House Ways and Means Committee Chairman Sander Levin, D-Mich., has released a draft bill that would provide tax credits for manufacturers of renewable energy equipment and funding for other sources of clean energy.
The draft legislation aims to encourage domestic manufacturing of energy equipment and renewable fuel development. The Domestic Manufacturing and Energy Jobs Act of 2010 includes $6.5 billion worth of investment tax credits for taxpayers that re-equip, expand or establish domestic manufacturing facilities that produce advanced energy equipment. The tax credits would encourage an estimated $22 billion of investment in domestic manufacturing facilities and build upon the $2.3 billion of investment tax credits provided in the Recovery Act.
The bill also would encourage domestic demand for renewable energy equipment and energy efficient equipment by continuing programs such as the direct payment in lieu of tax credits program (aka Section 1603 program); providing a long-term extension of the placed in service date for offshore wind and geothermal facilities; and providing state and local governments with financing tools to encourage energy-efficiency and renewable energy on residential property.
In addition, the bill would provide tax incentives for renewable fuel production and technologies to decrease U.S. dependence on foreign oil, in particular, tax incentives for large natural gas and electric/hybrid vehicles to transition the countrys diesel fleet to cleaner domestic sources of fuel. The draft would also continue tax incentives for domestically produced biofuels such as ethanol and biodiesel.
As the world moves toward renewable energy and a greener economy, it is necessary to accelerate a new era of American manufacturing and innovation, said Levin in a statement. With the U.S. government as a full, active and effective partner, the private sector can expand our green manufacturing capacity, ensuring that these jobs and products will be created in the U.S., competing globally and protecting our environment. The governments of other countries are racing ahead to dominate in this area."
The proposed legislation would modify the Section 48C advanced manufacturing tax credit to provide an uncapped 30 percent investment tax credit for expenditures to re-equip, expand or modify facilities that manufacture and fabricate solar energy property, fuel cell power plants, and advanced energy storage systems (including batteries for advanced vehicles).
The proposal would also increase the capped allocation of Section 48C tax credits for other advanced manufacturing facilities by $3 billion. The proposal would clarify that in applying for these tax credits, the Treasury Department must prioritize facilities that manufacture advanced energy equipment (as opposed to merely assembling such equipment). In lieu of this investment tax credit, taxpayers may elect to receive a direct payment equal to 85 percent of the amount of the tax credit.
In addition, the proposal would extend the existing tax credits for domestic manufacturers of energy-efficient appliance credits for three years (through the end of 2013) and would increase the energy-efficiency criteria of appliances that these manufacturers must make in order to be eligible for these tax credits.
The proposal would extend for two years (through 2012) and codify the direct payment in lieu of tax credit program that was initially created by Section 1603 of the American Recovery and Reinvestment Act of 2009 for renewable energy facilities (e.g., wind, solar, and biomass facilities), combined heat and power facilities, fuel cells and microturbines that qualify for the production tax credit and investment tax credit. Among other technical improvements, the proposal would clarify that real estate investment trusts may participate in the program.
The proposal would conform the placed-in-service date for geothermal energy facilities and offshore wind facilities under the investment tax credit with the placed-in-service date for solar facilities (i.e., through 2016). These facilities take longer to build and uncertainty regarding the availability of the tax credit in the future has made it difficult for some long-term projects to obtain financing.
The proposal would provide an additional $3.5 billion allocation of Clean Renewable Energy Bonds for public power providers and rural electric cooperatives. This $3.5 billion allocation would be allocated 60 percent to public power providers and 40 percent to rural electric cooperatives. In addition, the proposal would expand the types of property that can be financed with CREBs to include energy storage systems and certain biogas equipment.
The proposal would allow state and local governments to issue tax-exempt private activity bonds to finance the installation of solar, wind and energy storage property on residential property as part of property-assessed clean energy programs. PACE programs are programs in which state and local governments make improvements with respect to private buildings in exchange for an assessment with respect to such building that is intended to recoup the cost of the improvement.
The proposal would provide $2.4 billion allocation of Home Energy Conservation Bonds. HECBs are tax credit bonds to provide states and large municipalities with interest-free funds to capitalize long-term programs that provide consumers with low-interest loans and grants for energy-efficiency improvements to existing homes.
Under current law, residential fuel cells are eligible for a 30 percent investment tax credit (capped at $1,000 per kilowatt hour of capacity). Commercial fuel cells are eligible for a 30 percent investment tax credit (capped at $3,000 per kilowatt hour of capacity). The proposal would harmonize the capacity limitation of residential fuel cells to the capacity limitation of commercial fuel cells (i.e., $3,000 per kilowatt hour of capacity). Furthermore, the proposal would allow micro-combined heat and power systems to qualify for the 30 percent investment tax credit for residential energy efficient property.
The proposal would modify the existing energy-efficient commercial building deduction to provide incentives for taxpayers to increase the energy-efficiency of certified historic structures and to increase the efficiency of commercial roofs. In the case of certified historic structures, the proposal would allow taxpayers that meet certain energy-efficiency objectives to receive an enhanced deduction of $3.00 per square foot of the building for meeting these objectives with respect to the entire building or $1.00 per square foot of the building for meeting specific objectives in any of the following building systems: (1) the interior lighting systems; (2) the heating, cooling, ventilation, and hot water systems; and (3) the building envelope. In the case of commercial roofs, the proposal would allow taxpayers to claim a portion of the deduction allowable for the building envelope if the roof meets certain efficiency objectives.
