December 2, 2014
U.S.

PTC phaseout expected to return next year, as House prepares extenders punt

Nick Juliano, E&E reporter | Posted: Tuesday, December 2, 2014 | via www.governorswindenergycoalition.org

The House is planning to vote this week on a piecemeal bill that would reinstate dozens of expired tax breaks for this year, including those supporting renewable electricity, biofuels and energy efficiency, among others.

The bill floated yesterday, H.R. 5771, came after the collapse last week of bipartisan negotiations around a much broader package, which would have included a longer-term phaseout of the production tax credit (PTC), which primarily benefits the wind industry (Greenwire, Nov. 26). But the broader debate over how to wean wind producers off the tax credit is widely expected to return next year, when Republicans will claim a majority in the House and Senate, aides and lobbyists said yesterday.

The truncated extenders bill is one of Congress’ last pieces of business to wrap up before the end of the year. The other is passage of a new spending bill to keep the government open past the Dec. 11 expiration of the current continuing resolution. The spending bill debate was complicated by President Obama’s executive order on immigration last month, but lawmakers appear to be coalescing around a “CRomnibus” approach that would include a short-term CR for agencies involved in immigration enforcement combined with an omnibus appropriations bill for the remainder of the government.

In exchange for making permanent several business tax deductions, Republican leaders were willing to extend the PTC at its full value through next year, then gradually reduce it through 2017. The approach was similar to ideas that had been previously put forward by some in the wind industry, which is the primary beneficiary of the credit, and was generally seen as having strong support from Democrats. But the broader package ran into a veto threat last week from the Obama administration, which balked at the lack of permanent tax credits to benefit low-income workers or families with children.

The bill floated yesterday represents a last-ditch attempt to ensure that individuals and businesses can claim the expired incentives on this year’s tax returns. Collectively known as “extenders,” the 50 or so breaks lapsed at the end of last year; the House bill would extend them through this year.

Wind industry lobbyists have said a one-year extension would do little for companies in the industry because of the long lead time it takes to get projects in the ground. The credit applies to anything under construction before the credit expires or where companies have made a minimum “safe harbor” investment to secure their eligibility, so at least some new projects could qualify.

The Joint Committee on Taxation expects the PTC component of the bill to cost about $9.6 billion over the next decade. That’s less than the $13 billion estimated cost of a two-year PTC extension included in an earlier Senate bill, but still large enough to make up a bit more than three-quarters of the cost of the entire energy title in the extenders bill. Overall, the package carries a price tag of $44.7 billion, according to a summary from the Ways and Means Committee.

Wind industry lobbyists have said a one-year extension would do little for companies in the industry because of the long lead time it takes to get projects in the ground. The credit applies to anything under construction before the credit expires or where companies have made a minimum “safe harbor” investment to secure their eligibility, so at least some new projects could qualify.

The Joint Committee on Taxation expects the PTC component of the bill to cost about $9.6 billion over the next decade. That’s less than the $13 billion estimated cost of a two-year PTC extension included in an earlier Senate bill but still large enough to make up a bit more than three-quarters of the cost of the entire energy title in the extenders bill. Overall, the package carries a price tag of $44.7 billion, according to a summary from the Ways and Means Committee.

Groups like Americans for Prosperity and the American Energy Alliance, which have been linked to the billionaire industrialists Charles and David Koch, have mounted an aggressive campaign to eliminate the PTC once and for all, arguing it is too expensive and benefits an industry that is undeserving of government support. Wind boosters say the credit supports construction and manufacturing jobs and point to support from windy-state Republicans like Sens. John Thune of South Dakota and Chuck Grassley of Iowa, among others.

A GOP aide said yesterday that there are still members who would like to pursue a longer-term PTC phaseout in the new Congress. A former Democratic aide tracking the issue also said he expects a phaseout to return next year. The phaseout that negotiators had agreed to before last week’s deal fell apart was similar to an approach Thune proposed earlier this year and is seen as a good starting point for negotiations next year, the Republican aide said.

If the one-year extension passes Congress before the end of this year, it will likely force a renewed consideration of extenders next year, potentially separate from a broader debate over comprehensive tax reform. Sen. Orrin Hatch (R-Utah), who will chair the Finance Committee next year, said he expected to have to take up extenders again but acknowledged that would allow for a fuller discussion over what incentives to make permanent and which to eliminate.

“I’m happy to be involved and do whatever I can,” he told reporters in the Capitol yesterday.

URL to article:  https://www.wind-watch.org/news/2014/12/02/ptc-phaseout-expected-to-return-next-year-as-house-prepares-extenders-punt/