Baucus urges extension of green tax credits as part of payroll tax package

Source: Elana Schor • E&E • Posted: Wednesday, February 1, 2012

Bipartisan enthusiasm for sweeping tax reform — a task considered nearly impossible to complete before the November elections — should not prevent lawmakers from swiftly extending renewable energy credits, the Senate’s chief tax writer said yesterday.

At issue for the Senate Finance Committee are dozens of tax benefits that expired last year, including the research and development credit, as well as a passel more set to run out at the end of this year unless lawmakers act. In that latter group are two credits hotly pursued by alternative energy companies, a production credit used by wind and biomass producers and a 30 percent advanced manufacturing credit.

The fate of these tax “extenders,” including a Treasury Department grant program and transit deduction that ran out last year, is an especially high priority for Finance Chairman Max Baucus (D-Mont.) as he weighs which of them could hitch a ride on a payroll tax-cut package now being negotiated with House Republicans.

A comprehensive tax overhaul, which Congress could take up as soon as this year’s post-election session, “should evaluate each and every extender and determine whether it should be allowed to expire or remain permanent,” Baucus said yesterday at a hearing on the tax benefits.

“This process, however, will take time — time that our recovering economy doesn’t have,” the Montanan added, calling for quick action on the extenders as part of a conference deal with the House on payroll tax relief.

Support from liberal Democrats aside, the Treasury provision that let green energy investments take advantage of grants rather than tax credits is all but certain to remain a temporary feature of the 2009 stimulus law (E&ENews PM, Dec. 15, 2011). Its prospects for joining an extenders package were dimmed to near-zero following the implosion of government-backed solar firm Solyndra, which prompted new GOP scrutiny of renewable energy supports.

However, the wind and biomass production tax credit, in addition to the R&D and manufacturing credits, are more likely to remain intact as Baucus seeks GOP votes to steer an extenders package through during the payroll tax conference committee talks — the latest installment of which is set for today.

Caroline Harris, the U.S. Chamber of Commerce’s chief tax counsel, threw her weight behind extending the production credit in testimony to Baucus’ panel.

“When Congress fails to act, provisions such as the wind production tax credit do not operate efficiently,” Harris said yesterday. “Industries that are in their infancy are damaged because the code provisions they need to rely on to build up are not there.”

Yet the degree to which Baucus can count on GOP support for reupping the tax credits remains unclear, especially while broader tax reform eludes Congress and conservative groups renew their push to roll back as many federal energy supports as possible.

The Finance Committee’s ranking Republican, Sen. Orrin Hatch of Utah, cautiously urged fellow lawmakers to “mak[e] permanent the provisions that are worthy of remaining in the law, and eliminating those that are not” but stopped short of credit-by-credit endorsement at yesterday’s hearing.

The committee’s former top Republican and frequent Baucus ally, Sen. Chuck Grassley of Iowa, was more forthcoming in his endorsement of at least a “short-term” reprieve for “tax incentives for alternative energy sources.”

“With the economy still sputtering, we cannot afford the job losses that occur from pulling the rug out from under industries like biodiesel and wind that are still developing,” Grassley said in a statement. But beyond the near future, the Iowan added, renewable energy tax incentives should get more intense scrutiny as part of a “comprehensive tax reform” effort.