November 25, 2012

Wind power, low-income development programs face ax

Washington, D.C.'s budget battle could result in a housecleaning of 'tax extenders,' a kind of temporary break that benefit special interests

By Kevin Miller kmiller@pressherald.com
Staff Writer

WASHINGTON -- The tax reform momentum that seems to be building in Congress may imperil tax-credit programs that have had major impacts in Maine, including wind power investments and economic development projects in rural or low-income areas.

click image to enlarge

Wind turbines stand atop Mars Hills Mountain in Mars Hill in this Jan. 17, 2007 file photo. Wind farm tax breaks could be cut soon, even if Congress manages to avoid the federal fiscal cliff looming at the end of December.

AP file photo by Robert F. Bukaty

The credit for electricity produced at wind farms, as well the New Market Tax Credit program, are both due to expire Dec. 31. In Maine, wind farms have supported hundreds of construction jobs on farms that are generating 400 megawatts of electricity, with 1,000 more megawatts on the drawing boards. The New Markets program has funneled $221 million into development projects from the Millinocket woods to the Portland waterfront.

But with the congressional clock ticking, this could be the year that Congress opts not to renew some policies that skeptics view as tax carve-outs for special interests.

"It appeared to me that there is less interest in extending the whole package this year," said Will McBride, chief economist at The Tax Foundation.

Many of the "tax extenders" -- so called because they were supposed to be temporary programs and must be renewed -- are not officially part of the negotiations over avoiding the fiscal cliff, a combination of deep spending cuts and tax hikes that kick in Jan. 1.

But Congress is setting aside the credits, deductions and other tax breaks until after the much bigger fiscal cliff negotiations. That decision is creating uncertainty among some Maine businesses that take advantage of the tax breaks.

The 50-plus items on the list of tax extenders run the gamut from items that benefit a relatively small number of individuals and businesses, such as tax credits for purchasing plug-in hybrids and breaks for movie or television products, to tax breaks enjoyed by tens of millions of families.

Among the latter is the Alternative Minimum Tax, or AMT, a major policy that, if left unchanged, would result in substantial tax hikes for millions of Americans. While the AMT is likely to be dealt with during the bigger fiscal cliff discussions, most items on the list are in limbo.

Wind energy companies in Maine and across the nation currently can claim a tax credit of 2.2 cents per kilowatt-hour for electricity produced at qualified facilities. Supporters of the program say it is critical to helping expand the nation's renewable energy sector, a fast-growing sector of the U.S. economy, and to diversifying the country's energy sources. Critics, however, see the credits as an unfair subsidy for a higher-cost energy source.

The tax credit enjoys strong support among both Democratic and Republican lawmakers from major wind-energy states in the West and Midwest as well as among Maine's delegation. But opponents hope the debate over the fiscal cliff and concerns about the federal debt could help them kill off the tax credits this year.

Benjamin Cole, spokesman for the free-market group American Energy Alliance, said wind power and the wind production tax credits fail measures for affordability, reliability and fiscal responsibility. Cole, whose organization has ties to conservative groups, asked if an extension "is a responsible thing to be doing, given our financial condition?"

But Jeremy Payne, executive director of the Maine Renewable Energy Association, said allowing the tax credit to end would likely result in "a significant slowdown" in the development of wind projects. That would hurt a sector of the Maine economy that seen more than $1 billion in investment in recent years, Payne said.

"It's all of those jobs," Payne said. "Reed & Reed, Cianbro, those companies have put hundreds and hundreds of people to work at a time when governments are stepping away from infrastructure investments, such as on roads and bridges."

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