Something we never have a shortage of are proposals to change our tax systems. When it’s election time, we hear even more proposals, as well as how various parts of our tax system are flawed, usually due to actions or inactions of the opposing party. We also hear lots of incomplete statements, promises of tax changes too costly to be enacted, and ideas that will be replaced by the time the winner gets down to crafting a real set of tax and budget proposals. This article describes some of the tax proposals of the two presidential candidates along with suggestions on how we should analyze them against principles supporting effective tax systems, with highlights of some important facts seemingly missing from current tax discussions. These proposals are also relevant to members of Congress as to whether they support any of them and how they align with tax changes that the member would like to see enacted.
What Happens If You Can’t Use All Your Clean Energy Tax Credits This Year?
Clean energy tax credits have a lot going for them. Clients buy them at a discount, apply them dollar-for-dollar against federal tax liability, and walk away paying less to the IRS. That alone makes them worth a serious look. But here’s what often gets overlooked and what makes these investments genuinely remarkable compared to almost anything else in your tax planning toolkit: the flexibility built into how and when the credits can be used. Can’t absorb the full credit this year? Carry it back up to three years and trigger refunds on taxes your client already paid. Think about that for a second. There are very few places in the tax code where you can go back in time and rewrite last year’s tax bill. This is one of them. Still have excess after the carryback? Carry it forward for up to 22 years. That’s not a typo. Two decades of runway to put those credits to work as your client’s passive income grows. And if circumstances change and the credits simply aren’t needed? An emerging secondary market means there may even be an option to sell them. No other common tax planning strategy offers this combination a guaranteed discount on purchase, dollar-for-dollar offset of tax liability, the ability to look backward and forward, and a potential exit if plans change. Understanding how each of these features works is what separates a good credit investment from a great one.
