Earlier today, House Ways and Means Committee passed “H.R. 598 by a party-line vote of 24 to 13. The legislation will now be combined with other components of the recovery package from other House Committees into H.R. 1, the American Recovery and Reinvestment Act for consideration by the full House of Representatives next week.”
“This legislation will provide critical benefits and incentives to middle-America, poor-America, and businesses, large and small, who are struggling during this economic downturn,” said Chairman Charles B. Rangel (D-NY). “This plan will go a long way to help relieve the pain these families and businesses are experiencing so that we can restore some confidence and economic security and help America maintain its prominence in the global marketplace. Simply put, the American people cannot keep the engine of our economy running if they don’t have money to spend and this package provides tax relief and critical benefits to help them take home a little more each month and help the economy grow.”
Within this legislation are many elements focused on renewable energy, from the homeowner to the large institutions.
At least from the draft materials, there are good elements in this bill, even great elements. It is (sarcastically speaking, of course) nice to see encouragement of some bad things in this bill:
Tax credits for alternative fuel pumps. The alternative refueling property credit provides a tax credit to businesses (e.g., gas stations) that install alternative fuel pumps, such as fuel pumps that dispense E85 fuel, hydrogen, and natural gas. For 2009 and 2010, the bill would increase the 30% alternative refueling property credit for businesses (capped at $30,000) to 50% (capped at $50,000). Hydrogen refueling pumps would remain at a 30% credit percentage; however, the cap for hydrogen refueling pumps will be increased to $200,000. In addition, the bill would increase the 30% alternative refueling property credit for individuals (capped at $1,000) to 50% (capped at $2,000). This proposal is estimated to cost $54 million over 10 years.
Have to wonder whether anyone with a modicum of knowledge truly believes that this is a good use of resources. And, we should wonder whether, if T Boone Pickens has his way, it will cost just $5.4 million/year?
There are other, better elements. A 30% credit on home geothermal, to unlimited amounts? If that had been there a few years ago, I would have put in geothermal rather than an advanced fossil-fuel system. (PS: if anyone cares, high-efficiency fireplaces have these sorts of credits in most of Europe, but not in the US. Why biomass electricity but not efficient biomass heating?)
How about 30% on home energy improvements? And, no longer a limit of $1500? That is a big change. However, we have to wonder how many people will actually be able to take advantage of tax credits in the current environment.
What is frustrating, in any event, that this energy efficiency / home energy production is really nibbling around the edges. Ed Mazria has convinced me that Architecture 2030’s $197 billion plan (to spark 9 million jobs, $1.5 trillion in economic activity, and have a noticeable impact on US global warming emissions) could make a quite serious dent in the problem.
In any event, here is some press material from the Committee, including some of the energy provisions in the pre-markup draft bill.
“The American Economic Recovery and Reinvestment Plan”
Press Release from Chairman Charles B. Rangel outlining provisions in the Plan under the jurisdiction of the Ways and Means Committee
“The critical state of our economy calls for swift, comprehensive action and this package will provide relief to all communities and all sectors of the American economy,” said Chairman Charles B. Rangel (D-NY). “This recovery package will provide tremendous tax relief, health care and job training benefits for families struggling to make ends meet, while also giving businesses the boost they need to create new jobs. We have also designed specific provisions to help State and local governments fund critical infrastructure projects to improve our roads, schools, bridges and airports, while also maintaining and creating good-paying jobs for working families. This package was developed with strong coordination between the House and Senate leaders, President-elect Obama and his economic team. I look forward to working with all parties involved toward a swift passage.”
Detailed Summaries:
I. American Recovery and Reinvestment Tax Act of 2009
II. Assistance for Unemployed Workers and Struggling Families Act
III. Health Insurance Assistance for the Unemployed Act of 2009
IV. Health Information Technology for Economic and Clinical Health Act
Summary of Other Medicare Provisions
Text of The American Economic Recovery and Reinvestment Plan
REINVESTMENT IN RENEWABLE ENERGY
Long-term extension and modification of renewable energy production tax credit. The bill would extend the placed-in-service date for wind facilities for three years (through December 31, 2012). The bill would also extend the placed-in-service date for three years (through December 31, 2013) for certain other qualifying facilities: closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; waste-to-energy; and marine renewable facilities. This proposal is estimated to cost $13.143 billion over 10 years.
The up-and-down cycle of the PTC (production tax credit) has been highly disruption to large-scale renewable energy projects, especially to wind projects. The three-year extension gives some stability for planning out projects.
