WASHINGTON – Attempts within Congress to strip out tax breaks and other provisions favorable to the nation’s energy sector were largely left out of the tax reform bill presented by Senate and House Republicans Friday.
Everything from special treatment for pipeline investors to tax credits for electricity produced from wind turbines will continue as exists under the current tax code. Combined with a reduction in the corporate tax rates from 35 percent to 21 percent, energy companies of all stripes were expected to pay less taxes in the years ahead.
“All the energy changes [under consideration], it’s almost all gone,” said Liam Donovan, an energy lobbyist with the law firm Bracewell. “No news is good news.”
That will come as relief in Texas, where oil and gas drilling and refining, along with recent expansion in wind power and now solar energy, have long made energy a central pillar of the state’s economy.
When Republicans set out to reform the nation’s tax code earlier this year it was with the intent of lowering the corporate tax rate to bring it in line with other countries around the world.
“Our tax code actually incentivises companies that do business overseas to keep their money and investments and the jobs that go along with it overseas,” Sen. John Cornyn, R-Texas, said Friday. “What we’re doing is reducing the business tax rate, as [former] president Obama and others have supported on a bipartisan basis, to make ourselves more competitive.”
But with an eye towards the country’s $20 trillion deficit, they also sought to reduce the tax breaks used by all industries to shrink their bills far below the published rate.
The tax bill initially passed out of the House would have cut the value of tax credits for wind energy almost in half at the same time it capped how much companies could deduct for interest payments on construction projects like pipelines.
In the end, the change to the wind tax credit, along with another provision to do away a tax credit for electric vehicles, never made it into the final bill. And pipeline companies were able to win back some of the interest deductions they claim under the existing tax system.
“It depends on what your tax situation is now, but energy companies are paying a reasonable effective tax rate as it is,” Donovan said, referring to the rate companies pay after deductions. “It’s the companies that have a low effective rate whose taxes are probably going to go up.”
Oil and gas drillers saw a further victory with a provision opening up federal leasing in the Arctic National Wildlife Refuge, a long protected wilderness in northern Alaska populated by polar bears and caribou.
But not everyone in the energy sector was entirely pleased with the tax bill.
One provision aimed at limiting multinational companies’ ability to shrink their U.S. tax liability also effectively reduces incentives for those same companies to buy up the renewable energy tax credits that are critical to financing wind and solar projects in this country. The scale of the impact is expected to be reduced following some final hour changes to the bill, but renewable energy lobbyists expressed concern Friday.
“Despite progress on reducing the corporate tax rate, the final tax bill now before Congress is a missed opportunity to promote growth and provide market certainty for advanced energy businesses that employ more than 3 million workers across the United States,” said Malcolm Woolf, senior vice president for policy and government affairs at the trade group Advanced Energy Economy.
Republican leaders said Friday they hoped to have the bill on President Donald Trump’s desk by next Wednesday.
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