House Approves Renewable Energy Tax Act

by Leroy Baker, Tax-News.com, New York

29 February 2008

The US House of Representatives on Wednesday approved the Renewable Energy and Energy Conservation Tax Act of 2008.

The controversial bill, which passed after a 236-182 vote, would repeal current tax breaks for large oil and gas companies, and use that money to invest in tax incentives that encourage the use and production of renewable energy and energy conservation.

The legislation, known as H.R. 5351, includes tax credits to promote renewable energy production from wind, solar, geothermal, cellulosic ethanol and biofuels and other sources, many of which are set to expire at the end of the year.

However, this is the fourth attempt by Democrats to get the package of measures enacted, and the bill is once again expected to encounter opposition from Republicans in the Senate, who contend that its provisions unfairly discriminate against a single industry. President Bush has also threatened to veto the legislation in its current form.

Arguing in favor of the provisions, House Ways and Means Chairman Charles Rangel stated that the bill is essential to help America reduce its dependence on foreign oil.

"The issues of global warming, climate change and America’s addiction to foreign oil have arisen on our watch and they have reached the level of a national crisis that threatens our health, our economy, and our national security. One day our children and grandchildren will ask where we stood when we had the opportunity to chart a new course for America’s energy policy and this bill takes an important first step in that direction," he commented after the House vote.

"If we are to end our dangerous reliance on foreign oil and create the green-collar jobs of tomorrow, we have an obligation to find renewable energy sources."

This bill helps us meet that obligation by encouraging the production and use of new technologies to test the winds, the waters and harness the strength of the sun so that we can tackle the energy challenges that arise on our watch. The world is watching, history is being made and we should not let politics be an impediment to the progress we must make," Rangel added.

In its current form, the bill provides for the extension of existing tax credits and the creation of new credits for the production of renewable energy and renewable fuels, such as the solar energy and fuel cell investment tax credit. These would be paid for by revenue raising provisions which would deny section 199 benefits for certain major integrated oil companies, and clarify the definition of foreign oil and gas extraction income, in an attempt to limit the ability of oil and gas companies to manipulate their extraction income in order to achieve beneficial results under US foreign tax credit rules.

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