, the proposed legislation would allow taxpayers to elect to have 85% of the ITC and PTC refundable; that is, taxpayers could take the credit as a refund even if they don’t have sufficient taxable income to offset the credits. This would be a game-changer for many industry participants, who currently have to enter into complex transactions to monetize the credits, and would allow further expansion of the renewables industry, which some argue is limited by the approximately $12 to $16 billion per year in available third-party tax equity investment.
The GREEN Act would also extend the credit for carbon oxide sequestration facilities that begin construction before the end of 2026 and, like the PTC and ITC refundability election, provide a direct-payment option for developers. According to the Carbon Capture Coalition, the direct payment option is important because it would “allow project developers the opportunity to receive the 45Q tax credit as an estimated payment on their tax return, allowing them to finance carbon capture, direct air capture and carbon utilization projects without being subjected to the onerous financial terms and burdensome transaction costs of tax equity financing, thus incentivizing more technology innovation, jobs and emissions reductions at no extra cost to the federal government.”
The GREEN Act includes significant other tax incentives for renewable energy, including other expansions of the PTC and ITC, that are beyond the scope of this article but would provide significant support for taxpayers in technologies beyond wind and solar.
The Committee on Ways and Means is not the only legislative body pushing for renewable energy incentives. The US Senate Committee on Finance is also gearing up to put forth its own proposals to enhance renewable energy efforts, signaling that climate change is an important issue not only to the Biden-Harris administration but to Congress as well. As Congress continues to advance legislation surrounding clean energy, the renewable energy sector will likely continue to see increased support.