Alternative minimum tax (AMT) tax on corporations would undermine clean energy and climate goals by hampering power companies’ ability to invest in clean energy and increasing consumer costs.
While applauding the passsage of the Bipartisan Infrastructure Package, in a letter to House and Senate leaders, the Electric Power Supply Association outlines several grave concerns with a proposed corporate AMT provision included in the possible reconciliation bill. EPSA points out several fatal flaws of the draft provision which need to be remedied or stricken from the bill.
The letter states, “EPSA member companies have been at the forefront of the energy transition and such an exorbitant tax levied upon these companies would negatively impact their ability to continue these clean energy investments at the planned pace. In addition, consumers would ed up bearing the brunt of these costs and energy transition delays – a result which we believe Congress does not intend.”
Concerns noted include:
- The draft legislation would require companies that use “mark to market” (MTM) accounting to include unrealized MTM revenues and losses in the annual calculation of financial statement income – thereby unfairly penalizing companies that are appropriately managing their risk exposure to commodity price changes by hedging in the financial markets.
- If a company triggers the AMT in a single year, it will be subject to paying the AMT in all future years, even if its book income falls below $1 billion. EPSA concerns that this approach punishes companies who relied on the benefits of the deductibility of accelerated depreciation when deciding to invest in job-creating generation infrastructure projects.
- The revised AMT language currently eliminates the 2020 pandemic year as a year to measure the three-year average financial income to determine applicability of the tax. The original three-year lookback rule of applicability, which includes 2020 for the first year of implementation of the corporate AMT, would recognize the especially difficult year that American business suffered as it fully employed American workers while suffering historic losses. Utilization of the 2020 financial year enables American business to transition to this historic tax more smoothly
The letter was sent November 10 to Senate Majority Leader Chuck Schumer and Senate Finance Committee Chair Ron Wyden, along with House Speaker Nancy Pelosi and House Ways and Means Committee Chair Richard Neal.