House Democrats Unveil New Energy Tax Package

by Mike Godfrey, Tax-News.com, Washington

13 February 2008

Democrats have reintroduced legislation into the House of Representatives that would extend tax credits for the production of renewable energy in the US, but would also repeal tax breaks for oil and gas companies.

The Renewable Energy and Energy Conservation Tax Act of 2008, known as H.R. 5351, was introduced by House Ways and Means Chairman Charles Rangel on February 12th, and 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, the bill also retains provisions repealing controversial subsidies to oil and gas companies, which resulted in a previous renewable energy bill stalling in Senate last year because of stiff opposition from Republicans.

In introducing the bill, Rangel argued that: "The American taxpayer should not be subsidizing oil and gas companies during times of record profits and record prices at the pump."

He continued:

"Instead, we need an energy plan that reduces our dependency on foreign oil and invests in clean, renewable technology that will create jobs here in America. This bill extends critical tax credits for the production and use of renewable energy while also encouraging families to invest in technology that conserves energy."

"If Congress fails to act this year, many of these valuable tax credits for renewable energy will expire. The Senate recently debated extension of expiring energy tax credits and this legislation gives them an opportunity to follow through on their expressed interest by working with the House to pass this bill."

The bill's revenue raising provisions would deny 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. The bill would also freeze the domestic production deduction for income of other taxpayers in respect of oil, natural gas or any primary product thereof at 6%. This is a scaled-back version of the provision proposing outright repeal of section 199 which passed the House as part of H.R. 6 in January 2007. It is expected to raise USD13.57 billion over ten years.

Another provision would 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. This measure is expected to raise $4 billion over ten years.

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