Tax-writing panel seeks additional details on PTC phaseout

Source: Nick Juliano, E&E reporter • Posted: Monday, June 11, 2012

A key tax break for the wind industry was barely discussed today at a House hearing dedicated to getting recommendations from economists on how to evaluate the merits of more than 100 expiring tax incentives. But lawmakers made clear that the fate of the incentive — and the rate at which it could be phased out — remains on their radar.

Rep. Kenny Marchant (R-Texas) was the only member of the House Ways and Means Subcommittee on Select Revenue Measures to devote virtually his entire time for questions to energy-related tax incentives. He pointed to “provisions with the stated purpose of incentivizing investment in certain types of energy,” although he did not explicitly mention the wind production tax credit, which expires Dec. 31.

While energy incentives are promoted based on the argument that they will be needed for only a limited amount of time, “very few, if any, of these industries have independently determined that these subsidies are no longer necessary,” Marchant said, requesting guidance from the panel on how Congress should determine when industries should be cut off

Alex Brill, a research fellow at the conservative American Enterprise Institute, said that many industries can become dependent on tax subsidies and that weaning them off the support has proved to be difficult. He suggested phasing out the credit over a set number of years to allow the market to prepare for reductions in government support rather than face a sudden cliff.

“So a strategy for an energy source that’s heavily reliant on a strategy to come to this committee would be to demonstrate very clearly at what point they feel like they would not need the subsidy anymore and then codify that into law,” Marchant said.

The idea of phasing out the wind PTC over a number of years has been gaining traction on Capitol Hill and among some representatives within the industry, although a precise mechanism for reducing or eliminating the 2.2 cents per kilowatt-hour that wind developers currently receive has not been proposed.

“We had a lot of consensus from not just members but supporters on this issue of phasing out the tax credit over the period of the next several years, which is kind of interesting,” Rep. Pat Tiberi (R-Ohio), who chairs the subcommittee responsible for an extenders package, said today, pointing to an earlier panel hearing featuring testimony from lawmakers and subsequent communications with the industry.

However, Tiberi told reporters after the hearing that he was still waiting for more specifics from wind developers and others on how long a phaseout would have to last.

“This phaseout issue has been kind of theorized, but there really hasn’t been anything put to paper yet,” he said. “So we’ve been trying to explore that with the industry on what they mean by it.”

Tiberi said he hoped to have an extenders package through Congress by the end of this year, although he predicted it would be unlikely to pass before a postelection lame-duck session. He said details of what would be included remain in flux, although the chairman has previously indicated that the PTC has a good chance of being included.

Whether codifying a PTC phaseout happens this year or waits for more comprehensive tax reform in the next session of Congress remains to be seen, he said.

The wind industry has been lobbying throughout the year to win an extension to the PTC, which it says has spurred more than $15 billion per year in private investment in wind farms and created tens of thousands of jobs.

The American Wind Energy Association has said that wind developers already have begun laying off employees because of uncertainty over whether the credit will be extended, and that manufacturing facilities will have to cut staff toward the end of this year because few orders are being placed for next year. In all, AWEA says 37,000 jobs will be lost this year without quick action on a PTC extension.