Tax incentives for renewable energy could be at serious risk in Congress’ upcoming lame duck session. Reports indicate that Senator Pat Toomey (R-PA) and other conservatives plan to try to block renewable incentives from being included in a year-end “tax extenders” package.
By way of background, as Congress returns to Washington after the midterm elections, there is a widespread desire to complete a package to extend certain tax provisions before the end of the year. However, House and Senate negotiators have dramatically different positions on the scope of the package. As a reminder, the Senate Finance Committee-passed tax extenders package, reflected in the proposed EXPIRE Act (S. 2260), would extend for two years nearly all the tax provisions that expired at the end of 2013 or are set to expire at the end of 2014. Notably, the EXPIRE Act would extend numerous energy tax incentives, including the production tax credit (PTC) for electricity from renewable sources under Section 45, incentives for various categories of biofuels and other alternative fuels, and others, through the end of 2015. Meanwhile, the House has not advanced legislation to extend energy tax incentives this year. Instead, the House is aiming to make permanent a smaller number of tax provisions, like the research and development (R&D) credit.
The news that Senator Toomey and others plan to mount an effort to leave renewable energy out of the extenders package is a troubling development for wind, solar, biofuel, geothermal, and other advanced energy companies. The good news for the renewable energy community is that Senate leadership on both sides of the aisle reportedly view the EXPIRE Act as the “baseline” for any extenders package.
So how could a deal without energy tax incentives come together? One possible deal could include a permanent R&D credit (a Republican priority), permanent tax credits for low-income families (a Democratic priority), extending some other provisions for one or two years, and allowing certain other extenders (like incentives for energy) to stay expired. There is support for permanent R&D among both Republicans and Democrats, although it is costly and the White House has threatened to veto it because of the impact on the deficit. However, if some of the low-income family tax credits were also made permanent as part of a deal, the White House might not veto such a bill, especially since there is significant pressure from the business community and the IRS to complete an extenders package. (The IRS may need to postpone the filing season if Congress does not resolve the tax extenders issue in time for the agency to program their systems and update their forms.)
The bottom line is that there are enough moving pieces in the year-end extenders debate that energy tax incentives could be left out in the scramble to put together a package by December 31.
While this may all seem very ambitious to accomplish in the lame duck session, another scenario is to extend the temporary provisions only for 2014, putting these issues right back on the table for the new Congress and creating another opportunity to eliminate renewable energy incentives from the tax code permanently.
Businesses and other stakeholders who care about tax incentives for renewable energy should engage with lawmakers immediately.