Temporary election to claim the investment tax credit in lieu of the production tax credit. Under current law, facilities that produce electricity from solar facilities are eligible to take a thirty percent (30%) investment tax credit in the year that the facility is placed in service. Facilities that produce electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy, and marine renewable facilities are eligible for a production tax credit. The production tax credit is payable over a ten-year period. Because of current market conditions, it is difficult for many renewable projects to find financing due to the uncertain future tax positions of potential investors in these projects. The bill would allow facilities that are placed-in-service in 2009 and 2010 to elect to claim the investment tax credit in lieu of the production tax credit. This proposal is estimated to cost $218 million over 10 years.
While the extension might be good, the reality is that the financial environment has made tax credits far less interesting. (There are fewer people requiring $10s or $100s of millions of write-offs since they don’t have the profits.) This shift will enable financing to move with greater ease.
Repeal subsidized energy financing limitation on the investment tax credit. Under current law, the investment tax credit must be reduced if the property qualifying for the investment tax credit is also financed with industrial development bonds or through any other Federal, State, or local subsidized financing program. The bill would repeal this subsidized energy financing limitation on the investment tax credit in order to allow businesses and individuals to qualify for the full amount of the investment tax credit even if such property is financed with industrial development bonds or through any other subsidized energy financing. The cost of this proposal is included in the estimated cost of the next provision.
Removal of dollar limitations on certain energy credits. Under current law, businesses are allowed to claim a thirty percent (30%) tax credit for qualified small wind energy property (capped at $4,000). Individuals are allowed to claim a thirty percent (30%) tax credit for qualified solar water heating property (capped at $2,000), qualified small wind energy property (capped at $500 per kilowatt of capacity, up to $4,000), and qualified geothermal heat pumps (capped at $2,000). The bill would repeal the individual dollar caps. As a result, each of these properties would be eligible for an uncapped thirty percent (30%) credit. This proposal is estimated to cost $872 million over 10 years.
Something for the homeowner. Increasing what is covered and raising the amount eligible for tax credit. For example, in the DC area, a “solar hot water system” is generally quoted in the range of $8-10k. Lifting the caps would mean a $400 to $1000 additional amount of tax credit on such an installation. Geothermal systems might run $20+k. At that lowest level, lifting limits means $4,000 of additional support.
Clean Renewable Energy Bonds (“CREBs”). The bill authorizes an additional $1.6 billion of new clean renewable energy bonds to finance facilities that generate electricity from the following resources: wind; closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; marine renewable; and trash combustion facilities. This $1.6 billion authorization will be subdivided into thirds: 1/3 will be available for qualifying projects of State/local/tribal governments; 1/3 for qualifying projects of public power providers; and 1/3 for qualifying projects of electric cooperatives. This proposal is estimated to cost $578 million over 10 years.
Qualified Energy Conservation Bonds. The bill authorizes an addition $2.4 billion of qualified energy conservation bonds to finance State, municipal and tribal government programs and initiatives designed to reduce greenhouse gas emissions. This proposal is estimated to cost $803 million over 10 years.
Tax credits for energy-efficient improvements to existing homes. The bill would extend the tax credits for improvements to energy-efficient existing homes through 2010. Under current law, individuals are allowed a tax credit equal to ten percent (10%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the taxable year. This tax credit is capped at $50 for any advanced main air circulating fan, $150 for any qualified natural gas, propane, oil furnace or hot water boiler, and $300 for any item of energy-efficient building property. For 2009 and 2010, the bill would increase the amount of the tax credit to thirty percent (30%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements during the taxable year. The bill would also eliminate the property-by-property dollar caps on this tax credit and provide an aggregate $1,500 cap on all property qualifying for the credit. This proposal is estimated to cost $4.275 billion over 10 years.
Tax credits for alternative fuel pumps. The alternative refueling property credit provides a tax credit to businesses (e.g., gas stations) that install alternative fuel pumps, such as fuel pumps that dispense E85 fuel, hydrogen, and natural gas. For 2009 and 2010, the bill would increase the 30% alternative refueling property credit for businesses (capped at $30,000) to 50% (capped at $50,000). Hydrogen refueling pumps would remain at a 30% credit percentage; however, the cap for hydrogen refueling pumps will be increased to $200,000. In addition, the bill would increase the 30% alternative refueling property credit for individuals (capped at $1,000) to 50% (capped at $2,000). This proposal is estimated to cost $54 million over 10 years.
Enhanced R&D credit. The bill would provide for an enhanced twenty percent (20%) R&D credit in taxable years beginning in 2009 and 2010 for research expenditures incurred in the fields of fuel cells, battery technology, renewable energy, energy conservation technology, efficient transmission and distribution of electricity, and carbon capture and sequestration. This proposal is estimated to cost $18 million over 10 years.
How meaningful is this proposal? How far will $1.8 million/year take these critical fields?
Tax policy is powerful.
Now tax policy is being wielded in support of energy smart policy.
That, we can hope, is a powerful combination.