Chief tax officer James McNeill’s work at SunEdison bears a similarity to the actual sun, casting light and heat on our planet, hitting the earth on all sides at different angles and at different times. The same thing can be said about tax considerations and the company that they envelop.
Some of those tax issues are beneficial. Others are a costly encumbrance. To SunEdison—with manufacturing, development, and operations in thirty-five countries—there are myriad tax, duty, tariff, and surcharge questions to be dealt with, which is McNeill’s job. As he explains it, there are some that affect customer markets, such as favorable tax incentives that vary by state and country. However, other tax issues are operationally strategic; they can affect the intercompany selling of parts and systems and charging affiliates for services and other intangibles.
All of this hints at the give and take of how a business in the renewable energy sector must operate.
It also demonstrates how people in finance help drive renewable energy to compete against fossil fuels. McNeill’s staff has worked on five continents—Africa, North America, South America, Europe, and Asia—to manage these supply- and demand-related tax matters to the point of making solar energy affordable and profitable. “The economies of scale created by increasing demand of these systems has significantly reduced the cost per watt in many regions of the globe,” McNeill says. “In many regions, solar is at or below parity pricing with fossil fuel-based utilities.”
Transfer pricing is at the core of reducing transactional costs. For example, one SunEdison company in Malaysia purchases tangibles (e.g., polysilicon solar ingot) from a SunEdison-owned manufacturing plant in Portland, Oregon. The ingot is converted into solar wafers used in SunEdison solar systems throughout the globe. Tax regulators in all these countries want to make sure that these transactions yield the greatest revenues for their respective countries, subjecting SunEdison and the tax department to close scrutiny as a matter of course.
“Generally, intercompany transfer prices must be at arm’s-length prices,” McNeill says, explaining how those would be comparable to pricing between unrelated parties. “In order to document that the prices are arm’s length, economic studies that comply with local country guidelines must be performed. This process requires close coordination between various finance functions and other operations within the company.”
A few other tax matters have a big effect on the enterprise. A major manufacturing site for SunEdison is in Portland, Oregon, where the company was lured with renewable energy incentives. In California, Section 73 in the Revenue and Taxation Code favorably excludes the value of a photovoltaic cell installation from property tax assessments, reduces residential and commercial property tax on new solar installations, and stimulates purchases from SunEdison.
“It would be shortsighted for the tax department to silo our professionals. . . . All functions should cross-pollinate with other functions.”
McNeill says he needs exceptionally qualified people to manage the breadth of how taxation affects their business. “My people are extremely smart,” he says. “They need to understand the technical interrelationships of international and domestic taxation, which have so many moving parts.”
That means going beyond just doing the research. “In an audit, they have to have various complex algorithms that affect cash and effective tax rates hardwired in their heads,” he says. “We have to immediately recognize the effect of proposed adjustments while in the meeting.”
So how does someone like McNeill cultivate the kind of tax finance experts able to do this?
McNeill’s philosophy is to attract the very highest caliber professionals and then use their networks to locate new talent. Retention obviously matters as well, something McNeill ties directly to company success. That means providing his people with the opportunity to develop and grow.
“Once talent within the tax department has been identified, a development plan is created to deploy them elsewhere in the company, if that is their desire,” he says.
As evidence of how that works, he mentions the company’s general counsel and chief of staff, both of whom rose through the SunEdison ranks from their start in the tax department. “Both could have replaced me at some point, but promotional opportunities arose elsewhere in an area of interest,” McNeill says.
To underscore this point, McNeill describes how what people learn in the tax department is foundationally useful for their aspirations to move around and up. “Transfer pricing requires tax staff to understand the economics of transactions,” he says. “This helps them understand the business as well as people in operations. Tax is a pipeline for leadership positions.”
But McNeill doesn’t regret letting go of talented performers to work in other areas of the company. “It would be shortsighted for the tax department to silo our professionals if they are qualified for leadership roles outside tax,” he says. “All functions should cross-pollinate with other functions.”
That all sounds a lot like putting out energy in all directions, just like the sun.
