News regarding the One Big Beautiful Bill Act (OB3) has died down since its passage by Congress in July, but the effects on tax policy and compliance are just beginning to ramp up.
OB3 has already jolted the power and utilities sector. From a property tax perspective, it’s not hyperbole to say that the OB3 dramatically reshapes government support for investments into energy infrastructure. It has the potential to impact everyone from individual households to multinational corporations.
In this webinar, Lee Watkins, Chief Strategy Officer at PowerPlan, Sean Kelly, Senior Solution Architect at PowerPlan, and Robert Butterbaugh, Director of Property Tax Services at GTM, shared their insights into the key provisions of OB3 affecting the sector.
Clean Energy on Ice?
One of the most talked-about elements of the federal bill is a shakeup of clean energy tax incentives. OB3 broadly phases out a series of popular wind and solar incentives launched during the Biden administration. It will create a far greater tax burden for many businesses and individuals who have invested in clean energy.
However, at the same time, further changes to the tax code stemming from OB3 will create new opportunities for renewables. Here are some of the key changes to wind, solar, and green energy:
- Elimination of tax credits: OB3 eliminated wind and solar property tax credits for any installation that’s in service after December 31, 2027. There are exceptions, however, for projects that begin construction before July 4, 2026. The loss of these incentives, in many cases, will result in higher year-end taxes along with lower valuations of renewable projects, which can lead to diminished cash flows for the owners of solar panels or wind turbines.
- 100% bonus depreciation: On the plus side, businesses now have more flexibility to deduct short-term expenses from their year-end taxable income, including property costs for any “qualified production property.”
- R&D expenses: Congress restored the immediate deductibility of domestic R&D investments, effective beginning in 2026, which had previously been scaled back. This will also help to mitigate some of the losses of subsidies.
Classification & Valuation Challenges
One of the most enduring challenges for taxpayers is navigating the varying state and local tax codes, along with their respective valuation methodologies, in order to maintain compliance. On top of federal policy, these rules dictate how renewable energy technologies get classified as assets, along with how much (or how little) property taxes apply to them.
State tax laws have generally struggled to keep pace with emerging technology. Real vs. personal property classification is one of the key challenges for tax departments.
Consider: There’s no standard across the U.S. for determining which classification solar, wind, or renewable equipment falls into. In a nutshell, real property refers to land, along with its non-removable fixtures, such as a house or office building. Personal property is anything that can be moved to a different location. With shifting guidelines between states, ensuring compliance can be a major lift for tax departments.
Automation & AI in Property Tax Management
In this fast-changing landscape for the tax code, AI and automation tools, such as RPA and Bots, can provide a lifeline to tax departments. These tools make it easier to perform the necessary, time-consuming aspects of tax compliance, freeing up your team to focus on the bigger picture.
Here are a few best practices that PowerPlan’s Sean Kelly recommends for streamlining your tax execution with these advanced tools:
- Focus on repetitive tasks: Utilizing automation tools for repetitive tasks like data entry, data extraction, and data analysis can allow paid human professionals to focus more of their time on strategic tasks that directly impact the bottom line.
- Closed systems: With new technologies comes the risk of cyberattacks and security breaches. One way to protect your data is to implement a closed system with your AI tools. A closed system means that there is no connection between your data and the open web — a virtual firewall between your proprietary information and potential hackers.
- Advanced applications: There are thoughtful ways to leverage AI tools for complicated tasks, not just repetitive ones. AI models can assist with asset classification and obsolescence detection; or, with a tax professional “at the wheel,” you can utilize these tools to run predictive analytics and forecast the impact of legislative changes on your taxes.
- Humans in the loop: In order to check and verify the results of AI and automation tools, always keep a human in the loop at critical stages of the process.
How GTM Can Help
Our tax experts continually work to stay at the forefront of both legislative and technological changes in the tax industry. Our team is available to discuss solutions and strategies for your tax department, whether it’s through full outsourcing or a collaborative structure with your existing team.
Reach out to GTM today to discuss how to prepare effectively for your tax future.
Watch the full webinar recording over on PowerPlan’s website: https://powerplan.com/resources
