News: CJ Exclusives

Feds keep recipients of tax credit confidential

N.C. discloses identities of those getting state tax credits for renewable energy investments

 

The federal government issued tax credits in North Carolina approaching a half-billion dollars for renewable energy investment in the five most recent years for which records are available, and high-income earners have benefited the most from the tax favors.

But the names of beneficiaries of that $466,928,000 in carve-outs from 2009 to 2013, the last year for which federal data is available, are sealed.

“Disclosure provisions of the Internal Revenue Code, specifically Internal Revenue Code section 6103, make it against the law for me to discuss private taxpayer information,” said Internal Revenue Service spokesman Luis Garcia.

That nondisclosure prevents cross-referencing recipients of the 30 percent federal solar tax credit to those that have collected North Carolina’s more generous 35 percent renewable energy tax credit, which totaled $101 million over the five-year federal credit period, and then more than tripled at the state level to $363 million through 2015.

Together, those state and federal tax credits total at least $830 million since 2009, without knowing the 2014 and 2015 federal tax credit amounts.

“The refusal of the federal government to disclose the renewable energy tax credit recipients is completely unacceptable. What could possibly be the justification? There are no national security implications to justify these secret deals,” said Jacki Pick, executive vice president and senior energy fellow at the Dallas-based National Center for Policy Analysis.

“This refusal to act transparently with taxpayer funds is the reason Americans’ trust in their government is at an all-time low,” Pick said.

She suggested the secrecy might be a matter for investigation by congressional oversight committees.

Carolina Journal made numerous attempts by telephone and email to get a reaction from U.S. Rep. Richard Hudson, R-8th District, who sits on the House Energy and Commerce Committee’s oversight subcommittee. Hudson did not respond.

Hudson also voted against the 2015 omnibus spending bill that included an extension of the federal renewable investment tax credits.

Nicolas Loris, research fellow in energy and environment policy at the Heritage Foundation, agrees with Pick that the secrecy is puzzling.

Loris testified before a congressional committee in March against the U.S. Department of Energy’s tax-funded loan-guarantee programs that include solar and other renewable energy projects. The federal government releases the names of loan recipients, he said.

“If they do that for the loan guarantee program I shouldn’t see why they couldn’t do it for other preferential policies that exist,” including the renewable energy tax credits, Loris said.

The best solution would be to terminate all programs that provide preferential tax treatment for some individuals or businesses and not others, he said.

Until then, passing stricter laws demanding transparency on the renewable tax credits “would be helpful, and maybe it would raise some eyebrows about why we are having these programs if the benefits are just accruing to the highest income earners in the United States,” Loris said. “It’s cronyism.”

According to CJ research, in 2015 all 23 North Carolina entities receiving $1 million or more in state renewable energy tax credits were large corporations. Eighty of the 86 recipients of at least $100,000 in renewable tax breaks were corporations. Blue Cross and Blue Shield of North Carolina and Duke Energy collected $54 million between them.

“My expectation is that you would see the same at the federal level,” with corporations receiving the lion’s share of tax credits, Pick said.

While the IRS does not identify renewable tax credit recipients, it lists the aggregate number of tax filers receiving a tax credit across several income ranges, and provides a total amount of tax credits issued for each income group.

According to IRS records, 90,180 North Carolina recipients received federal tax credits totaling $38,324,000 in 2013.

Those earning $1 million or more averaged $3,790 in tax credits. That was nearly nine times more than the overall average of $425, and roughly 12 times higher than the $319 average tax credit of those earning between $25,000 and $49,000. The state’s median household income is $46,693.

But those numbers pale in comparison to what would be a $17,500 average on $70,000 in tax credits issued to four tax filers in the group that claimed less than $1.00 in net income on their 2011 tax returns. The overall average tax credit for all tax filers that year was $381. The IRS did not respond to multiple requests for an explanation.

North Carolina passed a law eliminating its 35 percent renewable investment tax credit at the end of 2015, though it will continue to be issued for several more years because the law allows it to be divided and claimed over a five-year period. Last year the General Assembly extended the tax credit for select companies still in the process of developing their solar projects.

Congress voted last year to extend the federal tax credit until 2023.

“There is no way to know what a future Congress will do with this policy, but once a federal freebie is put in place, it dies hard — if ever,” Pick said.

Targeted tax programs usually start for a limited number of years, with the affected industry claiming it needs some time to become competitive. After the tax carve-out is established, industry lobbyists almost always seek recurring extensions, Loris said.

It is a bipartisan problem, Loris said. Even states with mostly Republican members in their congressional delegations fight to perpetuate the policies “because it’s their states that stand to benefit,” whether it’s for wind power in the Midwest or solar power in the Southwest.

But he remains optimistic, even though the federal wind production and solar investment tax credits were extended last year.

“In this last bout of renewable targeted tax credit fights, some of them got left out in the must-pass omnibus bill,” Loris said, and some members of Congress are vigilant to keep them from being sneaked into “must-pass” bills unrelated to energy.

“So I think there’s opposition,” Loris said. “We shouldn’t be picking winners and losers, and having this cronyism in the energy sector.”