The proposal would create a program to competitively award $2 billion of investment tax credits to support taxpayer efforts to improve domestic energy efficiency and identify new sources of renewable energy. Under this program, taxpayers would be able to compete for (1) $850 million of investment tax credits for energy efficiency improvements to manufacturing facilities, (2) $500 million of investment tax credits for energy storage equipment and advanced transmission lines that increase the integration of renewable electricity and enhance electric transmission efficiency, (3) $250 million of investment tax credits for facilities that recycle municipal waste into fuel; (4) $150 million of investment tax credits for facilities that extract oil from used plastics, re-refine used oil, or convert post-industrial waste into energy or alternative fuels; and (5) $250 million of investment tax credits for the construction of anaerobic digesters. The Department of the Treasury would make awards under this program in consultation with the Department of Energy and the Environmental Protection Administration through a competitive application process similar to the process that the Administration used to award tax credits to manufacturing facilities under Section 48C. In lieu of this investment tax credit, awardees may elect to receive a direct payment equal to 85 percent of the amount of the awarded tax credit.
The proposal would also provide tax incentives to consumers that purchase heavy natural gas vehicles and heavy hybrid vehicles (i.e., vehicles over 8,500 pounds). Under the proposal, consumers would receive a tax credit equal to 80 percent of the incremental cost (subject to a cap) of purchasing a heavy natural gas vehicle or a heavy hybrid vehicle relative to a comparable gasoline or diesel fuel motor vehicle. In the case of 90/10 mixed fuel vehicles and 65/35 mixed-fuel vehicles, taxpayers would qualify for a reduced tax credit 90 percent of the otherwise allowable credit in the case of a 90/10 mixed-fuel vehicle and 65 percent of the otherwise allowable credit in the case of a 65/35 mixed-fuel vehicle.
The proposal would also extend the 50 percent investment tax credit for alternative vehicle refueling property for three years (through 2013). The proposal would also make modifications clarifying the availability of this credit for electric vehicle refueling pump property and for property that fuels non-motor vehicles that run on hydrogen fuel cells.
The proposal would extend for one year (through 2011) the current law increase in the fringe benefit for mass transit. Under current law, the mass transit fringe benefit is equal to the parking transportation fringe benefit. Absent additional action, the mass transit fringe benefit will be reduced in 2011. The proposal would also revise the interaction between the bicycle commuter fringe benefit and the mass transit fringe benefit.
The proposal would implement a transportation proposal included in both President Bushs and President Obamas Annual Budgets to restructure disaster relief that was provided to the City of New York and the State of New York to rebuild Ground Zero in the wake of the September 11th terrorist attacks on Lower Manhattan. Because these benefits have not served their intended purpose, the President asked Congress to provide the City of New York and the State of New York with tax credits for expenditures made for mass transit projects connecting with the New York Liberty Zone.
The proposal would also extend for one year (through 2011) the per-gallon tax credits and outlay payments for ethanol at a reduced rate (36 cents per gallon). The proposal would also extend for one year (through 2011) the existing 14.27 cents per liter (54 cents per gallon) tariff on imported ethanol and the related 5.99 cents per liter (22.67 cents per gallon) tariff on ethyl tertiary-butyl ether.
The proposal would reinstate for 2011 the per-gallon tax credits and outlay payments for biodiesel and renewable diesel. The extension of these tax credits and outlay payments for 2010 has previously passed both the House of Representatives and the Senate at different times but has not become law. The extension for 2010 would be incorporated into this legislation if that extension has not been enacted by the time this legislation is considered.
The proposal would reinstate for 2011 the per-gallon tax credits and outlay payments for natural gas, propane (other than for use in a forklift), compressed biogas and liquid fuel derived from biomass (other than black liquor) used as a fuel for 2011. The extension of these tax credits and outlay payments for 2010 has previously passed both the House and the Senate at different times but has not become law. The extension for 2010 would be incorporated into this legislation if that extension has not been enacted by the time this legislation is considered.
The proposal would allow algae-based fuels to qualify for $1.01 per gallon tax credit for producers of cellulosic biofuel. The proposal would also clarify that the cellulosic biofuel producer credit is awarded to taxpayers that make crude oil from algae if this oil is subsequently refined into a fuel.
Under current law, producers of cellulosic biofuel are allowed to claim a $1.01 tax credit for each gallon of cellulosic biofuel that they produce and sell for use as a fuel. Under the proposal, producers of cellulosic biofuel or algae-based biofuel (collectively, second generation biofuel), would be allowed to elect to receive a 30 percent investment tax credit for property (including property affixed to a traditional ethanol facility) that is used exclusively to produce second generation biofuel. This investment tax credit would be provided in lieu of any other per gallon tax credits and outlay payments that would be available for biofuel produced by that property. Any taxpayer making this election would also be allowed to elect to participate in the direct payment in lieu of investment tax credits program.
The bill would also direct the chief of staff of the Joint Committee on Taxation, in consultation with the Comptroller General of the United States, to submit a report analyzing various aspects of the tax expenditures included in this act to the Committee on Ways and Means and the Committee on Finance.
The bill would also direct the Secretary of the Treasury to submit a report on the competitively-awarded credits provided under sections 48C or 48E of the Code included in this act (or direct payments made in lieu of such credits) to the Committee on Ways and Means and the Committee on Finance.
The bill would direct the Secretary of the Treasury to enter into an agreement with the National Renewable Energy Laboratory to undertake a study of biogas. A written report containing the findings of the study would be submitted to Committee on Ways and Means and the Committee on Finance.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access