Tax Breaks Dropped From Senate Energy Bill

by Mike Godfrey, Tax-News.com, Washington

26 June 2007

A $32 billion package of tax breaks designed to help wean America off of its addiction to oil failed to stick to the energy bill approved by the Senate last week.

Senators voted 57 to 36 on the tax package, just three votes short of the sixty needed to end the debate and send the proposals to the Senate floor.

Sen. Max Baucus, Chairman of the Senate Finance Committee, who helped develop the package of tax breaks in close cooperation with Chuck Grassley, the committee's ranking Republican, said that he was "very disappointed" that the tax package, passed by the committee last week, did not make the cut.

“This energy bill makes a good start on moving America away from our dependence on foreign oil, and toward energy sources that our children and their children can rely on far into the future. A sensible, targeted package of tax incentives for renewable energy would have made this bill much stronger, and served the American people better," Baucus commented in a statement.

"The full Senate must work together on energy tax incentives that will encourage the development and use of renewable and alternative energy, and invest in a more secure energy supply for American generations to come," he added.

The tax package would have created a number of new tax credits to encourage the production of clean and renewable fuels, such as cellulosic alcohol fuel, and extended other credits, including those encouraging the production of ethanol and biodiesel. Tax credits were also extended for consumers buying hybrid vehicles and homeowners increasing household energy efficiency.

The cost of the package was offset by the repeal of tax breaks to oil and gas companies, including the manufacturing deduction for the major oil and gas companies’ domestic manufacturing activities, a move which has inevitably been criticised by large oil firms. Other revenue raisers included a severance tax on the removal price of any taxable crude oil or natural gas produced from leased Federal lands in the Gulf of Mexico, simplifications to foreign tax credit rules for oil and gas activities, anti-fuel fraud excise tax provisions, and an extension of the excise tax on oil which is dedicated to the trust fund used to cleanup oil spills.

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