Alerts and Updates
"The Little Tax Credits That Could": The Ongoing Saga of the Renewable Energy Tax Credits
May 27, 2008
Like the proverbial "little engine" trying so hard to get over the mountain, proponents of renewable energy kept saying "I think I can, I think I can" all through this session of Congress in their ongoing efforts to pass legislation to extend the tax credits now scheduled to terminate on December 31, 2008. On May 21, 2008, the U.S. House of Representatives passed the "Energy and Tax Extenders Act of 2008" introduced by Congressman Charles Rangel (D-NY). If acted upon by the Senate and not vetoed by the President, the new law will:
- Extend the investment tax credits for solar energy for six years;
- Provide a three-year extension for the production tax credits (PTCs) for biomass, geothermal, hydropower, landfill gas and solid waste;
- Extend the PTC for energy derived from wind projects;
- Change the sunset date on credits for energy efficient commercial buildings from December 31, 2008 to December 31, 2013;
- Provide incentives for coal gasification projects, hybrid vehicles and cellulosic ethanol production; and
- Create a new Clean Energy Renewable Energy bond program.
Strikingly different from prior failed efforts, the funding for the tax credits does not require the rollback of tax breaks for major oil and gas companies. Instead, funding for this program will come from a change in policy on deferred compensation for certain offshore companies and delayed implementation of new tax rules for multinational companies operating outside of the United States. Given that the rollback on the tax breaks was the key obstacle in recent legislative battles, the change in funding sources is likely to give the bill a higher chance for survival.
For those keeping score at home, almost non-stop for the past year Congress has wrangled with the issue of how to handle and fund the soon-to-expire tax credits. After great efforts to extend the tax credits in the major energy bills considered in late 2007, the Energy Independence and Security Act of 2007 in its final form left the credit extensions on the Senate drafting room floor to avoid a veto on the entire bill.
In the first few months of 2008, the tax credit extensions showed up in a number of key legislation efforts. With support from both the House and the Senate, various provisions on renewable energy were included in the Economic Stimulus bill, the Foreclosure Prevention Act of 2008, the Clean Energy Tax Stimulus Act of 2008, and even the Farm Bill. In each case, Congress either could not reach agreement between the Senate and House or did not have enough votes in the Senate to end filibusters or to override a presidential veto with the tax credit extensions included. As the months passed, the renewable energy community increased its efforts to pressure Congress to act (and fast!), citing decreased investment in wind and solar, loss of jobs and reduction in clean energy production. Most recently, the industry and various advocates for renewable energy pushed Congress to take steps before Memorial Day.
Will this legislation finally pull the tax credit extensions over the mountain and deliver relief for the renewable energy community? Right now, the only things certain are that a final law was not enacted prior to Memorial Day, the fight is not yet over and the current credits will expire at the end of 2008 without new legislation. To date, the Senate has not indicated when it will consider the bill. Down on Pennsylvania Avenue, the White House has threatened a veto based more on the funding sources than the actual credit extensions. With only seven months remaining before the credits end, major investment will likely slow or dry up completely without Congressional action. In the meantime, the tax credits are still on the slow train climbing up the mountain (or in this case the Hill).
And that sound in the distance? .... I think I can, I think I can.
For Further Information
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