One-Year Extension for Clean Energy Projects Completed in 2016 Would Generate Up to $3 Billion in Additional Investments
Update: As predicted, not all of the renewable energy projects that originally filed for the Safe Harbor provision met the development threshold in the law by March 1, 2016. According to the NC Department of Revenue, of the 201 original projects that applied to utilize the Safe Harbor provision, only 82 filed the additional documentation necessary to take advantage of the law. These 82 projects that will be placed into service in 2016 represent an estimated additional $900 million in investment and a much needed boost to the local tax base of North Carolina's rural communities.
Despite broad bi-partisan support, the final state budget passed by the N.C. General Assembly in September did not include an extension of the state renewable energy investment tax credit (REITC), which is scheduled to expire on January 1, 2016.
The legislature did pass a "Safe Harbor" law that would allow renewable energy projects that are 80% complete by the end of 2015 to still qualify for the tax credit even if they are completed in 2016. The law required an application be submitted to the NC Department of Revenue (NCDOR) with a fee for each project by October 1st.
NCDOR recently made public that 201 projects applied for the Safe Harbor. If all 201 projects utilize the Safe Harbor law in 2016 – which is highly unlikely because not all projects will meet development thresholds in the law – they would be eligible for just under $1 billion in tax credits spread over the next five years. Also, some of the projects, despite filing an application with the Department of Revenue, will be completed before December 31st and not need to utilize the Safe Harbor law.
In the unlikely situation that all submitted projects are deemed eligible and thus completed in 2016, those 201 projects would represent an additional $3 billion in private sector investments in mostly rural, low income areas of the State. In addition, NCDOR reported that it has collected almost $2 million dollars in new revenue from the application fees alone.
“The Safe Harbor comes at no cost to taxpayers, as the tax credit is not a state appropriation, but rather it allows North Carolina companies and individuals to reduce their state tax liability if they choose to make investments in new clean energy projects in our monopoly-controlled energy market,” said Allison Eckley, NC Sustainable Energy Association’s communications manager. “In fact, a study of the return on investment by RTI International of the state investment tax credit shows that for every $1 of state tax credit used, $1.54 of state and local tax revenues are created over the life of the project.”
Moreover, Eckley notes that much of this investment has been made in areas of our state that need it most: “Specifically, 75% of clean energy investment from 2007 to 2014, totaling nearly $3 billion, has occurred in our Tier 1 and Tier 2 counties – the most economically depressed parts of North Carolina.”
Recent criticism of the Safe Harbor extension focuses solely on the $1 billion in tax credits that could potentially be claimed over the next 5 years. By focusing only on the amount of credits claimed, and not the total economic impact of these projects, the recent criticism is misleading.
“If all of the projects submitted to the N.C. Department of Revenue under the Safe Harbor bill are completed, state and local governments could earn $1.5 billion in tax revenues for its $986 Million of investment tax credits,” said Eckley.
“The extra tax revenues will go a long way in rural North Carolina. It makes you wonder why the final budget did not include a long-term extension of the state investment tax credit for all renewable energy projects and allow these state and local benefits to continue.”
Beyond the positive economic impact to state and local governments, clean energy lowers our bills, makes us healthier and more secure, enables us to be better stewards of our land, and bridges the economic disparities between rural and urban communities of our state. Truly, clean energy is a proven, winning solution for our growing state – both now and in the future.