Biden tax and infrastructure proposals could impact power and utilities companies

July 2021

In brief

President Biden has proposed extensive infrastructure and other spending initiatives, including tax incentives for clean energy and domestic manufacturing, as well as corporate and individual tax increase proposals designed to offset the costs of his spending proposals. On May 28, the Treasury Department released its ‘Green Book’ General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals, providing additional detail on the President’s proposals. Congressional leaders also are considering proposals around renewable energy incentives. 

On June 24, President Biden and a bipartisan group of Senators announced a $1.2 trillion infrastructure agreement that includes $579 billion in new spending on a range of infrastructure projects. The plan would be paid for by $584.3 billion in net offsets that include closing the tax gap, redirecting unspent emergency relief funds, and other offsets that include reinstating Superfund excise taxes on chemicals.

This bipartisan agreement would be subject to action by the House and Senate under regular legislative procedures (i.e., a 60-vote supermajority would be required in the Senate). House Speaker Nancy Pelosi (D-CA) has stated that the House will consider the bipartisan infrastructure agreement only after an agreement has been secured to consider a budget reconciliation bill that would allow for action on corporate and individual tax increase proposals with only Democratic votes. Senate Majority Leader Chuck Schumer (D-NY) said that he plans to bring both the bipartisan bill and a budget reconciliation bill to the Senate floor in July.

Action item: Power & Utilities (P&U) companies should evaluate and model the effect of the proposed corporate tax rate increase on existing excess deferred taxes and the creation of any new deficient deferred taxes. Tax executives should communicate with the C-suite regarding these impacts as well as other potential implications of a rate increase (e.g., future cash flows, capital expenditures). These companies also should consider the impact of potential method planning opportunities in advance of a rate change. In addition, companies should communicate with policy makers about how specific proposals and changes to tax incentives affecting the P&U industry could impact companies’ future investment goals to reach zero net emissions within the next 15 to 20 years.

The takeaway

Companies should evaluate and model the potential effect of President Biden’s and other proposed infrastructure renewable credits and tax increase proposals, specifically the impact enacting such proposals could have on future rate base, interaction with existing regulator approval on the 2017 Act’s treatment of excess deferred taxes, and technology needs to account for the new layer of regulatory accounting.

For more information:

For the White House summary of President Biden’s American Jobs Plan and the Made in America Tax Plan, click here

For the summary of the Green Book and ESG proposals, click here

Four our previous webcasts on Policy Update & ESG, click here

For our webcast replay on Regulatory Update, click here

Contact us

Marc Caillouet

Partner, PwC US

Mark Kelly

Partner, PwC US

Sal Montalbano

Federal Tax, PwC US

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