Senate Panel Offers Clean Energy Tax Incentives

by Mike Godfrey, Tax-News.com, Washington

12 September 2008

Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) have unveiled energy tax legislation that they intend to bring to the Senate for consideration this month.

According to the Senators, the tax measures seek to reduce America's dependence on foreign oil and create "good-paying, homegrown, clean energy jobs" by providing credits and incentives to facilitate independent energy solutions. These include the production and use of wind and solar energy, biofuels, and carbon sequestration technologies.

The cost of the bill is offset in part by reducing the manufacturing deduction for the domestic manufacturing activities of the five largest oil and gas companies. However, as with other oil and gas incentives, the manufacturing deduction has been left intact for smaller independent domestic producers.

Commenting on the proposals, which have been bogged down in Congress for many months, Baucus urged his fellow lawmakers to put aside their differences "and move this country toward new forms and sources of energy."

"We know this bill can be a bipartisan solution for the entire Senate, because it reflects bipartisan success here on the tax-writing committee. This bill has the right tax policy to create thousands of jobs, jump-start alternative energy solutions and finally move America away from our dependence on foreign oil," stated Baucus.

Grassley observed that: "This energy tax package builds on the ground work already laid by the Senate tax-writing committee to establish the vibrant alternative and renewable energy industry we have today and takes those incentives to the next level in order to meet the need for a more stable and sustainable energy supply in America. It pushes forward on solar, biofuels, carbon sequestration technology and ethanol initiatives."

He added that: "This tax package comes from the tax-writing committee led by Chairman Baucus, so it’s done right. It also reflects the principle that tax-related offsets should be used for tax relief not more spending. This package ought to be part of a balanced Senate energy plan that works for consumers and includes more domestic production of oil.”

Additional provisions in the bill include an increase in the nuclear production tax credit and extensions for alternative fuels credits.

Key provisions in the bill include:

• Long-term extensions of wind and solar energy tax credits.
• Consumer credit of up to USD7,500 for plug-in electric vehicles.
• New credit for capture and storage of carbon dioxide.
• Extension of tax incentives for energy-efficiency including buildings, appliances and smart meters.
• Long-term extensions of credits for alternative transportation fuels.
• USD2.5bn in new credits for clean coal facilities.
• New tax incentive for smart meters, which provide real-time feedback on electricity use.

Recommended