• Cost Estimates for Expiring Energy Tax Provisions
  • December 6, 2016
  • Law Firm: Mintz Levin Cohn Ferris Glovsky Popeo P.C. - Boston Office
  • Passage of a tax package is another possible item on Congress’ list for the lame duck session, which is discussed in a recent ML Strategies alert. Three dozen tax provisions are scheduled to expire December 31, about half of which pertain to energy provisions. Congress approved last December a $1.1 trillion omnibus appropriations and $680 billion tax extenders package and adjourned for the first session of the 114th Congress. To learn more about the tax extenders package, read on!

    Wind Production and Solar Investment

    Following weeks of intense negotiations, the measure included a long-term extension and phasing down of the wind production tax credit and the solar investment tax credit. It provided an extension, retroactive to January 1, 2015, of the wind production tax credit at its current 2.3 cent rate through 2020, with a phase down of 20 percent per year beginning in 2017. The measure extended the investment tax credit for solar with a phase down of 30 percent through 2019, 26 percent in 2020, 22 percent in 2021, and a 2022 expiration for residential projects, at which point is also reverts to a 10 percent credit for commercial projects.

    Tax Breaks and Renewals

    The tax extenders package impacted 52 tax breaks, providing two-year renewals for some and five-year renewals for others, making still others permanent, containing Internal Revenue Service administrative practice language, and offering new rules related to real estate investment trusts, among other issues. In total, the package extended or created more than $33 billion in energy-related tax credits over ten years.

    Unaddressed Extenders

    What it did not do, however, was address extenders that were neither made permanent nor expanded in the approved package, like investment tax credits for non-solar technologies such as qualified fuel cells, microturbines, combined heat and power facilities, and thermal energy properties.

    Senate Finance Committee Democrats sent a letter to Committee Chair Orrin Hatch (R-UT) earlier this year requesting that he hold hearings on energy tax legislation already introduced this Congress. With Senate Minority Leader Harry Reid (D-NV) and Senator Chuck Schumer (D-NY) hyper focused on the solar portion of the ITC, language pertaining to other technologies in the ITC was left on the drafting room floor, despite strong support by Democrats in the Senate and House. As a result of agreements with leadership, some in Congress are looking very closely at ways to address the non-solar Section 48 technologies in an end of the year agreement, and others are seeking to provide tax provisions to a handful of other technologies that they think need to be addressed, such as offshore wind and CCS, along with a growing list of things like the pension coal provision. Additionally, Senate Majority Leader Mitch McConnell (R-KY) has indicated that a tax extenders package is one of the things he is open to accomplishing during an end of the year debate, but Senate Finance Committee Chairman Orrin Hatch (R-UT) has said that he does not want to take up extenders during the lame duck. It also remains to be seen how open to an agreement the House may be on the matter. If an extenders package does not pass this year, then it could be a part of a larger tax reform effort which, with the Republicans’ unexpected win in the presidential election has become much more likely.