THE NEW ENERGY INCENTIVES, OR THERE AND BACK AGAIN
There and Back Again was the name Bilbo Baggins gave to his true account of the adventure most now know by its more famous name, The Hobbit.
The fateful adventure of the New Energy tax credit extensions, though without dragons or swordplay, is only slightly less harrowing than Bilbo’s adventure and – like Bilbo going home to The Shire – appears headed once again back to the Senate.
Just 3 days ago, the Senate affirmed the tax credits by passing a bill that sent waves of exhilaration through the New Energy world and set New Energy stocks soaring on Wall Street.
All the New Energy tax credits in the Senate’s bill needed was ratification by the House of Representatives. No problem. The House originated the legislation last week and passed it then handily. Why wouldn't the House affirm it?
The Senate asked only one thing of the House: Pass it the way it was amended in the Senate. The compromises in the reconstructed measure were delicate. Pulling at the slightest thread could cause the whole thing to unravel.
Senate Majority Leader Harry Reid (D-Nev): "Don't send us back something else..It will not pass. If they try to mess with our package, it will die.''
But the House has something called the ‘pay-go” rule: For passage, any and all spending must have “pay-fors” from budget revenues.
The Senate legislation had lumped the tax credit extensions with a set of large revenue items. That wasn’t good enough accounting for House leaders. They broke the Senate legislation into 4 pieces. One is the Renewable Energy and Job creation Tax Act of 2008 (H.R. 7060).
The House bill, which is the rewrite of the Senate bill, which is the rewrite of the House bill (still with this?) appears to now be headed back to the Senate (although a procedural dispute at the end of Thursday left even the final vote uncertain). And nobody yet knows how or where or when the Senate will take it up.
“Everything is up in the air, everything is on the table…” a Senate staffer told NewEnergyNews Thursday.
The vital New Energy tax credits will expire December 31 if the legislation does not pass. Expiration will likely drive the New Energy industries into recession for 2009.
Greg Wetstone, senior director (governmental/public affairs), American Wind Energy Association (AWEA): “We’re watching closely and hoping the House and Senate come together very soon…This is crunch time, and I hope we see things get down to business very quickly.”
When NewEnergyNews questioned a House staffer on whether he thought the new House measure has a chance in the Senate, his answer was challenging. “You don’t think a bill that passed 96-2 has a chance with these changes?”
Just as the staffer overestimated the “yes” votes on the Senate measure (it was 93, not 96), he overestimates the chances of anything in this fight going the way it seems likely to go. The fate of the New Energy tax credit extensions is as much in doubt as Bilbo’s fate when he came face to face with the dragon.
Since the middle of 2007, this battle for the fate of New Energy in 2009 has been burning like a fire signaling the partisanship now on display in the more prominent financial market bailout fight. It is the same as it has been all along: The House won't pass the extensions without the "pay-fors" and a filibustering minority in the Senate may block any legislation with them.
A conference committee is supposed to work out differences but it may be too close to the election to do that. (click to enlarge)
Some speculate Congressional hesitation is due to a fear there will be no revenues to fund the credits in the wake of the financial crisis bail out. New Energy advocates say failure to extend the credits will make the crisis worse while passage will resuscitate the New Energy sector and drive recovery.
H.R. 7060 is probably the best (though largely the same) version of the tax credit extensions. It extends the production tax credit (PTC) for wind a year, the PTC for biomass, hydrokinetic and geothermal energies 2 years, and the investment tax credit for solar and small wind 8 years. It has an 8-year extension on energy efficiency building improvement tax credits as well as tax benefits for buying electric vehicles (EVs) and for producing cellulosic ethanol and advanced biodiesel. It also extends major R&D tax credits.
The bill includes many of the same benefits (to veterans, teachers, Native Americans, hurricane victims, etc.) that were in the Senate package.
From an environmental point of view, H.R. 7060 improves the previous Senate bill. It still has tax credits for “clean” coal development. But it no longer provides tax credits to oil shale producers and coal-to-liquid producers. While this will please environmentalists, these removals could add to the difficulty of winning Senate passage.
The new House measure also removes a controversial benefit to New York City although why any patriotic citizen would object to a tax credit to help rebuild the World Trade Center zone baffles NewEnergyNews.
The pay-fors: H.R. 7060 freezes an oil industry deduction on earnings (raising $4.9 billion over 10 years), changes the way stock sales are accounted for (raising $6.7 billion/10 years), extends existing taxes on unemployment income and the oil spill liability fund ($3.2 billion/10 years), redefines foreign oil earnings and expenses ($2.2 billion/10 years), postpones a cut in taxes on foreign interest earnings ($18.6 billion/10 years) and closes a loophole on deferred compensation from tax haven corporations ($24.8 billion/10 years).
