North Carolina life insurance customers may pay higher premiums unless the Cooper administration reverses course on renewable-energy tax credits.
That’s what the American Council of Life Insurers said in an Aug. 28 letter to Ronald Penny, Gov. Roy Cooper’s revenue secretary. ACLI regional Vice President Curtis Leonard said the Department of Revenue’s September 2018 decision rejecting tax credits for some partnerships set up in North Carolina “has created an environment of investor uncertainty and has rapidly eroded the confidence of life insurers that invest regularly in North Carolina’s economy.”
“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.”
Washington, D.C.-based ACLI has 280 member companies representing 95% of the insurance industry assets in the U.S., its website says.
The renewable energy tax credits have helped finance North Carolina’s rapid expansion of solar generating facilities.
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.
The revenue department ruled some investors set up partnerships for solar credits that didn’t satisfy the federal Internal Revenue Code, and N.C. law should match the federal code. The ruling caused major uncertainty for some tax filers who counted on getting the credits.
Carolina Journal first reported on the tax credit rejections in early August. The life insurance companies are part of a larger group of individual and corporate investors standing to lose as much as $500 million they were expecting from the state, tax lawyers familiar with the situation told CJ.
Earlier, Monarch Tax Credits, a Georgia-based company that facilitates investments in renewable energy, had asked DOR to reconsider. An attorney representing Monarch told CJ the department’s rejections could affect as many as 200 Monarch clients.
ACLI’s Leonard noted the department announced its position only after investors had made investments. “In so doing, the Department has chilled investor confidence in the trustworthiness of any future tax credit offerings by the state,” he said.
Leonard said the renewable tax credit program has existed for more than a decade, and DOR had ample time to address any concerns over investor participation. He said many insurance companies have been audited over the legal validity of their partnership interests. The audits have created the perception that DOR will “claw back” tax credits that have been claimed.
CJ reached out to DOR and Cooper’s office seeking comment. At press time, neither office responded.
Insurance companies at risk
DOR publishes an annual report on the taxpayers that claimed the solar investment credits. The most recent is the 2019 Economic Incentives Report. The section “Business and Energy Credits: Credit for Investing in Renewable Energy Property Processed During Calendar Year 2018” lists 3,121 individuals or businesses claiming $210 million overall.
Several ACLI members 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.
Since the credits must be taken in five equal annual installments, if DOR holds fast the potential losses to each company could be five times the amounts listed.