by Brenée Goforth
Media Manager & Communications Associate, John Locke Foundation
This week, Carolina Journal’s Don Carrington reported on the continuing controversy surrounding North Carolina’s renewable energy tax credits. Carrington explains the situation:
Before January 2016, developers of solar and other renewable energy projects in North Carolina were eligible for a state tax credit equaling 35% of a project’s cost. Some finance companies developed partnerships to transfer the tax credits to people and businesses with high tax liabilities. Taxpayers had to take the credit in five equal annual installments.
The state stopped issuing new credits after 2016. But it honored the credits already issued.
Until September 2018.
In September of last year, North Carolina decided to stop allowing members of these partnerships to claim renewable energy tax credits. The American Council of Life Insurers (ACLI) has said that decision could affect the rates it charges consumers.
Life insurance companies take the monthly premiums they charge for insurance and invest them. After factoring in the costs of investment and the expected returns (including renewable energy tax credits), many life insurance companies decided to invest in renewable energies. Now, with the denial of these tax credits, the bottom lines for these insurance companies have changed, and the difference will likely be passed onto consumers. According to ACLI’s President, Curtis Leonard, in a letter to Ronald Penny, the N.C. Revenue Secretary:
“For the Department to retroactively deny the General Assembly’s promised tax credits to those who have invested and who have thus played a major role in those renewable energy successes is bad business,” Leonard said in the letter to Penny.
“If anticipated tax credits are now disallowed, the only way for companies to compensate for that will be to pass those costs on to future North Carolina consumers.”
Leonard also noted the chilling effect this could have on investment in North Carolina:
“In so doing, the Department has chilled investor confidence in the trustworthiness of any future tax credit offerings by the state,” he said.
According to Carrington’s reporting, several of ACLI’s members previously claimed renewable energy tax credits:
- Southern Farm Bureau Life Insurance Co. $1,556,785
- Cincinnati Insurance Co. $1,900,000
- Massachusetts Mutual Life Insurance Co. $1,043,075
- United of Omaha Life Insurance Co. $1,396,486
- Northwestern Mutual Life Insurance Co. $2,725,972
- Metropolitan Life Insurance Co. $4,595,502.
Carrington notes, since the credits must be taken in five equal annual installments, the potential losses to each company could be five times the amounts listed.