Energy Tax Credits Approved by Senate Finance Committee
Date Posted: October 5, 2007
by Frank Zaworski, Grainnet
Washington, DC--The Senate Finance Committee Oct. 4 voted 17-4 to approve a package of tax credits in the "Heartland, Habitat, Harvest, and Horticulture Act of 2007" to provide assistance to burgeoning renewable energy industries.
The tax credit proposals must now be approved by the full Senate.
A summary of the tax credits approved by the Committee follows:
Residential Wind Credit: Currently, there are no tax incentives for residential wind property.
The proposal creates a new 30 percent personal credit for residential wind property, capped at $4,000 per year.
The cost is $5 million over ten years.
Transmission Pole Payment Exemption: Easement payments generally must be included in a taxpayer's income for federal income tax purposes.
The proposal allows taxpayers who locate an electricity transmission pole on a line of 230 kilovolts or more to exempt easement payments received from the electric utility or electric transmission company from gross income.
The cost is $179 million over ten years.
Small Producer Credit for Cellulosic Alcohol: The proposal creates a new production tax credit for cellulosic alcohol of 50 cents per gallon (in addition to the current 51 cents/gallon credit and 10 cent/gallon credit) for up to 60 million gallons of cellulosic fuel production in a taxable year.
The cost is $828 million over ten years.
Expand Expensing for Cellulosic Ethanol Facilities: The proposal expands the eligible property qualifying for the 50 percent expensing to include alcohol produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis.
Cost is $1 million over ten years.
Small Ethanol Producer Credit: The proposal extends for two years (through December 31, 2012) the 10 cent per gallon tax credit on the first 15 million gallons of ethanol production for producers with annual capacity of not more than 60 million gallons.
Cost is $172 million over ten years.
Fossil-Free Alcohol Production Credit: The proposal creates a new small producer alcohol credit of 25 cents per gallon for facilities that produce ethanol through a process that does not use a fossil-based resource available through December 31, 2012.
Cost is $278 million over ten years.
Biodiesel Tax Credits: Extends for two years (through December 31, 2010) the $1.00 and 50 cent production tax credits for biodiesel.
Extends for four years (through December 31, 2012) the 10 cent per-gallon tax credit on the first 15 million gallons of biodiesel production for producers with annual capacity of not more than 60 million gallons.
Cost is $267 million over ten years.
Renewable Diesel Incentives: Extends for two years (through December 31, 2010) the $1 tax credit for diesel created through a thermal depolymerization process and caps, on a per facility basis, the $1 credit at 60 million gallons per year.
Cost is $211 million over ten years.
Alternative Fuels Excise Tax Credit: The proposal modifies the credit to include biomass-gas-based versions of liquefied petroleum gas and liquefied or compressed natural gas.
Cost is less than $500,000 over 10 years.
Alternative Refueling Station Tax Credit: The proposal extends the 30% alternative refueling property credit (capped at $30,000) for non-hydrogen property for one year (through December 31, 2010). Cost is $119 million over ten years.
Additionally, four amendments totaling approximately $1 billion were approved during the markup:
• An amendment by Senator Jim Bunning (R-Ky.) extending the alternative fuels tax credit (Section 6426) to December 31, 2010, with a 50 percent carbon capture standard on date of enactment.
A 75 percent carbon capture standard may be implemented prior to December 31, 2010 subject to certification of feasibility.
• An amendment by Senator Ken Salazar (D-Colo.) to further increase the value of the cellulosic ethanol credit from $1.11 per gallon to $1.28.
• An amendment by Senator Debbie Stabenow (D-Mich.) to extend the length of the cellulosic ethanol credit subject to available funds.
•An amendment by Senator Blanche Lincoln (D-Ark.) providing a five-year depreciation period (instead of seven years) for energy-efficient small motors used on farms.
Additional energy-related offsets include:
• 5-cent reduction in ethanol credit: This proposal reduces the 51-cent-per-gallon tax credit for ethanol by 5 cents beginning with the first calendar year after the year in which 7.5 billion gallons of ethanol has been produced.
The 7.5 billion target matches the renewable fuel standard passed by Congress in the 2005 Energy Policy Act.
This proposal is expected to raise $854 million over ten years.
• Extension of Tariff on Ethanol: The proposal extends the tariff on imported ethanol for two years (through December 31, 2010), and will raise $25 million over ten years.
• Elimination of Certain Refunds of Duty Imposed on Ethanol: Present law allows duties paid upon import to be reclaimed at a later date if the same or similar product is exported.
Current law treats ethanol blended with gasoline the same as jet fuel. The proposal terminates that treatment.
Any drawback for ethanol blended with gasoline is still allowed.
This proposal is expected to raise $10 million over ten years.
• Exclusion of denaturant from alcohol fuels credit. The proposal excludes the volume of denaturant (a substance used to render alcohol toxic or undrinkable) in the fuel for purposes of calculating the volume of alcohol eligible for the alcohol fuels credit.
The proposal is estimated to raise $284 million over ten years.
• Alcohol and biodiesel as taxable fuel. The proposal in the modification to the Chairman's mark adds qualified alcohol fuel mixtures and qualified biodiesel fuel mixtures to the definition of taxable fuel and requires all producers of qualified mixtures to file information reports with the Secretary of Energy.
This proposal is estimated to raise $2 million over ten years.