A legislative panel has agreed to rewrite a tax break that has spurred alternative energy projects — but also has threatened to put a big hole in the state budget.
A compromise bill that sets limits on business energy tax credits, particularly for large wind projects, drew approval from all 10 members of the House Revenue Committee at 8 p.m. Friday. It heads for a House vote this week.
“I am brain-dead, and I am terrified there is something awful in here we have missed,” said Rep. Vicki Berger, R-Salem, who sits on the committee.
“That being said, we will have a chance to correct anything we missed as it moves through the process. I would caution that I do not want to see major shifts in the policy ideas we have articulated here, because that will cause me unending heartburn. … This is the perfect thing to do tonight.”
The bill helps plug what has threatened to be an additional loss of $100 million to state tax coffers.
Gov. Ted Kulongoski said he was satisfied with what lawmakers did to limit the credits, which are subtracted directly from income taxes owed by businesses. He had vetoed a 2009 attempt to set limits.
“Every tax credit has a shelf life and should be routinely reviewed to ensure it is still necessary to achieve its primary objective,” he said in a statement after Friday’s vote.
The issue stems from lawmakers’ 2007 expansion of the business energy tax credit, which was created in 1979, from 35 percent to 50 percent of a project’s cost with a cap of $10 million per project.
To help balance the current budget and limit projected tax losses to about $120 million, lawmakers last year proposed some restrictions, including a cap of $3.5 million on larger projects.
Kulongoski vetoed the bill, and the tax loss was estimated at $143.8 million.
Lawmakers were told by their tax analysts Wednesday that under current law, overall credits would cost the state an estimated $235 million in this budget cycle — nearly $100 million more than Kulongoski’s figure, and nearly twice the amount lawmakers planned.
For wind-related projects, the Oregon Department of Energy last month listed 34 applications for tax credits since the 2007 expansion. At Kulongoski’s direction, the agency took steps to restrict the credits.
To Associated Press news executives in Oregon, including Statesman Journal editors, Kulongoski defended his veto last week as a way to encourage alternative-energy projects. But he also accepted some of the responsibility for the ballooning credits, as reported in news accounts last year.
“I still think it was the right decision,” he said. “But I should have been more careful.”
House Bill 3680, which blends provisions of the vetoed bill and recommendations from the Energy Department, would reduce those tax losses by $55 million in the current budget and $98 million in 2011-13.
In addition to limiting tax credits on wind projects larger than 10 megawatts that receive pre-certifications this year, in 2011 and 2012, the new bill will cap overall credits for renewable-energy projects at $300 million for the current budget cycle and$150 million in 2011-12.
It also proposes to stretch out to six years, instead of the current five years, tax credits for large renewable-energy projects exceeding$10 million.
“What happened with this credit gives us a cautionary tale that even good ideas need to be managed appropriately,” said Rep. Sara Gelser, D-Corvallis.
One of the concerns addressed in the new bill was the breaking up of large projects into several small projects for businesses to get additional credits. That practice will be curtailed by the bill.
Advocates for renewable energy had urged lawmakers not to be too restrictive.
“Oregon should not be penny-wise and pound-foolish,” wrote Matt Blevins, a vice president of M&R Strategic Services, working with Renewable Northwest Project, and a former lobbyist for the Oregon Environmental Council.
“It must uphold its commitment to projects that have received preliminary incentive certifications to provide certainty to the market and encourage additional investment in the state.”
Blevins’ comments were in a column posted on the BlueOregon Web site.
Other portions of the new bill extend the tax-credit program in the renewable-energy manufacturing sector, which has created an estimated 1,800 direct jobs since 2006 and thousands more indirect jobs. Those numbers are expected to double in the next two years.
Jon Bartholomew, a policy advocate for the Oregon State Public Interest Research Group, urged more transparency for the applications for such tax credits.
“The public trust in our government and programs like the business energy tax credit is predicated on being able to see what is going on,” he said.
Rep. Jules Bailey, D-Portland, said the bill achieves a balance.
“We are protecting job creation in this state and a clean-energy future for Oregon,” he said. “At the same time we are adding accountability, using taxpayers dollars wisely, and having the program meet standards that the people of Oregon expect from their state government.”
Peter Wong, Statesman Journal – http://www.statesmanjournal.com/article/20100207/LEGISLATURE/2070348/1042/STATE