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What’s in the Green Act?

The US House of Representatives Committee on Ways and Means has reintroduced the Growing Renewable Energy and Efficiency Now (GREEN) Act, which aims to extend tax credits for renewable energy and carbon capture projects. If passed, the GREEN Act would build upon and boost the extended tax benefits to renewables that Congress passed in the stimulus package at the end of 2020.

According to the proposed legislation from Representative Mike Thompson (D-Calif.), the GREEN Act would reinstate and extend the solar investment tax credit (ITC) to 30% for projects that begin construction after 2020 and before 2027, then phase down to 26% for projects that begin construction in 2027, 22% for projects that begin construction in 2028 and 10% thereafter. The new offshore wind ITC would also be extended one year, for projects that begin construction prior to the end of 2026. The proposed legislation also adds certain storage technologies to the list of eligible ITC property and extends the current 60% production tax credit (PTC) for wind facilities that begin construction before 2027.  Importantly, the proposed legislation would allow taxpayers to elect to have 85% of the ITC and PTC refundable; that is, taxpayers could take the credit as a refund even if they don’t have sufficient taxable income to offset the credits. This would be a game-changer for many industry participants, who currently have to enter into complex transactions to monetize the credits, and would allow further expansion of the renewables industry, which some argue is limited by the approximately $12 to $16 billion per year in available third-party tax equity investment.

The GREEN Act would also extend the credit for carbon oxide sequestration facilities that begin construction before the end of 2026 and, like the PTC and ITC refundability election, provide a direct-payment option for developers. According to the Carbon Capture Coalition, the direct payment option is important because it would “allow project developers the opportunity to receive the 45Q tax credit as an estimated payment on their tax return, allowing them to finance carbon capture, direct air capture and carbon utilization projects without being subjected to the onerous financial terms and burdensome transaction costs of tax equity financing, thus incentivizing more technology innovation, jobs and emissions reductions at no extra cost to the federal government.”

The GREEN Act includes significant other tax incentives for renewable energy, including other expansions of the PTC and ITC, that are beyond the scope of this article but would provide significant support for taxpayers in technologies beyond wind and solar.

The Committee on Ways and Means is not the only legislative body pushing for renewable energy incentives. The US Senate Committee on Finance is also gearing up to put forth its own proposals to enhance renewable energy efforts, signaling that climate change is an important issue not only to the Biden-Harris administration but to Congress as well. As Congress continues to advance legislation surrounding clean energy, the renewable energy sector will likely continue to see increased support.

© 2023 McDermott Will & EmeryNational Law Review, Volume XI, Number 42

About this Author

Heather Cooper, Energy Attorney, McDermott Will & Emery Law Firm

Heather Cooper is counsel in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Miami office.  She works on federal income tax matters, with a focus on energy tax issues. She represents clients in restructurings, mergers and acquisitions, and other transactional energy related matters. Her national practice includes advising on renewable energy transactions, such as solar and wind projects.

Carl Fleming Washington D.C. Transaction Lawyer McDermott Will Emery Law Firm

Carl J. Fleming focuses his practice on mergers and acquisitions, project development and project finance, predominately in the renewable energy industry. He leads energy, infrastructure and PPP transactions throughout the US and in more than 40 countries worldwide. Carl represents private equity investors, Fortune 500 companies, foreign governments, and a broad range of leading renewable energy developers and sponsors.

Carl provides legal and commercial advice for the development, construction, operation, purchase and sale, and financing of projects and infrastructure, including...

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Edward Ed Zaelke Energy Lawyer McDermott Will

Edward (Ed) Zaelke is the head of the Firm’s Global Energy Project Finance group. He focuses his practice on project finance and private equity in renewable energy transactional matters. With more than 30 years of experience, he advises clients on all elements of alternative energy development and finance, including equity and debt financing, merger and acquisition transactions, equipment purchase and sale agreements, power purchase agreements, siting and other real property issues, governmental approvals, and engineering, procurement and construction (EPC) contracts....

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Elle Hayes Corporate Attorney McDermott Will & Emery Miami, FL

Elle Hayes focuses her practice on general corporate matters and transactions.

While in law school, Elle was assistant communications editor for the Journal of Technology Law & Policy. She also served as a student volunteer coordinator with Southern Legal Counsel, where she organized events to assist homeless and low-income individuals obtain legal advice, and interned with Chief Judge Joseph Farina of the Eleventh Judicial Circuit Court of Florida.