The pay-fors are said to have come at the insistence of the conservative “Blue-Dog” Democrats. In combination with fiscally conservative Republicans, they represent enough of a factor to steer legislation.
Steny Hoyer (D-Md), Blue Dog and Majority Leader, House of Representatives: "…it is simply wrong to pay for [the tax extenders package] by once more whipping out the national credit card…Fiscal responsibility is not something we can compromise on, especially not now…”
Fiscal conservatism is no doubt a factor but it is also the case that many Blue Dog Democrats, like many Republicans, have big oil industry and financial institution constituencies and the pay-fors come largely from oil industry and financial institution tax breaks.
Point of tangential interest: The AMT (not relevant to energy) is not a sticking point. It was discharged earlier.
With all the turmoil over the financial market stabilization legislation, it is impossible to know when the House will finish with the New Energy tax credit extension legislation and when the Senate will take it up. If the market stabilization proposal remains embattled, Bilbo Baggins may come into the fray on Friday. If the Princes of partisanship resolve their differences over how to deal with the financial crisis, New Energy could get tacked on to bigger legislation or get put off until after the Jewish holiday.
The White House said Tuesday President Bush would sign the tax extenders package passed in the Senate. That was before House pay-fors, to which the President is known to object, were added in. Now a veto is more likely.
So, like the man said, “Everything is up in the air, everything is on the table…”
Contact Congress and demand they pass the tax extenders package at: the American Wind Energy Association’s POWER OF WIND or the Solar Energy Industries Association’s TAKE ACTION.
click to enlarge
House still going its own way on tax extenders
September 25, 2008 (CQ Politics)
Tax breaks in the House: battle with Senate awaits
Jim Abrams, September 25, 2008 (AP)
House Sticks with Offsets for Tax Extenders
Richard Rubin, September 25, 2008 (CQ Politics)
The U.S. House of Representatives; The U.S. Senate
H.R. 7060, The Renewable Energy and Job creation Tax Act of 2008
This GE study proved the wind tax credits, like other New Energy incentives, create revenues in the long run. (click to enlarge)
- Passed in the House September 25.
- Taken up by the Senate ???
- December 31: The House must approve the measure before the existing ITC expires on the last day of the year.
- Congress was expected to adjourn for the election September 26 but the financial crisis leaves that in doubt.
- Research from Navigant Consulting shows the 8-year tax credit extension means 440,000 new solar industry jobs and a doubling of new solar capacity to ~630 megawatts in 2009.
- H.R. 7060:
(1) extends the production tax credit (PTC) for wind 1 year,
(2) extends the PTC for biomass, hydrokinetic and geothermal energies 2 years,
(3) extends the investment tax credit (ITC) for solar systems and small wind turbines 8 years,
(4) has an 8-year extension on energy efficiency building improvement tax credits,
(5) has tax benefits for buying electric vehicles (EVs), has tax benefits for producing cellulosic ethanol and advanced biodiesel,
(6) includes many of the same benefits (to veterans, teachers, Native Americans, hurricane victims, etc.) that were in the package passed by the Senate September 23,
(7) includes tax credits for “clean” coal development,
(8) extends major R&D tax credits,
(9) excludes tax credits to oil shale producers and coal-to-liquid producers,
(10) removes the controversial tax credit to New York City to help redevelop the World Trade Center zone.
- H.R. 7060 pay-fors:
(1) freezes an oil industry deduction on earnings (raising $4.9 billion over 10 years),
(2) changes the way stock sales are accounted for (raising $6.7 billion/10 years),
(3) extends existing taxes on unemployment income and the oil spill liability fund ($3.2 billion/10 years),
(4) redefines foreign oil earnings and expenses ($2.2 billion/10 years),
(5) postpones a cut in taxes on foreign interest earnings ($18.6 billion/10 years),
(6) closes a loophole on deferred compensation from tax haven corporations ($24.8 billion/10 years).
click to enlarge
- Rhone Resch, President, Solar Energy Industries Association (SEIA), on what passage means: "You're going to see national markets open up for residential solar…"
- Lyndon Rive, CEO, SolarCity: "Without [the ITC], we're not going to have scale that brings solar to grid parity, and investors aren't going to be interested…"
- Charles Rangel (D-NY), chairman, House Ways and Means Committee: “We can wrap this up today if they don’t insist it’s their way or the highway…They should not miss this opportunity to pass this bill so we can make law and provide this tax relief to families and businesses.”
- Nancy Pelosi (D-Calif), Speaker, House of Representatives: “I’m optimistic we can come to an agreement. These extenders have to pass.”
- Harry Reid (D-Nev), Majority Leader, Senate: “It would be a terrible shame to the American people that a small group of members of the House or Representatives would hold up this extremely important package…”