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By Ari Natter
Jan. 6 --Congress is in no rush to extend the production tax credit for renewable energy and 15 other energy tax incentives that expired at the end of 2013, and the path forward remains unclear, analysts told Bloomberg BNA.
Expiration of the incentives--which included a $1 per-gallon tax credit for biodiesel producers, a $1.01 per-gallon credit for cellulosic ethanol and a tax credit for residential energy efficiency improvements--leaves investors in the clean energy industry uncertain and could affect project financing.
But extending the energy tax incentives, which were estimated to cost $18 billion over a 10-year period when they were renewed in January 2013, isn't an “immediate burning issue” for Congress, John Gimigliano, principal in charge of the energy sustainability group in KPMG's Washington national tax practice, said in an interview.
“I think Congress has gotten over the idea that the world will stop spinning if they don't rush back and do extenders,” said Gimigliano, who previously served as senior tax counsel for the House Ways and Means Committee.
While Gimigliano said quickly passing legislation on tax extenders will be “very difficult,” he said Congress would be likely to approve a legislative package in 2014 that extends the expiring provisions retroactively.
Any interest in moving quickly on tax extenders is likely to come from the Senate, where Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, has said committee staff from both parties have started the process of developing extenders legislation.
One legislative vehicle probably would be a bill needed possibly in March to extend the debt ceiling, although Congress may wait until after the November elections to act, analysts said.
Complicating the timing of the effort is the nomination of Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, to become U.S. ambassador to China.
The departure of Baucus is likely to delay progress on efforts to extend the incentives, Amit Ronen, former deputy chief of staff to Finance Committee member Maria Cantwell (D-Wash.), told Bloomberg BNA.
“Although the Baucus nomination ends any hope for tax reform this Congress, that doesn't necessarily green light tax extender legislation, despite significant support from key Senate Finance Committee members and Democratic leaders,” said Ronen, now the director of George Washington University's Solar Institute.
“Republican demands for offsetting revenues and reforms to clean energy incentives, and relatively little public pressure, make it unlikely that expired tax credits will be extended before the midterm election,” Ronen said.
Another possibility is that Congress will extend some of the expired incentives, but not such incentives as the 2.3 cent per-kilowatt hour production tax credit for electricity from wind, said Derek Dorn, a partner at Davis & Harman LLP.
“I think we can expect that rather than just taking the entire package and changing the expiration date on everything, we can expect some scrutiny of the underlying provisions,” said Dorn, who previously was staff director of the Senate Finance Subcommittee on Energy, Natural Resources and Infrastructure. “The wind PTC is one of the more controversial ones.”
The tax credit effectively remains in place until roughly 2015 because of a provision that allowed projects already under construction before its 2013 expiration to receive the credit.
But with a one-year extension of the credit estimated to cost $6.2 billion over 10 years by the Joint Committee on Taxation, an extension of the PTC “will continue to be a heavy lift,” Christi Tezak, managing director at ClearView Energy Partners LLC, said in an interview.
Still others, such as Denise Bode, the former head of the American Wind Energy Association, were more optimistic that Congress would act on tax extenders, if not early in 2014, then during a lame duck session of Congress after the November elections.
“I do think the opportunity might be greater in some respects because you've got the changing of the chairs” of the Senate Finance Committee, Bode told Bloomberg BNA.
The departure of Baucus could provide an earlier opportunity to do tax reform because he has prioritized a broad rewrite of the overall tax code over working on a temporary tax-extenders bill.
“There may be more impetus if you are not going to get tax reform done sooner” to do tax extenders instead, said Bode, now a principal at Cornerstone Government Affairs, a public affairs consulting and advocacy firm. “I think it could change the thinking.”
To contact the reporter on this story: Ari Natter in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Larry Pearl at email@example.com
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