The Clean Renewable Energy and Conservation Tax Act of 2007 includes tax credits and bonds to promote investment in renewable energy production, alternative fuels, and other energy conservation initiatives. The measure passed last Thursday by a vote of 235-181.

However, these incentives are offset by a controversial set of revenue raisers that would curtail billions of dollars in tax breaks for large domestic oil and gas companies. These include: denial of section 199 benefits for certain major integrated oil companies, which would exclude gross receipts derived from the sale of oil, natural gas, or any primary product from the domestic production deduction; freezing the domestic production deduction for income of other taxpayers in respect of oil, natural gas or any primary product thereof at 6%; increasing the amortization period for geological and geophysical expenditures (G&G costs) from five years to seven years for large integrated oil companies; and clarifying foreign oil and gas extraction income. Together, it is estimated that these offsets would raise more than $13 billion over ten years.

Unrelated revenue raisers include: a proposal for mandatory basis reporting by brokers on the sale of stock, expected to raise $4.1 billion over ten years; the extension of the Federal Unemployment Tax Act, which imposes a 6.2% gross tax rate on the first $7,000 paid annually by covered employers to each employee which it is estimated will raise to raise $1.45 billion over ten years; and an increase in the penalty for failure to file a partnership return to $80 per partner from $50, a proposal expected to raise $319 million over a decade.

“Earlier this year, Congress made a promise...to use funds raised from repealing tax breaks for the oil and gas industry to promote renewable energy and energy efficiency, and this legislation makes good on that promise,” stated Chairman Rangel following the House vote.

“The tax provisions passed today reflect the views of the House and the Senate, and were developed in close coordination with Senate Finance Committee Chairman Baucus. The compromise package now goes to the Senate where it deserves strong bipartisan support," he added.

However, any hopes Rangel had that the bill would win an easy passage through the Senate have, unsurprisingly, already been dashed. Even with Democratic presidential candidates returning from the campaign trail to support the bill, it fell short of the 60 votes needed to cut off debate by seven votes. This means that Republican support will be crucial if the proposals are to pass into law, but this is unlikely to be forthcoming, given the billions in tax increases directed at the domestic oil and gas industry. In any event, President Bush has threatened to veto the legislation in its current form.

Nonetheless, Sen. Max Baucus, chief of the Senate Finance panel, is upbeat about the bill's prospects, and is adamant that the tax provisions must stay to help rebalance America's energy policy.

"The tax title is an essential, necessary component to help America achieve energy independence and also address climate change ...and I know that it'll get included for final passage," Baucus remarked in a telephone press conference, according to Dow Jones Newswires.

"It will not be jettisoned, I will just say that flatly, because it's so important, and so many senators know it's so important, we'll find a way to get it passed," he insisted.