Environmental Law

Congress Bats Renewable Tax Breaks Back and Forth -- No End in Sight

By Dennis Pfaff and Kevin Livingston, Editors

Congress continued its high-stakes game of tax policy ping-pong Friday and despite the passage of another bill appeared little closer to actually extending federal incentives for renewable energy.

The House took the latest swing at the issue, approving on a 257-166 vote a $60 billion tax relief bill (see summary) that included $15 billion for renewable energy, carbon capture, energy efficiency and conservation projects. However, the measure differed from a bill (see summary) that passed the Senate earlier in the week and it also faced a veto threat from President Bush. Almost immediately, a key Senate leader on the issue, Sen. Max Baucus, chairman of the Senate Finance Committee, all but declared the House measure dead on arrival.

Various reports, including stories from Bloomberg and Environmental Capital, published by the Wall Street Journal, cited the House's insistence on eliminating tax breaks elsewhere to pay for parts of the bill, including the non-energy provisions, as a major sticking point. Bush's veto threat, for instance, criticized the House version for "raising taxes on certain classes of Americans" and for separating out legislation to spare millions of Americans from paying billions of dollars under the Alternative Minimum Tax.

Energy provisions in the two bills were similar but not identical, according to a comparison of the measures' summaries. Both bills would extend for eight years investment tax credits for solar energy and give homeowners more of an incentive to install solar equipment. It would also give a one-year extension to production tax credits for wind. However, the House version would extend incentives for other forms of renewable energy for somewhat longer than the Senate bill, and it would give less toward carbon capture projects than would the Senate bill.

The House also would scrap the Senate bill's financial encouragement for refineries to process oil from shale and tar sands, a provision that had drawn fire from environmentalists.

Despite the controversy, Bloomberg reported that Baucus, a Montana Democrat, said he was confident of a compromise. Earlier in the day, however, the senator's statement asking the House to take up the Senate version had warned that the House bill "cannot pass the Senate and will assuredly draw a veto." 

House Speaker Nancy Pelosi issued her own statement saying it was the Senate that should act:

“I urge my colleagues in the Senate to seize the opportunity to enact this bill law, thus creating and saving jobs in a difficult economy, providing essential tax relief to families and businesses, and speeding our transition to a clean, renewable energy and energy efficient future.”

Rep. Charles Rangel, the chairman of the House Ways and Means Committee, and a chief backer of the House bill, also held fast, saying in his own statement that the Senate had already approved offsets contained in the measure:

“We’ve made sacrifices in this bill – we have removed controversial provisions that have drawn objections in the past. We have removed controversial offsets, instead closing loopholes and ending tax breaks that the Senate has already blessed. This bill makes sense. The only thing keeping this bill from the president’s desk is politics and I hope we can work together to jump that hurdle and I hope we can jump the hurdles and make this bill law.”  

Caught in the middle, the industry reacted cautiously to the developments Friday. The Solar Energy Industries Association's president Rhone Resch issued a statement praising Pelosi and Rangel for their "leadership and perseverance" on the issue. At the same time, Resch urged speedy action:

"We are calling on Congress to take immediate action to extend the tax credits that are supported by 94 percent of the public and the administration. We need to avoid further downturn in the renewable energy industries, Congress needs to act now."

--Dennis Pfaff of Thelen LLP   

Photo: Massachusetts home with rooftop solar system; Courtesy U.S. Department of Energy-National Renewable Energy Laboratory, Credit: groSolar

Full post as published by Climate Law Update on September 26, 2008 (boomark / email).