Some corners of the energy industry left out of the current GOP tax plan or hit hard by its revenue-raising provisions are pushing for another shot at tax relief before the year closes.
Two avenues are available: the ongoing conference committee in which lawmakers resolve differences between the House- and Senate-passed tax bills, and a potential end-of-year measure renewing or creating new tax breaks, similar to the annual “extenders” legislation Congress had hoped to end in late 2015.
Every year for about a decade, Congress has advanced last-minute legislation extending temporary tax breaks for a variety of industries and activities. That was all meant to come to an end in 2015, when lawmakers passed an end-of-year funding bill that also made permanent some extenders, such as the research tax credit and another for expensing business purchases. But that legislation didn’t capture about three dozen of the temporary breaks, and some industries have fought to have those tax provisions renewed. About half of the remaining provisions are for renewable energy.
The biofuels industry is pushing for a two-year extension of an expired, $1-per-gallon tax break on biodiesel, along with another for biofuels made from refuse or corn byproducts and another for alternative fuel mixtures, said Michael McAdams, president of the Advanced Biofuels Association.
Those breaks expired at the end of 2016. Often, Congress has renewed tax extenders late, retroactively reinstating them for the previous year. For all of 2017, the industry has been operating in the market without a credit for biofuel blended in the U.S., McAdams said.
“Generally speaking, a lot of these guys in the market expect it to come back, so they operate as if they are going to get the credit,” McAdams said of the $1-per-gallon blender’s credit. “And then we get down to the end of year now, and I’ve had already this morning three phone calls from guys panicking, because this credit is hundreds of thousands of dollars to the small guys.”
Depending on how much biodiesel is sold, the credit costs the federal government around $2.2 billion to $2.6 billion per year. In 2016, the industry blended about 2.6 billion gallons of biodiesel, the most recent number available.
McAdams said his organization has been working with other groups affected by the 36-odd expired extenders to lobby Congress to revisit the tax breaks.
“To borrow a phrase from golf, we have not left anything in the bag relative to trying on behalf of our members to get this credit before Christmas,” McAdams said.
The industry hoped that lawmakers would have put some of the biofuel credits into the tax-overhaul bill, but that didn’t happen. A possible scenario would be for Congress to attach an extenders bill to a continuing resolution to fund the government in the last half of December, lobbyists say.
Sen. John Thune, a senior member of the Finance Committee, said last week that the chamber planned to move a bill addressing expired tax provisions by the end of the year, Bloomberg reported. Still, it’s unclear if that’s the route Congress will take.
A group of other small tax breaks left out of the 2015 legislation—so-called “orphan” measures, which include provisions for geothermal power, fuel cells, small wind-energy projects, and combined heat and power property—could also find their way into legislation at the end of the year.
“We are in the middle of a full-court press on this issue; the industry depends on it,” said Jennifer Jenkins, executive director of the Distributed Wind Energy Association, which is pushing the 30 percent small-wind-projects credit.
In February, GOP Rep. Tom Cole of Oklahoma introduced legislation that would have extended and gradually phased out the orphan tax breaks. Cole said he is pushing to include the language in the tax-overhaul bill’s final version rather than an end-of-year extenders measure. The House version has Cole’s language, but the Senate version does not.
“I think this appetite to pull the energy chapter out and put it in an extenders package, to me, is something that should be a nonstarter, and so let’s see how it ends up,” Cole said last week.
In the tax bill’s conference committee, the renewable industry would be hit hard by either the House or Senate versions of the tax-overhaul bill, but in different ways. And groups are working legislators to tone down the final legislation’s language as they reconcile the two versions.
The Senate bill’s language meant to prevent offshoring capital—called the Base Erosion Anti-Abuse Tax—has stirred up concern from wind and solar groups.
In a maneuver known as tax-equity financing, renewable-energy developers often sell the federal tax credits earned on their projects to overseas investors, who are better structured to take advantage of them compared to the smaller stateside renewable companies. The Senate bill would put a damper on that practice by essentially creating a new minimum tax for the investors buying the credits.
That would diminish the value in backing renewable-energy projects, industry groups say.
“Not surprisingly, major financial institutions have indicated that, under such a regime, they would no longer participate in tax-equity financing, the principle mechanism for monetizing credits,” a consortium of renewable groups wrote in a letter to Congress in late November.
The House bill phases out a 10 percent investment-tax credit for solar projects by 2027. The bill would also cut the wind-energy tax credit from 2.4 cents per kilowatt-hour to 1.5 cents per kilowatt-hour and change other rules. That credit is currently set to be phased out after 2019.
“The wind industry supports pro-growth tax reform. In fact, our industry went first on tax reform, creating great jobs in all 50 states flowing from the 2015 bipartisan phase-out of the production and investment tax credits,” Peter Kelley, vice president of public affairs for the American Wind Energy Association, wrote in an email. “We are working closely with champions in Congress to ensure wind industry growth and investment in jobs continues.”