History

• The push to promote renewable energy in Michigan began in earnest in 2002 when Michigan created a tax exemption for businesses with alternative energy property (generally defined as: alternative energy system, alternative energy vehicles and the personal property of an alternative energy technology business). The exemption applied to taxes levied after December 31, 2002 and before January 1, 2013.
• In 2008 a spate of legislation was passed that was designed to promote renewable energy, including Act 270 which amended the Michigan Business Tax Act and provided a tax credit to any photovoltaic manufacturing business that entered into an agreement with the Michigan Economic Growth Authority to construct a new manufacturing plant.
• One of the larger pieces of “sustainable/green” legislation enacted in 2008 – Public Act 295 – included a modest renewable portfolio standard that was designed to increase the use of renewable energy in Michigan by requiring electrical utilities to source 10% of their electrical production from renewable energy systems such as wind or solar.
• In 2010 Michigan revised its construction code to adopt ASHRAE Standard 90.1-2007, which sets forth more energy efficiency requirements than the prior ASHRAE Standard that Michigan relied upon for years.

Recent Developments
Since 2010, the push for sustainability based legislation appears to have tapered off – in fact, it seems to have been put in reverse. For example, two bills introduced in 2011 that initially received a lot of press, have fallen off the radar screen: House Bills (HB) 4286 and 4049.

HB 4286 would have provided a taxpayer with a tax credit equal to 50% of the cost of constructing a “green building”. Similarly, HB 4049 proposed a tax credit for builders of energy efficient homes. However, neither bill made it out of the Committee on Tax Policy.

Moreover, HB 5447, proposed by State House Representative Franz in February, 2012, would repeal Michigan’s 10% renewable energy standard. The bill, however, is opposed by a wide variety of groups so its fate is unclear.

Are these actions (or inactions as the case may be) due to economic factors (we just went through one of the biggest recessions/depressions since 1929)? A shift in concern? Or is it something deeper – such as a growing public distrust along the lines of Arizona SB 1507 which would ban any state sustainability initiatives whatsoever? (An interesting video of the AZ Senate Judiciary Committee hearing on this bill can be viewed here.)

If there is a shift away from sustainability initiatives, it’s most likely due to a variety of factors. Nonetheless, at least one study, performed in Canada, shows that our neighbors to the north are becoming less concerned with environmental issues. If the same thing is occurring in the U.S. and Michigan, it could explain the recent legislative activity that appears to be shifting away from publically funded sustainability measures. Given the impact such a trend could have on “green” and “sustainable” businesses in Michigan, we will continue to monitor it and provide updates.

The post Is Legislative Support for Sustainability Initiatives on the Decline? appeared first on Dawda PLC.

The post Congress Extends Wind Energy Tax Credit appeared first on Dawda PLC.

2013 was a great year for solar energy installations in the U.S. and globally. According to an article published on the CleanTechnica website, on a global basis it was the first time that solar installations surpassed wind installations. As of July, Forbes reported that the U.S. had joined the ranks of Italy, Germany and China with 10,000 MW of solar capacity installed. With 930 MW installed in the 3rd Quarter of 2013 alone, the U.S. was expected by some commentators to surpass long-time leader Germany. As noted by the Forbes article, one of the main reasons for the increase in solar photovoltaic installations is the large drop in production cost. In 2008, the cost of a solar panel was around $3.65. Today it’s 50 cents per panel and that’s expected to drop to 36 cents by 2017.

What’s more, solar isn’t going away any time soon; stock market analysts are expecting an equally, if not bigger, year for U.S. solar companies in 2014.

The post United States of Energy (Part 3) – Solar appeared first on Dawda PLC.

President Obama’s budget still has not been enacted. Many of the components of the budget may not survive the upcoming expected legislative wrangling, including the House-Senate conference procedures. But the budget does represent the President’s wish list.

Receiving extra emphasis this year are elements that encourage renewable energy projects. Perhaps most noteworthy is the extension of the renewable energy production tax credit, changing it from needing to be extended every year to be being a permanent tax credit. This would be a complement to the permanent status that Congress afforded the research and experimentation credit.

The production tax credit will affect the following renewable energy production facilities: wind, solar, hydroelectric, geothermal, hydroelectric as well as waste facilities that produce energy like municipal solid waste, landfill gas and biomass.

One caveat: in order to claim these tax credits, production of the facilities must begin by January 1, 2017 except for wind facilities, which must commence construction by January 1, 2020. The tax credit for wind facilities is being phased out, and will reduce each year between now and 2020. The tax credit for solar facilities will also decrease yearly beginning in 2020.

Additional tax credits are proposed for qualifying advanced energy projects, which are defined as products that make substantial changes to existing manufacturing facilities or construct new ones that do the following:

Produce energy from renewable resources
Creates components for use with electric or hybrid vehicles
Creation of electric grids that support renewable energy sources
Creation of blended fuel technology
It will be interesting to see which of these budgetary items will become law and which will end up on the cutting room floor.

The post The Latest Budget and Environmental Tax Credits appeared first on Dawda PLC.

A Mixed Bag So Far

By Jeffrey D. Moss, Guest Blogger

CBO’s March 2012 Report

The Congressional Budget Office (“CBO”) has recently issued a report entitled “Federal Financial Support for the Development and Production of Fuels and Energy Technologies” which analyzes the impact of the Federal programs implemented to support the development and production of fuels and energy technology. The CBO report, issued March 6, 2012 concludes that the recent emphasis upon tax preferences and incentive programs for renewable fuels, and alternative energy sources such as solar and wind technologies have had mixed results. Although the most prominent story in the media relating to renewable energy is the failure and subsequent bankruptcy of Solyndra, a company which intended to bring a new form of solar panels to market and which received a $535 Million Federal loan guarantee as part of its financing, several incentives have made an impact. The failure of Solyndra is not the whole story.

Fossil Fuel Credits Just Keep on Going

Prior to 2005, almost the entire array of energy related tax preferences were aimed at the domestic production of fossil fuels such as oil and natural gas. The amount of preferences provided to all energy, including alternative energy, began increasing in 2006 and spiked for the periods 2009 through 2011, with renewable energy and energy efficiency receiving a 78% share of the incentives provided in 2011. Nevertheless, many significant renewable energy tax incentives expired at the end of 2011 and are currently not part of the 2012 budget.

Renewable Tax Credits Allowed To Expire

The credits for energy efficiency improvements to existing homes and the Section 1603 grants in lieu of production tax credits have expired, along with the excise tax credits for alcohol, fuels and excise tax credits for biodiesel. Together these four expiring tax credits combined for over 60% of the amount of credits provided in 2011. Therefore, in 2012, unless additional legislation is passed, the Federal Government will dedicate less than half of the incentives it provided in 2011 to energy. It would be difficult to conclude with finality that these incentives are not working when they have only been in place for three years.

Tax Credits Result in R&D Advances

The Congressional Budget Office did conclude that there has been significant research and development advances occurring during the past few years as a result of the tax incentives and preferences, however, it is difficult or impossible to quantify the future benefit that these R&D advances will make ultimately on the production of alternative energy. For more see the Congressional Budget Office report linked above.

Jeffrey D. Moss is a Member of Dawda, Mann, Mulcahy & Sadler, PLC. He concentrates his practice in the areas of business transactions, tax law, estate planning and tax exempt nonprofit matters.

The post Tax Credits for Renewable Energy appeared first on Dawda PLC.