Governors' Wind Energy Coalition

Most energy provisions of the tax code would remain unchanged under the Senate’s tax overhaul released last night, sidestepping for now battles over sector-specific incentives.

The 253-page chairman’s mark makes no mention of key breaks for fossil fuels and clean energy that have been the subject of intense discussion on Capitol Hill in recent years.

It would keep intact the 2015 deal that extended and phased down the renewable production and investment tax credits, which would see reduced value and face new eligibility requirements under the House bill that is expected on the floor next week (E&E Daily, Nov. 3).

“The Senate tax reform bill keeps a promise to America’s more than 100,000 wind energy workers and restores the confidence of businesses pouring billions of dollars into rural America,” said American Wind Energy Association CEO Tom Kiernan in a statement.

He praised Republicans on the Finance Committee, including Chuck Grassley of Iowa, John Thune of South Dakota and Dean Heller of Nevada, for “speaking out against retroactive tax hikes proposed in House tax legislation.”

In another departure from the House bill, the Senate proposal would maintain the $7,500 electric vehicle tax credit (E&E News PM, Nov. 2).

The Senate plan, to be marked up in Finance starting Monday, echoes the House in maintaining the oil percentage depletion allowance and intangible drilling cost provisions. That’s a nod to the energy preferences of GOP senators on the panel from oil- and gas-producing states, including Senate Majority Whip John Cornyn of Texas and Louisiana’s Bill Cassidy.

However, the Senate’s plan does not appear to follow the House in canceling two other oil and gas breaks, for marginal wells and enhanced oil recovery costs.

While some energy sectors may be breathing sighs of relief over the Senate proposal, the omission of other sought-after energy incentives will have lobbyists rushing to Capitol Hill to press for their inclusion.

Unlike the House bill, the Senate language does not include an extension of the nuclear production tax credit sought by Georgia lawmakers worried about the financial viability of the Plant Vogtle project in their state. It’s the only active nuclear construction site in the country.

Nor does it include extensions of the investment tax credit for the so-called “orphaned” sources — including fuel cells, small wind, combined heat and power, and geothermal — that were left out of the 2015 deal due to what has been characterized as an error.

Other energy tax breaks with bipartisan support, including the tweaked 45Q carbon capture and sequestration credit and lapsed biodiesel incentives, are not in either chamber’s overhauls. They could surface in next week’s Finance markup or during floor debate.

However, any additions must adhere to the $1.5 trillion addition to the deficit over 10 years allowed under the fiscal 2018 budget resolution in order to use budget reconciliation to bypass the Senate’s customary 60-vote threshold.

The “conceptual” chairman’s mark released yesterday — which under long-standing Finance Committee custom will be converted into legislative language after the markup concludes — currently scores at $1.4957 trillion, according to the Joint Committee on Taxation.

Like the House plan, the Senate bill aims to reduce the corporate rate from 35 percent to 20 percent, a level the White House has indicated is a priority for President Trump.

However, the Senate bill would delay the reduction until 2019, while the lower rate would kick in for 2018 in the House plan.

The Senate bill would also provide for five years of 100 percent business expensing, which would benefit energy firms and other industries across the board.

A key challenge for the Senate proposal is the outright elimination of state and local tax deductions, an issue that House GOP tax writers struggled with because of opposition by Republicans from high-tax states like New York and New Jersey.

The Senate plan received cautious praise this morning from a key conservative group, Americans for Prosperity, which is part of the billionaire Koch brothers’ political network.

“There are a number of positive aspects in this plan that show promise for the effort to overhaul the tax code and provide the relief Americans deserve,” said AFP Chief Government Affairs Officer Brent Gardner in a statement, citing a “competitive corporate tax rate and rate reductions at every income bracket.”

However, FreedomWorks called the one-year postponement of the corporate rate reductions “unacceptable.”

Environmentalists slammed the Senate plan for maintaining fossil fuel tax breaks.

“Communities across the country are just beginning to recover from hurricanes and wildfires made worse by climate change, yet the Senate keeps handing billions to climate polluters. It is simply unconscionable,” Janet Redman, U.S. policy director at Oil Change International, said in a statement.