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By Rebecca Kern
Nov. 16 — What brings home builders, farmers, utility cooperatives and environmentalists together? Expiring energy tax credits.
These groups say they want tax credits for commercial and residential small wind turbines, geothermal energy pumps, fuel cell properties and combined heat and power systems to be extended by Congress, and there could be negative impacts on businesses, manufacturing and consumers if they aren’t extended.
These four energy tax credits, valued at $1.4 billion if they were extended until 2019, are among the nearly 40 tax credits set to expire on Dec. 31. Many are related to non-energy industries.
The most likely vehicle for extension would be a year-end spending bill, but questions remain about whether enough support exists to include them.
However, Rep. Kevin Brady (R-Texas), chairman of the House Ways and Means Committee, told reporters Nov. 15 that tax extenders should be dealt with as part of overall tax reform in 2017, Bloomberg News reported.
Lloyd Ritter, federal policy director for the Distributed Wind Energy Association, which represents more than 100 small companies, from manufacturers to installers of small wind turbines, said jobs and manufacturing will be badly hurt if these credits expire because the technologies are still relatively new and need federal tax support.
“There’s no question that without a fair, level playing field in the tax arena, these small businesses in rural America are going to suffer,” Ritter told Bloomberg BNA.
Conservative tax group opposition is growing, including from Americans for Prosperity and Citizens Against Government Waste. They have come out against the one-off tax credits for these energy technologies, saying they prefer broader tax reform rather than tax laws for special interests in the renewable energy industry.
These two groups joined 45 other fiscally conservative organizations in sending a letter in October to House and Senate leaders calling on them to oppose extending these tax credits in a year-end funding bill.
Kevin Book, managing director at the energy analysis firm ClearView Energy Partners LLC, said he expects that there may more support for these tax credits in the lame duck session in Congress because spending on renewables is likely to fall under the Trump administration.
“The incoming Trump administration probably won’t look for an early giveaway to renewables. So there’s an incentive for some of the members who want those extenders passed, to get them passed before the end of the lame duck,” he told Bloomberg BNA.
The four tax credits, often called the “orphan tax credits,” were left out of the end-of-year funding bill in 2015. Last year’s bill did extend the investment tax credits in a phased-down timeline for wind projects (through 2019), and phased-down timeline for solar projects (through 2022 for residential and 2023 for commercial). It also extended a production tax credit for wind projects through 2019.
Christine Harbin, director of federal affairs and strategic initiatives at Americans for Prosperity, said her group wants these latest tax credits to expire because “this is on top of some big expansions of similar hand-outs for these industries.”
Thomas A. Schatz, president of Citizens Against Government Waste, told Bloomberg BNA that his group supports comprehensive tax reform, which would remove special breaks for every industry and lower the corporate tax rates closer to what other industrialized countries have.
Harbin called the U.S. tax code “woefully broken.”
“What is really important to talk about in the conversation about tax extenders is that the very fact that Congress has to consider a package of expiring tax provisions so close to the end of the year really highlights how broken our tax code is,” she told Bloomberg BNA.
Book said more movement under a Trump administration is likely for broad tax reform.
“There’s momentum for it already, and better odds when Washington goes three ways Republican,” he said.
He said one of the problems with the current low energy prices is that lawmakers are more likely to kill tax provisions that benefit energy. He said enough Republican support probably exists for the production tax credit and investment tax credit aiding the solar and wind industries, so he doesn’t anticipate them being cut out in tax reform.
But with Trump planting “his flag firmly in the camp of the oil industries,” Book said he thinks that future renewable tax credits may be at risk.
A broad coalition of groups has come out in support of extending these energy tax credits, including business groups, such as the Advanced Energy Economy, a business trade group working to make energy clean and affordable, the National Association of Home Builders, representing home builders and remodelers, and the American Farm Bureau Federation, representing farmers and ranchers.
They also have gained support from the Distributed Wind Energy Association and utilities such as the National Rural Electric Cooperative Association, which represents not-for-profit electric cooperatives.
“The energy efficiency tax credits and deductions scheduled to expire at the end of the year are an important suite of incentives for homeowners, builders and businesses to make efficient investment decisions,” Ben Evans, vice president of communications for the Alliance to Save Energy, an energy efficiency coalition of businesses, government, environmental and consumer organizations, told Bloomberg BNA.
The National Rural Electric Cooperative Association particularly is supportive of extending the geothermal heat pump tax credit so that it can be an alternative energy option for its consumers, Kirk Johnson, the group’s senior vice president of government relations, told Bloomberg BNA.
Johnson said the tax credit for geothermal heat pumps, which use heat from the Earth to provide energy to warm and cool homes, involves high upfront installation costs. But geothermal pumps can be more energy efficient than other centralized heat pump systems over time, saving consumers money on their electricity bills.
If an owner wants to install a geothermal pump, “the tax credit often is the only thing that enables that to make financial sense,” he said.
The groups in support of extending the tax credits are backing a bill introduced by Rep. Tom Reed (R-N.Y.), H.R. 5167, which would extend the tax credits for these four technologies for an additional five years, until Jan. 1, 2022. The bill has support from 20 Republicans and 16 Democrats, as of Nov. 14.
Sen. Ron Wyden (D-Ore.), ranking member of the Senate Committee on Finance, has said he supports extending these tax credits.
“Renewing clean energy tax breaks is a major priority for Sen. Wyden in the lame duck session,” Ryan Carey, a senior adviser for policy communications on the committee, told Bloomberg BNA.
If the tax credits aren’t extended this year, Congress still has the option to take action next year to pass legislation that would retroactively credit those who install these technologies.
But this retroactive fix isn’t good for these nascent industries, Marc Boom, associate director of government affairs at the Natural Resources Defense Council, told Bloomberg BNA.
“That probably doesn’t move the market, and certainly makes it very difficult for businesses to plan to take advantage of it,” he said. He said making extensions now allows people to plan and “it can actually drive the market forward.”
The National Rural Electric Cooperative Association’s Johnson said his group already has seen its members stop installing geothermal heat pumps because of the uncertainty of the tax credit expiring. Also, the National Association of Home Builders told Bloomberg BNA that its membership stopped seeking to use the geothermal tax credit in June or July since it takes so long to actually install the technologies and they don’t want to build them if the credit doesn’t exist anymore.
Similarly, Ritter, with the Distributed Wind Energy Association, said small wind projects take months to develop and put into place.
“So we’ve already seen severe economic impacts in these rural communities throughout the country because of the policy uncertainty that the tax situation is presenting to everybody,” Ritter said.
“If the Congress wants to make good policy and level the playing field, they have to move on these credits,” he added.
To contact the reporter on this story: Rebecca Kern in Washington at rKern@bna.com
To contact the editor responsible for this story: Larry Pearl at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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