The $21.8 billion legislation, similar to a package passed by the House last week, advances the development of advanced electricity infrastructure, contains incentives to mitigate carbon emissions, promotes the production of alternative energy and the security of the domestic fuel supply, supports the use of alternative vehicles, and encourages energy savings and efficiency. However, the Senators announced that "modest changes" have been made that should give the legislation a better chance of passage by the full Senate as part of the larger energy bill.

Under these changes, repeal of the Section 199 tax deduction for domestic oil and gas production now applies only to major integrated oil producers, rather than to all domestic oil and gas producers. This reduces revenue raised by the provision to $9.4 billion, from the $9.99 billion raised by the original proposal. A proposal repealing favorable depreciation for natural gas distribution lines is also eliminated.

“If America’s really going to make a change in terms of energy policy, encouraging new energy strategies in the tax code must be part and parcel of that effort. The energy tax package we’re unveiling today in the Senate is just as strong and just as needed as the legislation passed by the House,” declared Baucus, adding: “This tax package can help to chart a bold course toward energy independence for America, and will also eliminate outdated incentives from the past. Encouraging the development of renewable fuels, rewarding energy conservation, and requiring responsibility from today’s energy producers are the right roles for tax policy to play in this country’s energy future.”

“This energy tax package builds on the tremendous legislative gains we’ve made in recent years to encourage renewable energy, develop domestic energy supplies and encourage greater conservation and energy efficiency," announced Grassley. "These tax policy initiatives help to buffer our economic and national security interests, protect the environment, and create jobs in the United States. An important component of the Senate version of this legislation is that it restores the wind-energy tax credit to current law and rolls back the misdirected limitation on the credit that was in the House bill."

Other modifications to the package, which were made in consultation with Senate Energy Committee Chairman Jeff Bingaman, who is also a member of the Senate Finance panel, include: the creation of a new category of tax exempt bonds for electric transmission facilities; a change of effective date of provision regarding biodiesel that is imported and sold for export, changed to date of enactment, rather than retroactive; extension for two years of current refinery expensing provision, per energy tax legislation approved by Senate Finance Committee in June; creation of 20% consumer tax credit for conversion of hybrid vehicles to plug-in hybrids; the addition of a provision repealing suspension of certain tax penalties and interest; and the addition of option to treat elective deferrals as after-tax contributions.