Wind energy providers
Thanks to a one-year extension of the wind production tax credit, Silver Spring-based Clean Currents, which supplies wind power to establishments such as Honest Tea and Busboys and Poets, is continuing with plans to open offices in two more states and add a dozen employees to its current roster of 25 by the end of this year.
The tax credit provides a 2.2 cent credit for every kilowatt-hour of renewable energy generated during a facility’s first 10 years.
“Without the evening of the playing field that this represents, it would’ve been impossible to keep up with competitors’ prices,” said Gary Skulnik, the company’s president and co-founder.
Skulnik said it was too early to determine exactly how much money the company would save because of the tax credit.
“It’s really not a direct, immediate benefit to our bottom-line,” he said. “But long term, it definitely helps our profitability.”
Venture capital firms
The venture capital industry saw the top tax rate for capital gains climb to 20 percent from 15 percent as a result of the fiscal cliff agreement. And that’s not the only hit to investors’ wallets. An additional 3.8 percent tax on investment income, passed as part of health care reform, takes effect this year.
Many investors expected a tax hike to be part of the deal even before it was reached. Peter Barris, managing general partner at New Enterprise Associates, is one of them. Even still, the result will be that venture capital firms and their financial backers take in less money when they cash out of investments.
“I don’t know of anybody that says paying more taxes is a good thing,” Barris said. “We expected an increase and this is a manageable increase. I don’t think it’s a sizeable enough increase that it’s going to change behavior in any material way.”
It could have been worse. Congress could have changed tax law to deal with carried interest, or the profits left after investors are paid back for the money they put up. Carried interest is currently treated as capital gains, but some have called for it to be treated as ordinary income, and subject to higher rates.
Still, more important than tax rates is the health of the overall economy, Barris said, which can impact the ability of portfolio companies to pursue successful initial public offerings.
We worried “the sentiment on Wall Street would be such that it would shut down the market for new public offerings, and from that standpoint we were acutely aware of what was going on and sensitive to what was going on,” Barris said.