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Energy & Sustainability 2017 Year in Review: Tax Bill (Part 1 of 4)

In this four-part series, we revisit 2017’s biggest developments in Energy & Sustainability-related news, milestones, policy changes, and financial transactions. This is the first installment of the series.

The biggest changes to the U.S. tax system in decades went into effect on January 1st after the President signed the tax reform bill just before Christmas. The legislation will have varied implications for the energy sector:

  • Utilities will likely see increased savings due to:
    • the lower corporate tax rate
    • a federal income tax deduction on interest expense and on state and local taxes
    • continued normalization rules for regulated utilities.
  • Fossil fuel companies, which will pay less under the new corporate tax rate, viewed the bill as a win.
  • The legislation opens up a section of Alaska’s Arctic National Wildlife Refuge to oil and gas drilling.
  • The bill did not include a continuation of nuclear tax credits for projects brought online after 2020, which could stall the Vogtle Nuclear Project in Georgia currently under construction.
  • With regard to renewables, the legislation retained 80 percent of the value of the Investment Tax Credit and the Production Tax Credit. However, the final bill also includes the Base Erosion Anti-Abuse Tax (BEAT), which requires companies to make two calculations in assessing tax liability: 1) quantifying 10 percent of the company’s taxable income, and 2) quantifying the company’s tax liability while subtracting any tax credits. If #2 is less than #1, the company has to pay the balance. Since tax equity investments make up the majority of funding for renewable projects, the provision makes renewable investments less appealing to large, risk-averse companies and will ultimately lead to increased costs for clean energy projects.
  • While the bill maintained the $7,500 tax credit for electric vehicles, it did not extend credits for other advanced energy technologies.

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Thomas R. Burton, III

Member / Chair, Energy & Sustainability Practice

Tom Burton has helped to shape the clean energy industry by drawing on his passion for innovation. As a Mintz attorney, Tom counsels investors, entrepreneurs, and Fortune 100 companies. He also guides start-up organizations and accelerators to foster the next generation of energy leaders.

Sahir Surmeli

Member / Co-chair, Energy & Sustainability Practice

Sahir Surmeli is a Mintz business counselor who advises companies, boards, entrepreneurs, investment banks, and venture and private equity investors as they build and grow companies. He handles public offerings, 144A and private financings, acquisitions, joint ventures, and strategic partnerships.