ILSR’s Research.pdf

A typical 2-megawatt wind turbine can power 600 American homes, but it's nearly impossible for those households to collectively own a turbine due to two significant barriers: the federal Production Tax Credit (PTC) and Securities and Exchange Commission (SEC) registration fees. The PTC limits the type and amount of income tax that can be applied, and the SEC has complicated and expensive registration fees for sizable cooperative investments. To achieve energy independence, lawmakers need to revise the PTC and simplify SEC registration. The PTC restricts investment in renewable energy, and its tax credit can only be applied to "passive income," limiting recipients to individual investors who owe taxes from rental property or investments. Two workarounds have been developed, including partnering with a large equity firm or gathering many local investors, but these arrangements have their own limitations. SEC registration options are also complex and expensive, with five types of registration available, each with different upfront and compliance costs. A proposed bill by Representative Tim Walz (D-MN) could help address part of the PTC roadblock by allowing wind project investors to access up to $40,000 of the PTC against ordinary income, potentially expanding the pool of potential local investors.