Green Manufactures

Green Manufactures

July 10, 2010

Green manufacturers may get additional tax credits from Congress, but a key US Senator is concerned that the existing tax credits confer an advantage on US manufacturers who import components from overseas.

Congress authorized $2.3 billion in tax credits as part of an economic stimulus bill in 2009 to encourage construction of new factories in the United States for manufacturing wind turbines, solar panels and other products for the green economy. The credits are 30% of the cost of new equipment installed in such factories. They are in section 48C of the US tax code.

Companies had to apply to the IRS and the US Department of Energy for an allocation. The government awarded all the credits in January this year. There is a good chance that any energy bill Congress passes this year will authorize additional tax credits.

The existing statute directs the government to give a preference to factories whose products are expected to have the lowest levelized cost of generated or stored energy “based on the costs of the full supply chain” when evaluating applications. Senator Jeff Bingaman (D.-New Mexico), chairman of the Senate Energy Committee, expressed concern at a hearing in May that the stipulation creates a bias in favor of manufacturers who import low-cost components to assemble into finished products in the United States.

Even if Congress fails this year to provide more credits, there is a good chance that the IRS will have more to allocate anyway as a number of companies look likely to turn back credits they were unable to use.

The IRS has told companies that were awarded tax credits that they risk losing them if they delay construction of factories, move the locations or alter other material facts that led to selection of their proposals.

The companies who received awards in January promised to build 183 new factories.

Keith Martin