Energy tax incentives gain new life with passage of economic rescue package

President Bush on Friday signed into law a measure to renew critical energy tax incentives that had been set to expire at the end of this year. The measure, which gained new life after a political impasse had left its future uncertain only the week before, was one of many added to the financial bailout package to attract the approval of congressional members.
The bill signed Friday had been approved by the House earlier that day and by the Senate on Oct. 1.
The energy tax incentive measure was modeled on bipartisan legislation that had previously passed in both congressional houses late last month, but the House’s changes—geared to offset spending by reducing oil industry tax breaks—prompted disagreement from the Senate and provoked a White House veto threat.
The following incentives were included in the package deal on Friday, part of “Division B—Energy Improvement and Extension Act of 2008”:
Renewable Energy Tax Credit: The bill extends and modifies the production tax credit (PTC), through the end of 2009, for generating electricity from sources such as wind. PTCs for other energy sources such as geothermal, closed-loop biomass, hydropower, landfill gas, and trash combustion facilities are also extended. It also creates a tax credit for a new energy production category—marine renewables, or energy derived from waves, tides, and currents. The bill creates a new limitation on the amount of credits that can be claimed with respect to property placed in service after 2009.
Solar Energy and Fuel Cell Investment Tax Credit: The bill extends and modifies the tax credit for commercial solar energy and fuel cells through the end of 2016. It increases the credit limitation for fuel cell property from $500 to $1,500 per half-kilowatt of capacity.
Coal Electricity Projects: The bill provides tax credits for advanced coal-fired electricity projects. Additionally, it requires the energy secretary to give highest priority to projects with the greatest separation and sequestration percentage of total carbon dioxide emissions. This measure is expected to decrease tax revenues by $1.4 billion over 10 years.
Coal Excise Taxes: The bill allows for the refund of certain taxes collected on exported coal. Coal producers or exporters could receive a refund (plus interest) from the Treasury Department for coal exports between Oct. 1, 1990, and Oct. 3, 2008.
Energy Tax Credits: The bill also modifies and/or extends a number of energy-related tax incentives including:

  • Tax credit for alternative refueling stations (which is anticipated to decrease tax revenues by $87 million over 10 years—though the development of this and other credit-earning tax-paying projects would have been far less likely without the credits).
  • Biodiesel production and renewable diesel tax credits (decreasing tax revenues by $451 million over 10 years).
  • Tax credits for energy-efficient upgrades to existing homes (decreasing tax revenues by $61 million over 10 years).
  • Enhanced tax deduction for energy-efficient commercial buildings (decreasing tax revenues by $891 million over 10 years).
  • Tax credit to manufacturers of energy-efficient appliances (decreasing tax revenues by $322 million over 10 years).

New Energy Tax Provisions:

  • Plug-in electric vehicle tax credit (decreasing tax revenues by $758 billion over 10 years).
  • Extending transportation fringe benefits to those who commute to work by bicycle (decreasing tax revenues by $10 million over 10 years).
  • Five-year depreciation of “smart meters.”
  • Bonus depreciation for cellulosic biofuel plant property.
  • Tax credit for steel industry fuel (decreasing tax revenues by $61 million over 10 years).

Sources: U.S. Senate,

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