State Tax Credits News Briefs - March 2011

Tuesday, March 1, 2011

The Connecticut Department of Economic and Community Development (DECD) released an assessment of the economic and fiscal impacts of the state's tax credit and abatement programs. Prepared every three years in consultation with the state Department of Revenue, the December report analyzed programs from 1995 through 2007 and concluded that a few programs had a significant positive impact, while several programs had negative or very limited impacts. Programs that were the source of the top three claim amounts were the 5 percent Fixed Capital Investment tax credit, with $77.5 million in 2006; the Electronic Data Processing (EDP) tax credit, with $38 million in 1997; and the R&D tax credit, with $55.4 million in 1997. Download a copy of the report from DECD's web site at www.ct.gov.

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Virginia Sen. Mary Margaret Whipple introduced legislation to alter the state's land preservation tax credit program regulations and another bill that would create a state renewable energy production tax credit (PTC). Any land offered for easement under the land preservation tax credit program must be evaluated by the Department of Conservation and Recreation if the tax credit is valued at $1 million or more. S.B. 979 would decrease to $500,000 the threshold at which that evaluation is required. Whipple says the bill would help ensure that taxpayers see a return on investment. S.B. 981 would establish a $1 per megawatt-hour PTC for electricity or thermal energy sold or produced for self-consumption that is generated from a renewable energy source. Copies of S.B. 979 and S.B. 981 are available at www.historictaxcredits.com and www.energytaxcredits.com, respectively.

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Indiana's Legislature is considering changes to the state's venture capital investment tax credit (VCITC), which attracts investment in early-stage firms. The current maximum credit amount is the lesser of $500,000 or 20 percent of the total amount of capital invested in the startup. If passed, H.B. 1008 would increase the program cap per taxpayer from $500,000 to $1 million, eliminate the $200 application fee and simplify the application process. Since 2003, 208 companies have participated in the program and 20 have reached the $500,000 limit. See more information about the VCITC program at www.iedc.in.gov.

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The Wyoming House of Representatives rejected a wind energy tax bill that sponsors said could have saved wind developers as much as $30 million in taxes over a 20-year period, the Casper Star-Tribune reported. H.B. 191 would have consolidated the wind equipment sales tax and the new $1-per-megawatt-hour wind energy tax into a single $3-per-megawatt-hour excise tax. It also would have made $15 million in assistance available to local governments for infrastructure costs associated with wind projects. Barring legislative intervention, existing wind energy operations in the state will begin paying the new wind energy tax in 2012.

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The California Public Utilities Commission (CPUC) lifted a moratorium on approval of tradable renewable energy credit transactions (TRECs), Stoel Rives LLP reported. However, the CPUC's decision retained restrictions on TREC transactions that the state's three major utilities can use to meet their California Renewable Portfolio Standard (RPS) obligations. According to the restrictions the CPUC placed in March 2010, utilities may only use TRECs for 25 percent of their annual RPS compliance obligations. Following that decision, Southern California Edison, Pacific Gas and Electric, and San Diego Gas and Electric filed a joint petition seeking, among other things, modification of the criteria used to determine whether a contract was a TREC transaction subject to the 25 percent cap. CPUC responded by issuing the moratorium on approval of TREC transactions pending resolution of the matter, and the commission's recent decision includes a denial of the utilities' joint petition. The 25 percent cap will remain in place until December 31, 2011.

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