Wind Energy Promotion Act Introduced in Congress

Washington, D.C. - U.S. Representative Tim Walz and House Agriculture Committee Chairman Collin Peterson have introduced the Wind Energy Promotion Act, which will make it easier for individuals and small groups to take advantage of tax incentives that encourage wind energy production. Walz, a freshman member of the Agriculture Committee, said he heard about the need for the legislation while he was holding a series of Farm Bill forums throughout southern Minnesota in February and April.

Rep. Walz visits the Bingham Lake Wind Farm to discuss energy policy.
Rep. Walz (4th from left) visits the Bingham Lake
Wind Farm to discuss energy policy.

"Raising capital for wind energy projects is difficult, because many residents of rural America do not qualify for the Renewable Energy Production Tax Credit (PTC), which is one of the major incentives to promote wind energy production," said Walz. "This legislation will expand renewable energy production by leveling the playing field for individuals in rural America who are looking to enter the industry. Everyone wins if we pass this legislation."

"We think it is unfortunate that our tax code makes it easy for corporations to receive the Production Tax Credit, but not for individuals in rural America who wish to do the same," said Chairman Peterson. "I'm pleased to join Congressman Walz in introducing this legislation to make our tax code fairer and to bring the benefits of renewable energy investments to more of our rural citizens."

Currently, the PTC provides a 1.9 cent-per-kilowatt-hour tax credit for individuals who invest in wind energy generation. However, only passive income—such as income from investments—may be offset by the PTC; someone who merely invests in a wind farm cannot receive the PTC unless they have other sources of passive income to offset.

The practical effect of this passive loss restriction is that currently, PTCs are only useful to corporations and to individuals with large amounts of taxable investment income. As a result, most wind energy investments today are made by foreign multi-national companies and not by groups of Americans who want to join together to produce renewable energy.

The Walz-Peterson Wind Energy Promotion Act would make it easier for Americans to invest in wind energy projects by expanding the eligibility of who can receive benefits from the Renewable Energy Production Tax Credit. This legislation would not limit the ability of the current beneficiaries of the PTCs to continue receiving them.

The Wind Energy Promotion Act would amend the tax code to allow up to $40,000 of the PTC to be used against ordinary income. This "passive loss exemption" is similar to a $25,000 passive loss exemption that currently exists to encourage investments in oil and gas development and real estate.

The Wind Energy Promotion Act also addresses the relationship of the PTC to the Alternative Minimum Tax (AMT). Because allowing the PTC to apply to ordinary income will force some middle-class taxpayers to file for the AMT, this legislation would change the tax law to eliminate the effect of the AMT on income derived from using the PTC.

Details of the Wind Energy Promotion Act are available in the document links below.