As part of our continuing efforts to provide current, topical information relating to renewable energy projects, RenewableEnergyLawInsider provides a series of posts from individuals with a wide range of experience and expertise. Today, Tracy Hammond from the Polsinelli Public Policy Group in Washington D.C. provides an update about the various energy industry tax policy options that are being considered by the Senate Finance Committee. Enjoy!
Last week, the Senate Finance Committee outlined a variety of options to overhaul many of the provisions of the tax code that relate to the energy industry. Options included eliminating all existing incentives, replacing energy tax expenditures with a carbon tax or making narrower tweaks to credits, deductions and other preferences that apply to energy sources. The document is only an early indication of how comrehensive tax reform could impact the energy sector.
The white paper developed by Democratic and Republican committee staff serves as a menu of nearly all prominent energy tax reform ideas that have been put forth over the past several years. It is presented as a set of options—not recommendations. None of the varied proposal have been endorsed by Finance Chairman Max Baucus (D-MT) or ranking member Orrin Hatch (R-UT). Instead, it represents “a non-exhaustive list of prominent tax reform options” for committee members to consider.
Suggested principles include:
- providing certainty to energy firms
- simplifying the tax code
- making tax expenditures fair and efficient
- encouraging energy independence
- addressing externalities inherent in energy production
The document cites Congressional Budget Office estimates that this year alone energy-related tax expenditures will cost the government over $16 billion in unrealized revenue in addition to $3 billion in direct spending. Renewable energy companies will receive 45% of the benefits, with 29% going towards energy efficiency, 20% for fossil fuels and 7% for nuclear power.
Options for reform include eliminating all energy expenditures—including permanent oil and gas tax deductions and temporary renewable PTCs—to maintaining some incentives while tweaking others. The paper discusses a carbon tax, and considers expanding master limited partnership (MLP) treatment and extending accelerated depreciation to renewable energy companies.
The paper reflects a growing sentiment that may ultimately result in the elimination of temporary tax breaks targeted at wind and solar energy, biofuels, and electric vehicles; and replacing them with “one or more technology-neutral tax incentives.”
Upon release, Finance Committee members met for over an hour to discuss the paper, but did not disclose which options they might seek to enact into law.
Sen. Debbie Stabenow (D-MI), Chair of the Finance subcommittee on energy, said she had suggested the need to provide longer-term certainty for renewable energy companies, but admitted there was no consensus among committee members.
“It was a pretty good discussion,” Sen. Pat Roberts (R-KS) said after the meeting. “But I think everybody agreed we need more information…then we can get into the weeds.”