A proposal to phase out the production tax credit over the next several years could return next year, a senior Republican tax-writer said today.
The proposal would have gradually reduced the value of the PTC through 2017 and was included in broader “tax extenders” legislation to temporarily renew dozens of expired tax incentives and make some permanent, but the overall package fell apart after White House objections. Rep. Kevin Brady (R-Texas), a senior member of the House Ways and Means Committee, said that it was a fairly small aspect of the overall negotiations and could return in the new year.
“I think it’s a relatively minor part of that whole discussion. I think it certainly achieves the goal of ending the subsidy that has gone on far too long and doing it in a way that both parties embrace,” he said in a brief interview this morning. “So that might be in the mix for the next go-round.”
For now, the House is preparing to move a more modest extenders bill to retroactively renew tax breaks that expired last year through the end of this year. Brady predicted that package would pass the House when it comes to a vote tomorrow, and Sen. Orrin Hatch (R-Utah), the top Republican on the Finance Committee, said the Senate would have no choice but to adopt the one-year extension.
Finance Chairman Ron Wyden (D-Ore.), who will hand the gavel to Hatch in January, said he is not ready to accept the House bill, which he said would be too hard on working-class people. Wyden moved a two-year extenders bill through committee on a bipartisan vote earlier this year, and he has said that he would prefer that approach.
“The Finance Democrats had a very productive meeting last night, and I think the way I’d characterize it is game on,” he told reporters today.
The future of the PTC and the other tax breaks remains to be seen. Congress may have to consider another extenders bill next year, but Brady and others have said they hope to turn their attention to tax reform.
Last week’s deal was negotiated primarily between Ways and Means Chairman Dave Camp (R-Mich.) and Senate Majority Leader Harry Reid (D-Nev.) and would have renewed all extenders through 2015, phased out the PTC through 2017 and made permanent 10 other incentives, including the research and development tax credit and a benefit for individuals who use public transit to commute to work. The White House threatened to veto the bill before it was formally released, citing a lack of permanent tax credits for low-income workers and families.
“It’s just a reset. Basically, it’s Groundhog Day for the tax extenders instead of focusing where we need to be, which is tax reform,” Brady said. “At the end of the day, we’re going to make R&D tax credit permanent. At the end of the day, we will make expensing permanent. This is more of kicking the can down the road.”
Wind supporters have said a longer PTC extension would be better given the long lead time necessary to bring projects to fruition. But the ability to claim a credit as soon as a project is under construction or a “safe harbor” investment is made means at least some facilities would be able to claim the credit this year.
Conservative groups that have been fighting the PTC for years slammed its inclusion in the one-year extenders bill, objecting to its high cost. The Joint Committee on Taxation estimates the PTC would cost $9.6 billion over a decade, more than a fifth of the package’s $44.7 billion price tag.
“At the very least, the House should revert back to the original ‘placed in service’ language rather than accepting the vague and expensive ‘under construction’ idea that the PTC should apply from the moment that a CEO of a wind company simply thinks about building a turbine,” said Thomas Pyle, head of the American Energy Alliance, one of the groups that has been fighting the credit.
The House Rules Committee meets this afternoon to send the one-year extenders bill to the floor. Modifications are not expected.