March 28, 2024

Tax Break, or Kickback? Energy Benefit Becomes a Lightning Rod

“The whole purpose of the tax deduction was to incentivize owners, and our situation as a governmental entity is no different from Apple or any other corporate entity,” Philip Aldridge, vice chancellor for business development at the University of Texas, said. The University of Texas System and the University of Houston System have filed a lawsuit arguing that they were misled into transferring incentives worth millions of dollars without compensation.

“We own the building, we financed 100 percent of the building, and we, as the owner, determined whether the building was going to be energy efficient or not,” Mr. Aldridge said.

Jonathan Duchac, an associate professor of accounting at Wake Forest University, goes a step further. In a paper on the subject in The ATA Journal of Legal Tax Research, he and his co-authors argue that simply giving away the deductions violates most state constitutions, which have anti-gift provisions.

“Government can’t give away things of value without being compensated,” Mr. Duchac said.

There are fierce dissenters, especially among construction industry trade groups and the consulting firms that advise them. The American Council of Engineering Companies petitioned the Senate Finance Committee last summer arguing that the practice of public officials asking for compensation in exchange for a 179D transfer “raises a number of serious legal and ethical questions.”

A few lawmakers have also warned federal officials that asking for fees in return for allocating the deduction might amount to a “kickback.”

But more and more state agencies, public entities and others are pushing back against that interpretation.

In June, the California State University System changed its policy, requiring officials to negotiate reimbursement in exchange for allocating the energy deduction. In October, a Des Moines Register investigation into the tax break lamented that Iowa governments frequently “gained little or nothing for authorizing the deduction on taxpayer-funded construction.” And in December, North Carolina overturned a rule that had prohibited state officials from similarly asking for compensation.

Article source: https://www.nytimes.com/2018/05/25/business/economy/energy-tax-break.html?partner=rss&emc=rss

Speak Your Mind