What: “A Climate for Change? Tax Implications of U.S. Greenhouse Gas Regulation”
Who: Clint Stretch, managing principal, Tax Policy, Deloitte Tax LLP
Brad Seltzer, principal, global leader Energy & Resources Tax, Deloitte Tax LLP
When: Available immediately
Details: A number of domestic and international considerations have led many political observers to conclude that the Unites States will take legislative action during the remainder of 2009, or in 2010, to address climate change. The goal of these legislative efforts is to achieve a gradual but significant reduction in greenhouse gas (GHG) emissions from their earlier levels by the middle of the century. Action in this area would be a watershed regulatory and tax development and would affect all types of businesses in many aspects of their operations.
Looking ahead, it would not be surprising to see climate change regulation, in terms of its business impact, be regarded in the same manner as securities regulation, food and drug safety regulation, financial services regulation or employee retirement income security rules. Therefore, this legislation will present an array of risks and opportunities that will demand attention from boards of directors, senior management and tax departments.
This Deloitte whitepaper describes general approaches to climate change legislation and the resulting implications for tax policy. Following the discussion of political and business considerations driving legislative action, the paper focuses on the largest component of the currently prevailing legislative approaches to climate change: a “cap-and-trade” program.
After laying the groundwork for understanding cap and trade, the paper addresses the role of taxes in efforts to directly limit GHG emissions. It begins by describing the debate that continues between advocates of a cap-and-trade approach and those who, as an alternative, would favor a tax on GHGs. This is followed by a summarizing of the tax issues that may confront businesses if Congress adopts a cap-and-trade system, which will necessarily create new intangible assets worth hundreds of billions of dollars. Without further guidance, there will be significant uncertainty regarding the tax treatment of assets, liabilities, and transactions arising as a result of cap and trade.
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