Yesterday Congress passed HR 8 to mitigate the fiscal cliff, the expiration of marginal tax rates and a handful of tax extenders.
While Republicans fought to extend income tax rates for as many Americans as possible, Democrats were busy loading up HR 8 with misguided energy tax credits. Of the dozen or so energy tax extenders contained within HR 8, the expansion of the already damaging wind Production Tax Credit is certainly the most egregious. Although the wind PTC is only extended for a year, it is now available to wind producers that begin construction in fiscal year 2013. As long as a wind company “begins construction” (an intentionally vague term) in 2013, they can employ the PTC for a full decade whenever the facility begins actually generating intermittent power.
For the past 20 years, the wind PTC was available to wind generators that began producing energy the same year the tax credit was available. To summarize, if traditional PTC language had been included in the fiscal cliff bill, wind generators would need to begin producing power this year (since the tax credit expires December 31, 2013).
But the PTC isn’t the only distortive tax credit included in HR 8. Below you will find a list of all the energy tax policies included in the fiscal cliff bill, most of which should probably be repealed with the coinciding tax increase offset in a revenue neutral way – the last thing conservatives want to do is help fund Obama’s bloated government. Click here to see JCT’s revenue implications.
- Credit for alternative fuel vehicle refueling property is extended to 31 December 2013.
- Credit for 2- or 3-wheeled plug-in electric vehicles. In the case of a qualified 2- or 3-wheeled plug-in electric vehicle, up to 10% of the cost of the qualified 2- or 3-wheeled plug-in electric vehicle, or $2,500 may be allowed as a credit.
- Qualifying 2- or 3-wheel vehicles need a 2.5 kWh pack (down from 4 kWh), are capable of achieving a speed of 45 mph (72 km/h)or greater, and must be acquired after 31 December 2011 and before 1 January 2014.
- Extension and modification of cellulosic biofuel producer credit. The extension now carries through to qualified production beginning before 1 January 2014. Algae is treated as a qualified feedstock.
- Additionally, the section strikes the term cellulosic biofuel in favor of “second generation biofuel”.
- Incentives for biodiesel and renewable diesel are extended to 31 December 2013.
- Credit for energy-efficient existing homes is extended to 31 December 2013.
- Extension of production credit for Indian coal facilities placed in service before 2009 for an 8-year period rather than a 7-year period. The amendment applies to coal produced after 31 December 2012.
- Extension and modification of credits with respect to facilities producing energy from certain renewable resources. Among other provisions for municipal solid waste, hydro, and biomass facilities, production tax credits for wind facilities are extended to 1 January 2014.
- Credits for energy-efficient new homes are extended to 31 December 2013.
- Credits for energy-efficient appliances are extended into 2013.
- The special allowance for cellulosic biofuel plant property is extended to 1 January 2014. In addition, algae is treated as a qualified feedstock for such.
- The special rule for sales or dispositions to implement FERC or state electric restructuring policy for qualified electric utilities is extended to 1 January 2014.
- Alternative fuels excise tax credits are extended to 31 December.