Oregon Governor Agrees to Curb Renewable Energy Income Tax Credit

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By Tom Alkire

PORTLAND, Ore.—Oregon Gov. Ted Kulongoski (D) recommended Dec. 2 curbing the state's business energy tax credit program that has mushroomed over the past few years and is now the second largest state income tax credit costing an estimated $83 million annually.

Earlier this year, the Legislature passed a bill (H.B. 2472b) that would have reduced the tax credit, but Kulongoski vetoed the bill Aug. 7 (151 DTR H-3, 8/10/09). Now he has urged the Legislature to rein in the tax credit during the February 2010 session.

Under the current tax credit program, personal and corporate income taxpayers can claim tax credits for renewable energy projects for up to 50 percent of eligible costs over five years. Such projects have a cap of $20 million.

Under Kulongoski's recommendation, taxpayers could claim a renewable energy tax credit of only 5 percent of eligible costs on large wind projects over five years, up to a project cap of $200 million. In other words, a taxpayer could get a $1 million tax credit over the next five years on a $20 million project, an Oregon Department of Energy spokeswoman said Dec. 3.

Currently, a taxpayer could get a $10 million tax credit over the next five years on a $20 million project.

Credit Phaseout Sought for Large Wind Projects

Kulongoski also recommended decreasing the 5 percent tax credit by one percentage point each year until the tax credit program is eliminated for large wind projects. For small renewable energy projects (under $100,000 per project), he recommended the current 50 percent tax credit remain in place.

The cost of wind energy projects has grown from $147 million in 2006 to $850 million this year, according to a DOE report.

Oregon's renewable energy tax credit is one of the most generous such credits in the United States, said several legislators critical of the program (212 DTR H-4, 11/5/09). Fifteen other states now have some sort of personal and corporate income tax renewable energy tax credit. Three other states have a renewable energy tax credit for corporate income taxpayers only, and two have such a tax credit for personal income taxpayers only, according to the report.