In the early hours of Saturday morning, Republicans voted 51-49 to approve their overhaul tax bill, the biggest change to U.S. tax law in decades. 

It has critical implications for renewable energy.

“If this bill were to be enacted exactly as written in the Senate, it would have extremely negative consequences for renewable energy investment and job creation in the United States,” said Greg Wetstone, CEO at the American Council on Renewable Energy (ACORE). “Suddenly credits that had substantial value would face an environment where they have little if any value at all.”

In addition to a Base Erosion Anti-Abuse Tax (BEAT) provision that could hurt tax equity investments, Republicans added a corporate tax provision back into the bill before it passed. The change was meant to bring in billions of dollars in revenue to balance the bill and win support from holdout GOP senators.

Gregory Jenner, a tax lawyer at Stoel Rives and former Acting Assistant Secretary of the U.S. Treasury for Tax Policy, said it has serious -- and likely inadvertent -- consequences.

“It would pretty much blow up the tax equity market for wind,” he said. 

In both the Senate and House bills, legislators dropped the regular tax rate, which was at 35 percent, to equal the 20 percent alternative minimum tax (AMT), which was added back into the bill. In the Senate version, that change would go into effect in 2019. The AMT is calculated from a broader tax base and can only be lowered using the Production Tax Credit (PTC) for the first four years of a project. Corporations have to pay whichever percentage is higher. 

For example, Jenner explained, under current law, a company with revenue of $100 would be taxed at $35 using the regular tax rate. Under the AMT, its taxable income might be $110, with a tax of $22. That corporation could use tax credits to reduce its regular tax rate down to $22 without triggering the AMT. 

Under the new bill, that same corporation would be taxed at $20 under the regular tax. According to Jenner, most corporations would now likely be paying the AMT and thus only able to utilize the PTC for four years.

The ITC would not be impacted, meaning wind projects would be hit hardest by this segment of the bill.

Keith Martin, a transactional lawyer at Norton Rose Fulbright, said the change might mean investors will favor the ITC over PTC. 

The AMT adds insult to injury for renewables.

The BEAT provision, which complicates the tax system for cross-border income, also made it through the vote. Renewables advocates had been lobbying all week to knock it out of the final text. Rather than a 10 percent calculation of a multinational company’s taxable income, the current form of BEAT requires a calculation of 11 percent, which Jenner said “just makes a bad provision worse.”

“The banks appear to have traded a higher tax rate for being spared from having to add back into income cross-border ‘qualified derivative payments’ to affiliates,” writes Martin in a recent post explaining the final bill. 

The change will have the same potential cooling affect on tax equity project investment, knocking out billions of dollars in project finance. In 2016, $11 billion of renewable energy projects were financed through tax equity; in 2015 it was $13 billion.

Both Martin and Jenner believe that the renewable energy industry could catch a break with the AMT, though. They don’t expect that provision to make it into the final version of the law. 

“With all these last-minute changes, they needed to come up with a revenue source,” said Jenner. “They plugged the gap by restoring the corporate AMT, but I don’t think they ever intended for that provision to survive conference.”

BEAT, on the other hand, just might. Lawmakers exempted research and development credits from that provision, indicating that legislators are aware that other investments, including clean energy, would be impacted, said Jenner.

While the new bill gets hashed out in conference, Wetstone said ACORE is determined to make legislators aware of the economic repercussions of the bill.

“It’s a slow education process. […] These are very complex provisions,” he said. “I think we’re making progress, but things could happen quickly. It’s going to be intense for the next week or so.”

Senate Majority Leader Mitch McConnell has said he hopes to get the bill out of conference and onto President Trump's desk by Christmas. The Alabama special senate election on Dec. 12 could influence the outcome. A democratic win could jeopardize the legislation. 

“There is a real incentive to get this done very, very quickly,” said Jenner. “This is a runaway train at this point -- who knows what they’re going to do. I do not believe for a minute that the renewable energy industry is safe.”