UPDATE – Senators offer another tax incentive extension bill

Bipartisan leaders of the Senate Finance Committee have introduced a tax relief “extender” bill that includes another one-year extension of renewable energy production tax credits and Clean Renewable Energy Bonds.

On April 10, the Senate endorsed a one-year extension of expiring production tax credits and bonding for renewable energy, including hydropower, by attaching the language to a bill to address the home mortgage market crisis. (HNN 4/10/08) That bill was sent to the House, which put it into a conference committee to seek a House-Senate compromise.

Meanwhile, Senate Finance Committee Chairman Max Baucus, D-Mont., and the committee’s ranking Republican, Sen. Chuck Grassley, R-Iowa, introduced the latest measure, whose major plank would prevent the alternative minimum tax from being applied to a larger number of income taxpayers.

It also includes a one-year extension, through 2009, of the in-service date of renewable energy projects eligible for production tax credits. It also would add $400 million in additional bonding authority to the Clean Renewable Energy Bond program, effective for bonds issued after Dec. 31, 2008.

The Baucus-Grassley bill makes no other changes in eligibility for the incentives. The existing production tax credit includes among eligible renewables “incremental” hydro: efficiency improvements or capacity additions to existing hydro projects, and the addition of hydropower generation to existing non-hydropower water resources facilities. It also includes small irrigation hydropower of less that 5 MW.

The bill also would provide credits for energy efficiency activity as well as broader tax relief in areas such as student tuition and individual retirement account rollovers.

Offset for lost tax revenue sought

Like the Senate’s previous renewables incentives in the housing relief bill, the Baucus-Grassley bill does not include provisions to offset the lost tax revenue. The Senate has rejected House-backed attempts to repeal $18 billion in tax incentives for oil company investments in order to pay for the renewables program.

Baucus said April 17 the House Ways and Means Committee restated its position in favor of “pay-as-you-go” funding of the tax incentives. As a result, he said he was working on language to offset the lost revenue, to help secure the bill’s eventual passage.

The Senate’s housing relief bill was amended April 10 by Sens. Maria Cantwell, D-Wash., and John Ensign, R-Nev., to extend the production tax credit and other renewables incentives for a year. (HNN 4/4/08) The Cantwell-Ensign amendment also added marine and hydrokinetic energy to the list of qualified energy projects for renewables incentives.

Senators passed the Cantwell-Ensign amendment, 88-8, after rejecting an amendment by Sen. Lamar Alexander, R-Tenn., that would have extended renewables incentives for two years, rather than one.

The Senate then passed the amended home mortgage relief bill, HR 3221, sending it back to the House, which previously passed a bill that included a three-year extension of production tax credits and authorization for $2 billion in bonds. (HNN 2/27/08) The House also has its own, narrower home mortgage rescue plan.

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