Tax Issues Weigh On Nebraska Wind Power Development

Nebraska doesn't waive wind project sales and use taxes like other states do.

Published on: Nov 1, 2012

The evidence is plentiful to show how wind farms positively benefit communities by improving local economies, raising property tax revenues and creating jobs.

Russ Knott, president of the Petersburg State Bank in Petersburg, told a crowd of 300 at the recent Nebraska Wind Conference that two nearby wind generation facilities have greatly enhanced his northeast Nebraska community, creating 18 new jobs and improving local businesses, including the building of a new grocery store. Young couples are beginning to return to town, he added

While Nebraska is listed as the fourth highest state nationally in wind generation potential, the state is well behind neighboring states in power generation from wind facilities. And it faces numerous roadblocks in expanding wind generation.

Tax Issues Weigh On Nebraska Wind Power Development
Tax Issues Weigh On Nebraska Wind Power Development

One is possible loss of the federal Production Tax Credit which is set to expire by the end of the year if Congress fails to extend after the elections. The program gives wind developers a per-kilowatt-hour income tax break for the first 10 years of production from a new wind farm project. Many don't expect it to be extended and, without it, the entire wind industry nationally will be dealt a setback.

Nebraska also is at a disadvantage in competing with neighboring states because it assesses a state sales and use tax on wind projects. Twenty-eight states, including the neighboring states of Kansas and Oklahoma, have waived that sales tax, which gives them an advantaging in selling wind power to other states.

In the 2012 Nebraska Legislature, a bill introduced by Omaha State Sen. Abbie Cornett, would have approved tax rebates for wind energy developers, but it remained in the Revenue Committee at the end of the session. Some expect a renewable energy tax package to be introduced in the 2013 Unicameral session.

Nebraska is a 100% public power state, but a law—LB 1048—passed in 2010 allows private renewable energy developers to develop projects that could export wind-generated power to other states.

However, Derek Sunderman, with Trade Wind Energy in Kansas, told the audience in Lincoln that the lack of a sales tax rebate in Nebraska makes wind projects in this state more costly to developers.

Nebraska currently produces about 1.2% of its power from wind generation and with the aforementioned tax hurdles and the overall economic downturn, wind generation won't expand significantly any time soon.