Approval of renewable tax credit extensions blocked by political impasse
Current U.S. tax credits for renewable energy, including wind and solar energy, are set to expire on Dec. 31, 2008. Last week, both U.S. congressional houses passed versions of a bill that would extend these credits, but the House’s version of what has been called “the year’s most important tax package” prompted criticism from the Senate and provoked a White House veto threat. The bill now faces an uncertain future.
After repeated failures to pass similar legislation, on Sept. 23, the Senate approved the renewable energy amendment to H.R. 6049 (Energy Improvement and Extension Act of 2008) almost unanimously, by a vote of 93–2.
This $17 billion renewable tax credits package would have extended and modified:
The renewable energy Production Tax Credit (PTC) through the end of 2009 for generating electricity from sources such as wind. Other energy sources such as geothermal, closed-loop biomass, hydropower, landfill gas, and trash combustion facilities would also have been extended. The bill would also have created a tax credit for a new energy production category—marine renewable, or the energy derived from waves, tides, and currents. Additionally, the bill would have established a new limitation on the amount of credits that can be claimed with respect to property placed in service after 2009.
The commercial solar energy and fuel cell Investment Tax Credit (ITC) through the end of 2016. Added to that, it proposed several substantive changes to the credits, including complete elimination of the $2,000 cap for residential solar electric systems and allowing the utilities to make use of the commercial tax credit. The bill would have also increased the credit limitation for fuel cell property from $500 to $1,500 per half kilowatt capacity.
The Senate bill, a carefully crafted compromise between Republicans and Democrats, also covered three other tax initiatives: preventing more than 20 million people from being victimized by the alternative minimum tax, extension of expiring tax breaks, and disaster relief. The energy provisions would be fully paid for, according to this bill, but the rest of the package would be only partially paid for.
When the bill got to the House late last week, the House broke the initiatives into four separate measures. On Friday, with a 257–166 vote, it passed H.R. 7060, the Renewable Energy and Job Creation Act of 2008. This bill offered almost the same renewable tax credit extensions as the Senate bill.
But in contrast to the Senate’s bill, the House fully offset the bill’s spending provision so that the budget deficit wouldn’t worsen. This would be accomplished in part by reducing oil industry tax breaks and extending an existing tax on oil production to finance an oil spill cleanup fund, according to The Energy Daily, a POWER magazine sister publication.
In response to the House’s divergence from the Senate bill, the White House said it would veto any version that relied on tightening certain tax loopholes or increasing taxes on oil and gas companies. The House vote lacked the two-thirds majority to prevail over a veto.
Late on Friday, Sept. 26—the date set by Congress to adjourn the year’s session— though it was hoped that the House would accede to the Senate tax extender bill, there was still no news on a compromise.
“That means, for all intents and purposes, that the long-awaited renewal of tax credits for renewable energy are on hold again—unless the House and Senate can somehow reconcile their different versions over the weekend and avoid a White House veto,” a blogger at The Wall Street Journal wrote.
“The other alternative is that Congress comes back for a 10th time in a lame-duck session after the election to try to tackle energy tax policy again.”
Sources: U.S. House of Representatives, U.S. Senate, GOP.gov, Associated Press, Access Intelligence, Solar Energy Industry Association, The Wall Street Journal