Renewable Energy Law Alert: Senate Finance Chairman Proposes Alternatives to House Bill Renewable Energy Incentives
On Friday, January 23, the Chairman of the Senate Finance Committee released his proposal for the economic stimulus bill. Like the House bill (H.R. 598), the proposal by Chairman Max Baucus (Chairman's Mark) is called the American Recovery and Reinvestment Tax Act of 2009. He announced that the Chairman's Mark will be considered in the Finance Committee on Tuesday, January 27.
The Chairman's Mark proposes many of the energy incentives contained in the House bill, including:
- Extending the production tax credit (PTC) sunset date,
- Permitting taxpayers to elect to claim the investment tax credit (ITC) in lieu of the PTC for certain projects, and
- Extending bonus depreciation through 2009.
The Chairman's Mark does not, however, include the provision in the House bill that would permit taxpayers to receive cash grants in lieu of the ITC for certain projects. (See Next Steps below.) Given the substantial shortage of tax equity, failure to provide an alternative to traditional, nonrefundable tax credits could frustrate the legislative purpose of stimulating renewable energy development. For a more complete summary of the renewable energy-related provisions in the House bill, see http://www.stoel.com/showalert.aspx?Show=3486.
The Chairman's Mark also contains a number of energy-related provisions that were not included in the House bill. Some of the more significant are:
Modifications to General Business Credit
The Chairman's Mark would modify the rules governing the general business credit, which includes the ITC and PTC as components. It would allow carrybacks of the credit from 2008 and 2009 for five years (instead of the one-year carryback allowed under current law). The Chairman's Mark also would allow the general business credit carried over to, and carried back from, taxable years ending in 2008 and 2009 to offset 100% of a taxpayer's tax liability, and would expand its use against AMT liability.
Credit for Investment in Advanced Energy Property
The Chairman's Mark would create a new 30% credit for investment in certain property used in a "qualified advanced energy manufacturing project." Qualifying projects would include any project that re-equips, expands or establishes a manufacturing facility for the production of property designed to (1) produce energy from the sun, wind or geothermal deposits, (2) manufacture fuel cells, microturbines, or energy storage facilities, (3) manufacture energy grids to support transmission of intermittent sources of renewable energy, or (4) manufacture equipment for carbon capture or sequestration.
Unlike in the House, it is quite likely the Chairman's Mark will be modified as it makes its way through the Finance Committee and the Senate. Congress is targeting early February for final enactment.
The omission from the Chairman's Mark of the proposal that would permit taxpayers to receive cash grants in lieu of the ITC is likely to be the most debated issue going forward. The proposal, if enacted, would provide an innovative and in some cases more efficient mechanism for funding energy projects.
It is unclear why the House proposal was not included in the Chairman's Mark. There are several different reasons possible, not all of which mean the Chairman (or the Senate generally) is opposed to the proposal.
We will report further significant developments as the legislation progresses. In the meantime, if you have further questions, please contact one of the following attorneys:
Chris Heuer at (503) 294-9206 or firstname.lastname@example.org
Kevin Pearson at (503) 294-9622 or email@example.com
Ed Einowski at (503) 294-9235 or firstname.lastname@example.org
Robert Manicke at (503) 294-9664 or email@example.com
Eric Kodesch at (503) 294-9684 or firstname.lastname@example.org
Greg Jenner at (612) 373-8857 or email@example.com
Kevin Johnson at (612) 373-8803 or firstname.lastname@example.org
David Quinby at (612) 373-8825 or email@example.com
Mark Hanson at (612) 373-8823 or firstname.lastname@example.org
Carl Lewis at (206) 386-7688 or email@example.com
IRS Circular 230 notice: Any tax advice contained herein was not intended or written to be used, and cannot be used, by you or any other person (i) in promoting, marketing or recommending any transaction, plan or arrangement or (ii) for the purpose of avoiding penalties that may be imposed under federal tax law.