The alternative energy heavy NextEra Energy already had six different firms helping it lobby on tax policy when it brought Akin Gump Straus Hauer and Feld, one of the three biggest lobbying firms in Washington over the past decade, into the fray in the last months of 2010. A tax fight was gearing up and NextEra Energy, along with other companies, sought to preserve newly won tax breaks that have helped to push their tax burdens to among the lowest in the nation.
In this year’s State of the Union address, President Obama said that “a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change.”
It looks as though the alternative energy industry and their lobbyists won’t be one of the losers in any proposed corporate tax reform. The administration has repeatedly gone to bat for the tax provisions sought by alternative energy lobbyists.
NextEra Energy is one of six energy companies that pay less than five percent in taxes, according to a collection of data from Capitol IQ by Business Insider. The data is an aggregate amount covering the years 2005-2009. NextEra is reported to have paid a 1.74 percent tax rate over this period.
Taxes have been a focal lobbying point for many of these companies, but especially important for five of the six identified by Capitol IQ. Two of them—NextEra Energy and Xcel Energy—reported spending millions on lobbying while listing taxes on their disclosures more than any other issue in 2010. Xcel reportedly paid a 1.78 percent tax rate over the 2005-2009 period.
The teams assembled by NextEra and Xcel included lobbyists with years of tax experience, often on the appropriate congressional committees or in the executive branch. They include a former member of the Ways and Means Committee, a former tax counsel for the Ways and Means Committee, a former political advisor to Senate Finance Committee chairman Max Baucus, and a former tax counsel to the Senate Finance Committee.
In the fourth quarter of 2010, six out of the fifteen outside lobbying firms hired by NextEra and Xcel listed energy tax provisions as the sole issue they lobbied on. Six other firms lobbied on a mix of issues including taxes.
This fall the administration held meetings with alternative energy lobbyists including those from the low-tax rate NextEra and Xcel.
In October of last year Heather Zichal, deputy assistant to the President on energy and climate change, held meetings with NextEra’s vice president for government relations, Christopher Chapel, the American Wind Energy Association’s Robert Gramlich, the Solar Energy Industry Association’s Dan Adamson, and the American Biofuels Association’s Michael McAdams and Jack Huttner. In January and September Zichal held meetings with Xcel Energy lobbyists John O’Donnell and Stephen Plevniak, respectively.
NextEra Energy and Xcel Energy are two of the largest producers and provides of wind power in the United States and both have major holdings of solar platforms.
Much of the reduced tax burden for these energy companies comes from a number of subsidies, grants, and tax credits that have been advanced since the 1990s and expanded under the Obama administration.
One of the favorite credits of the industry is the production tax credit, which provides a 2.1-cent per kilowatt subsidy for companies generating power from wind, solar, geothermal, and certain bioenergy sources. It’s estimated that NextEra saved $430 million under the production tax credit in 2010.
Equally important to alternative energy producers is the grant in lieu of tax credit program created in the stimulus bill. This program, administered by the Treasury Department, provides a 30 percent subsidy of capital costs to new construction for wind turbine construction. This has pushed NextEra and Xcel to speed construction before the program ends.
The increased construction associated with the application of credits and grants comes with an added benefit: much of the spending can be deducted from the company’s taxes.
Both NextEra and Xcel hired the majority of their outside lobbyists in the fourth quarter of 2010 to push for the extension of the grant in lieu of tax credit policy. They were quite successful. The tax reform compromise package worked out between the administration and congressional Republicans in December included an extension of this policy.
NextEra is uniquely situated to gain from the extension of this policy. NextEra subsidiaries won three grants under the program totaling $257 million, according to the Sun-Sentinel.
While these tax policies may appear to diverge from the administration’s stated goal of reducing lobbyist sought tax credits and loopholes they are likely to survive. Other companies with unusually low tax rates are more likely to see their hard won tax breaks and loopholes targeted by the administration and Congress if a corporate tax reform push comes to shove.