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Wal-Mart’s $11M Profit From Oregon’s Renewable Energy Loophole Spurs Critics

solar panels2Critics of Oregon’s generous renewable energy incentives are pointing to how corporate giants are profiting at the expense of taxpayers.

For instance, Wal-Mart Stores Inc. last year paid $22.6 million for the right to claim $33.6 million in tax benefits under Oregon’s Business Energy Tax Credit, reports OregonLive.

The tax credit, which has many critics in the public and politcal realms, encourages investment in alternative energy, recycling and energy conservation.

It is estimated to cost the state $168 million over the next two years, which is about $100 million more than it cost the state in the last two-year budget cycle. Such high figures have prompted state legislators to consider limiting the tax credit.

In the case of Wal-Mart, critics say that the retail giant was able to pocket $11 million, while the the state’s general fund is out the full $33.6 million in lost tax revenues.

Other major companies such as Costco and U.S. Bank have taken advantage of the tax loophole as well.

Critics say the so-called “pass through” program has made it possible for corporations and high wage-earners to avoid paying state taxes.

A lack of accountability and foresight in drawing up the program has led to other problems.

For instance, a Weyerhaeuser Paper Mill in Albany, Ore., in 2008 received $3.3 million in energy tax credits for rehabbing a biomass cogeneration plant that burned waste wood to create energy and simultaneously captured the heat to dry paper. Weyerhaeuser didn’t need the credits and sold them to Wal-Mart for $2.3 million, reports OregonLive.

Weyerhaeuser, however, sold the Albany mill to International Paper, which subsequently shut it down. Now, the renewable energy that the taxes credits paid for is no longer in service, and critics of the program are using it as an example of why the program is a failure.

During the past eight years, the state incentive has drawn $300 million in applications. The credit provides up to 50 percent of a project’s cost (up to $11 million, including cost overruns).

Oregon has the nation’s fifth-best renewable energy incentives, according to Ernst & Young.

Oregon’s rule currently allows third parties to buy renewable energy tax credits for about 67 cents on the dollar, taking the tax breaks over five years, resulting in an average annualized rate of return of about 10 percent.

Acting state Energy Department Director Mark Long instead wants the state to adopt a rate of  about 3.5 percent a year. He said that mean more of the investment goes into the renewable energy project, rather than into investors’ pockets.

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4 thoughts on “Wal-Mart’s $11M Profit From Oregon’s Renewable Energy Loophole Spurs Critics

  1. Let’s not blame the companies for capitalizing on poorly crafted programs that in large part are setting infrastructure that will be used for many years to come. The taxpayers may be “loosing” in the short term, but, the state of Oregon will have become more energy independent. If that is the result Oregonians or Oregon’s law makers were seeking, then it is working.
    It is awfully easy for anyone to resent corporations for being opportunistic. But, for the incentives, would they invest? How can we insist on our “capitalist” system’s superiority and then frown on it when it is “capitalized” by corporations?

  2. Unfortunately articles like this in the Oregonian are very short-sighted and mischaracterize (and sensationalize)the story. These are not “windfall” profits – these companies provide capital to subsidize renewable energy investments for those groups that can’t take advantage of the tax credit. In return for their upfront capital, they receive tax benefit over a period of many years, equaling a 10% return on their investment – no “windfall” here. The supposed $11 million in profit is spread over many years. There is also no analysis of how much job creation or other forms of tax revenue (or even carbon emission reduction) that resulted from enabling these projects to occur. Most of these projects/investments would not have otherwise happened without the aggressive incentives. Right now Oregon suffers from significant job loss/poor economy issues, which would be far worse without some of the projects being funded by these incentives.

  3. I think this is fine as long as individuals are given the same type of breaks to implement small scale systems. I don’t think any state has a program where a person can get paid to put up solar panels however. Real energy independence for Americans involves freeing ourselves,not only from foreign oil, but from the whims of utility companies!

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