President Joe Biden is expected to sign legislation Tuesday that includes the most ambitious initiatives to fight climate change that the nation has ever seen. While not as bold as earlier proposals, the Inflation Reduction Act (IRA) is expected to curb America’s carbon emissions 31-to-44% by 2030 compared to 2005 levels.
The bill includes $370 billion for climate actions, such as clean energy tax incentives and government support for climate tech innovation and adoption. It’s packed with provisions that should help tech companies including Amazon and Microsoft achieve their bold goals for cutting carbon emissions.
Given their climate-related ambitions and struggles to slow emissions, the tech giants must be singing the praises of the new measure, right?
The legislation, which also has substantial healthcare implications, includes a 15% minimum tax applied to corporations that report $1 billion annually to their shareholders but pay taxes below 21% thanks to deductions, credits and other exemptions. The tax provision is expected to bring in $222.2 billion over a decade.
While roughly 470 American companies meet the $1 billion cutoff, most already pay more than the required minimum tax. The Tax Policy Center reported that about 150 companies would be subject to the 15% tax. Amazon is among those that could be affected. The Washington Post reported that the company paid 10% in taxes last year, and 7% and 6% in the years preceding. Microsoft paid more than 15% all three years.
The measure also includes a new 1% excise tax on companies when they do stock buybacks, which can drive up their value. Microsoft spent $28 billion on buybacks in the past 12 months, according to the Washington Post.
GeekWire contacted Microsoft and Amazon regarding the new tax rules. Microsoft responded with no comment and Amazon has not replied.
Their CEOs, however, belong to Business Roundtable, a policy advocacy organization that came out solidly against the measure.
“BRT strongly opposes tax proposals that would discourage investment in the U.S. We call on Congress to reject the proposed book minimum tax that would undermine proven bipartisan incentives that encourage capital investment,” the group tweeted following the Senate’s passage of the bill.
One of the few tech companies publicly supporting the Inflation Reduction Act is Salesforce, an enterprise software company that is based in San Francisco and has offices in Bellevue, Wash.
“We urgently need to move our country forward to a more sustainable future, one that will create jobs, reduce pollution, drive greater economic security and increase equity and access to clean energy for lower-income communities,” the company’s executive vice president of government affairs Eric Loeb told the publication Protocol.
In recent years, Amazon and Microsoft have been publicly bolstering their climate bona fides.
Amazon launched the Climate Pledge in 2019, vowing to reach carbon neutrality by 2040 and urging others to join it. It created the $2 billion Climate Pledge Fund that it’s investing in promising clean technologies. Two years ago, it became the planet’s largest corporate purchaser of clean power.
Microsoft aims to be carbon negative by 2030 and helped form the Transform to Net Zero coalition to support businesses who have committed to cutting emissions. It’s investing $1 billion over four years to kick start climate tech innovation.
In its annual Form 10-K report to the Securities and Exchange Commission this summer, Microsoft called out climate change as one of the top risks that it needs to manage for.
“The long-term effects of climate change on the global economy and the IT industry in particular are unclear,” reads the report. That includes changes in environmental regulations; the availability of natural resources and energy supplies; and the costs of powering and cooling computer hardware used for cloud-based services, according to the report.
Among its efforts to shrink its emissions, Microsoft recently announced progress in developing a hydrogen-based, clean energy solution for running its data centers.
The tech giants have also invested in clean transportation startups — Amazon is a backer of EV maker Rivian and green aerospace company ZeroAvia, while Microsoft in 2020 invested in a startup called LanzaJet making sustainable jet fuel.
Both Amazon and Microsoft had significant emissions increases last year, revealing the challenges of following carbon diets with the clean tech that’s currently available.
Washington Sen. Maria Cantwell called out in a recent news release the Inflation Reduction Act’s specific benefits to local companies in meeting their climate obligations.
The bill could address transportation infrastructure needs that would help the Microsoft headquarters in Redmond, Cantwell noted. Another component of the act could aid Amazon and local aerospace companies that have pledged to increase their use of sustainable fuels which currently cost more than fossil fuels.
“This grant program would help produce sustainable aviation fuel at an affordable price point,” Cantwell said, “to help them keep those pledges.”
Microsoft co-founder Bill Gates shared his support for the bill last week.
“The Inflation Reduction Act’s passage through Congress is nothing short of extraordinary. The United States is taking a historic step towards the clean energy economy we need to meet our climate goals,” Gates tweeted after its passage in Congress.
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