Negotiators near ‘extenders’ deal to preserve PTC through 2017 

Congressional negotiators are nearing a year-end tax deal that would extend and phase out the wind industry’s key federal incentive through at least 2017, according to sources familiar with the details of the emerging deal.

While details had not been made public at publishing time this afternoon, the treatment of the production tax credit (PTC) in the emerging bipartisan deal goes beyond the simple extension contemplated by an earlier Senate bill and seeks to provide a long enough pathway for wind and other qualified renewable energy developers to gradually wean themselves from government support.

The deal is included in a broader “tax extenders” bill that negotiators were said to be putting the finishing touches on this evening. Spokesmen for the House Ways and Means Committee and Senate Finance Committee, which have jurisdiction over the bill, did not respond to calls for comment.

In general, the package will temporarily extend through the end of next year the more than 50 tax breaks collectively known as extenders that were included in a Finance Committee package, S. 2260, earlier this year. About 10 of the tax breaks that had been temporary will become permanent, including the research and development tax credit, and the PTC will be phased out, sources tracking the process said. A tax break for transit riders also could become permanent in the package, while several other energy-related breaks are likely to get temporary extensions.

However, the White House signaled its strong opposition to the reported $450 billion package soon after details began emerging this afternoon.

“The president would veto the proposed deal because it would provide permanent tax breaks to help well-connected corporations while neglecting working families,” Jennifer Friedman, a White House spokeswoman, said in a statement reported by multiple news outlets.

The statement did not mention any specific credits, and Friedman did not immediately respond to a request for additional comment.

The $23-per-megawatt-hour PTC, which expired at the end of last year, would be reinstated retroactive to the beginning of this year and available at its full value for projects under construction before the end of 2015, according to three sources tracking the bill, which is being negotiated among bipartisan representatives from House and Senate leadership and tax-writing committees. In 2016, developers would be eligible for 80 percent of the PTC’s value, and they could claim 60 percent of its value through the first nine months of 2017, after which it would expire, the sources said.

The deal also apparently continues to determine eligibility for the PTC based on when construction on a project begins, although details on that point were murky at press time. When Congress last extended the PTC, as part of the 2013 “fiscal cliff” deal, it expanded eligibility to include projects under construction rather than requiring them to be placed in service.

Though the credit expired last year, the expanded language has allowed activity in the industry to continue in the interim. The Internal Revenue Service has generally said projects that were started or safe-harbored before the PTC most recently expired will be able to claim the credit as long as they are online by 2015. Once a project is placed in service, it can claim the $23-per-MWh credit for 10 years.

If the eligibility requirements remain unchanged by 2017, they could effectively give developers until 2019 to bring projects online, although it is too soon to say for sure how the IRS would interpret the language. Still, that is the same end date for the PTC envisioned in a 2012 letter from the American Wind Energy Association, which outlined a framework to phase out the credit in the context of a broader tax reform proposal that would also have reformed or ended tax incentives enjoyed by fossil fuel industries (E&E Daily, Dec. 13, 2012).

A tax lobbyist not affiliated with the wind industry said the longer-term PTC phaseout was meant to provide a win for Democrats who are strong supporters of the wind industry and to provide bipartisan momentum for the deal, which also makes permanent 10 tax breaks, including several with strong GOP support. The PTC also enjoys support from senior Finance Committee Republicans such as Sens. John Thune of South Dakota and Chuck Grassley of Iowa. Thune last week reiterated his call for a longer-term phaseout for the credit.

The PTC component of the deal is likely to rankle groups like Americans for Prosperity and the American Energy Alliance, two organizations linked to the Koch brothers’ political network that have been leading efforts to defeat the credit. It remains to be seen how those groups will respond, but one lobbyist who has been fighting the credit bristled at reports of the phaseout.

“But, if it is legit, it is leadership declaring war on conservatives, on those who oppose the president’s Climate Action Plan, on the members who have signed letters opposing the wind PTC, and on those who favor comprehensive tax reform,” Michael McKenna, a Republican lobbyist with a variety of industry clients, including a Koch Industries affiliate, said in an email.

“Very bad mojo,” he continued, adding that congressional leaders should at least allow a separate vote on the PTC.

Chris Warren, a spokesman for the American Energy Alliance, called the reported deal a “slap in the face” that endorses part of President Obama’s broader energy agenda, which “Republican leadership and other members of Congress promised to rein in.”

Supporters of the deal hope its other components attract enough support to bring it across the finish line. Still, the tax lobbyist cautions the deal’s passage is not assured, especially with rank-and-file conservative Republicans outraged at Obama’s announced executive action on immigration last week. Timing for an official announcement was unclear, but one could come as soon as later this afternoon or tomorrow.

The final package could also include a provision putting the value of a transit tax benefit back on par with what car commuters currently receive for parking.

Under a law enacted early last year, employers could provide either parking or transit benefits for commuting workers up to a maximum of $245 per month. After that provision’s expiration at the end of December, however, the tax-deductible parking benefit is now worth a maximum of $250 per month, while the comparable amount for transit and van pools is capped at $130.

Groups ranging from the Amalgamated Transit Union to the U.S. Chamber of Commerce have been pressing for parity. “The indications that we’re getting are that it will be included in a final package,” Patrick Malone, a spokesman for Rep. Earl Blumenauer (D-Ore.), said this afternoon in an email. While Malone had not heard a dollar figure for the equalized benefit that would be included in the package, he predicted it would be set at $235 per month.

Spokesmen for Sen. Charles Schumer (D-N.Y.), another leading advocate of parity, did not immediately respond to a request for comment.

Congress is likely to focus on moving the extenders package when it returns next week, with the hope of enacting this deal in time to move onto the looming Dec. 11 deadline when the government’s funding runs out. House leaders still say they hope to be able to do an omnibus appropriations bill by then, but a combination of immigration anger and the political capital leaders may have to expend on passing an extenders bill is raising the chances that lawmakers only enact another short-term continuing resolution.