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In reply to the discussion: I smell a big Wal-mart Rat! [View all]HiPointDem
(20,729 posts)Tax incentives may be politically expedient, but they are financially wasteful. In fact, tax credits cost Uncle Sam (and the taxpayer) twice as much as handing out cash. Why? For many clean energy projects, the developer doesnt have enough tax liability to effectively use the 30% investment tax credit or production tax credit.
Instead, they need a tax equity partner (like a Wall Street banker) who can use a big tax credit. With some legal finagling, the two partners ink a deal that monetizes the entire federal incentive, but the Wall Street equity partner takes a hefty cut. In 2010, renewable energy developers were selling their tax credits to financiers for 30-50 cents on the dollar, with the remainder padding the pockets of financiers rather than buying down the cost of clean energy.
Read more at http://cleantechnica.com/2012/01/04/federal-tax-credits-may-handcuff-clean-energy-development/#elA0U8cLSGLZ6eUl.99
What is a tax credit?
A tax credit is an economic incentive issued by a government agency to encourage the private activity, typically investments, in economic development. Such incentives can be in the form of grants, rebates, loans or tax credits. At Clocktower Tax Credits, we work with tax credits that can be sold or allocated to outside investors.
http://clocktowertc.com/faq.shtml