UPDATE – Senate passes tax credit extension with financial rescue

The Senate has approved a rescue package for the U.S. economy that — if passed by the House — also would rescue expiring production tax credits for renewable energy including hydropower.

Senators approved the package, 74-25, late Oct. 1, sending the measure to the House, which is expected to act Oct. 3.

The production tax credit extension — and a related extension of the Clean Renewable Energy Bonds program — were considered all but dead earlier in the week as leaders said Congress might run out of time to reconcile competing House and Senate versions before the Election Day recess.

All that changed late Sept. 30 when the Senate agreed to attach upcoming financial rescue legislation to a Senate-passed bill that would: extend incentives for renewable energy; continue other tax credits for businesses; and adopt a one-year fix to the Alternative Minimum Tax so millions of Americans would not be subject to higher income taxes. (HNN 10/1/08)

The House killed the original financial rescue bill Sept. 29, sending financial markets reeling, threatening Americans’ retirement investments, and showing many opponents the measure was more than a “Wall Street bailout.”

Senate incentives include hydro, ocean credits, new bond limits

The Senate renewables incentives, first passed by senators Sept. 23, would extend the project in-service date for production tax credits for hydropower for two years, to Jan. 1, 2011. (HNN 9/23/08) Eligible facilities would include incremental hydropower resulting from additions or upgrades to existing hydro plants, and hydroelectric projects installed at non-hydropower dams.

The bill also would expand the list of eligible renewables to include ocean, tidal, and in-stream hydrokinetic technologies. Those facilities would have a full three-year period in which to be placed in service to be eligible for incentives; they must be placed in service before Jan. 1, 2012.

The bill would extend for one year, to Dec. 31, 2009, the Clean Renewable Energy Bond program for public power utilities and electric cooperatives to finance plants that generate electricity from renewables. It also would place a new $800 million limitation on the renewable energy bond program.

On Sept. 26, the House passed its own tax measure that would extend expiring production tax credits for renewable energy, including incremental hydropower, and expand the incentives to include ocean and hydrokinetic technologies, but for differing lengths of time. (HNN 9/26/08) In doing so, the House ignored a warning of a White House veto and a plea that the Senate would be unable to agree on another tax package other than its own hard-fought bill.

House, Senate dispute funding for incentives

Unlike the House version, the Senate bill was a larger tax package that included tax incentives for other businesses and the one-year fix to the Alternative Minimum Tax. Although part of the Senate package was funded through limiting tax breaks to energy companies, other portions of the bill were not funded.

The major dispute between the House and Senate is the differing ways in which the two bills would be funded. The House bill includes revenue-raising measures, mainly aimed at oil companies, to pay for extending the expiring renewable energy incentives.

The Senate bill only partially pays for the tax measures, in deference to minority Republicans who argued there is no need to raise additional revenue if extending the incentives is merely an extension of the status quo. Unlike the situation in the House, the Republicans in the Senate have sufficient votes to filibuster to block a bill, ensuring their objections are heeded.

The House bill does not include an extension of the Clean Renewable Energy Bonds program. The Senate bill would extend the bond program with a new $800 million limitation on bonding.

The House bill would extend the incremental hydropower project in-service date for production tax credits nearly three years to Sept. 30, 2011, from Dec. 31, 2008, while the Senate bill would extend the in-service date two years, to Jan. 1, 2011. The House bill would require that facilities using ocean, tidal, and in-stream technologies be placed in service before Oct. 1, 2011, while the Senate bill would give those facilities until Jan. 1, 2012.

The House previously voted, Sept. 16, on an energy package containing incentives that would help hydropower. However, that bill also contained offshore oil drilling language that was expected to doom that version. (HNN 9/17/08)

The earlier House bill also included a federal renewable electricity standard requiring utility companies to generate 15 percent of their electricity from renewables by 2020. That language was not contained in either of the latest House and Senate versions.

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