Showdown puts energy credit at risk

The Senate Finance Committee’s abrupt move to take up “tax extenders” legislation is testing the lobbying clout of the renewable energy sector and other special interests in Washington.

A draft plan for legislation released Tuesday by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and ranking Republican Sen. Orrin Hatch (Utah) would provide a two-year extension of 45 tax provisions that lapsed in January.

{mosads}The legislation, which will be marked up on Thursday, protects several provisions with powerful backers in corporate America, including a credit for research and development and a preference that allows companies to defer paying taxes on offshore financial services income.

But Wyden and Hatch left other tax provisions that had been part of previous “extenders” bills on the cutting room floor — most notably the production tax credit (PTC) for wind and other renewable sources of electricity.

Some provisions often derided as corporate pork survived in the bill, like a preference for the Puerto Rican rum industry, while others — a tax break for NASCAR tracks, for instance — were excluded.

Hatch cast the “pared back bill” as a victory for good governance.

“For far too long Washington has acted to extend long-standing tax policy, rarely shining a spotlight on the individual provisions or their impact on the families and businesses that benefit from them. Such dysfunction must come to an end,” the Utah Republican said.

The short amount of notice on the markup — 48 hours — set off a scramble among lobbying groups, which have spent millions of dollars trying to rescue their favored tax breaks.

For groups that saw their tax provisions omitted from the draft, Thursday’s markup will be an opportunity to get on the legislative train before it leaves the station.

House Ways and Means Committee Chairman Dave Camp (R-Mich.), who announced his retirement on Monday, is expected to soon start his own examination of the lapsed incentives, though there’s deep skepticism around Capitol Hill that an extenders package can get enacted before November’s election.

The stakes are particularly high for the renewable energy industry, which is trying to overcome conservative opposition to save a production tax credit it says has fueled a renaissance in electricity production.

The American Wind Energy Association said it’s pushing hard to ensure that the wind credit is included in Wyden’s bill.

“Negotiations are continuing, and we’re confident that we do have the bipartisan support and that it will be in the bill that the committee passes,” said AWEA spokesman Peter Kelley.

The industry has a key ally in Sen. Chuck Grassley (R-Iowa), a former chairman of the Finance Committee who calls himself the “grandfather” of the production tax credit.

Grassley said he plans to file an amendment to the extenders bill that would renew the incentive for two years, and criticized his colleagues for leaving the PTC out of the draft.

“There’s no fair rationale for leaving wind energy out of the chairman’s mark,” Grassley said in a statement. “There’s a significant amount of bipartisan, bicameral support for the wind tax provisions. … Wind energy supports thousands of jobs and generates billions of dollars in investment across the country using a natural, non-polluting resource.”

Finance aides said they expected amendments to restore some, if not most, of the dozen provisions left out of the original package.

Asked by reporters whether he has the votes on the committee to add the energy credit to the bill, Grassley said: “I think so. But I haven’t counted votes, so I’m taking what people have told me.”

The PTC, which expired at the end of 2013, incentivizes renewable energy by giving credits for the amount of electricity produced.

Grassley’s amendment would extend the credit for two years at the past level of 2.3 cents per kilowatt-hour —“unless, in order to get the votes, we had to modify it,” Grassley said.

The production in tax credit is popular among Democrats and lawmakers from states where wind energy is prevalent. Sen. Mark Udall (D-Colo.), for example, signaled his support for the production credit in a statement, calling wind energy a “smart investment.”

“I will keep fighting in Congress to ensure we keep the wind at the backs of wind-energy companies in Colorado and across our nation,” Udall said.

But the credit has drawn opposition from conservatives, who argue it is a handout to an industry that should now be able to stand on its own two feet.

Camp released a tax reform package in February meant to simplify the tax code, and it included a provision to sunset the PTC.

While Wyden did not say why he excluded the PTC, an aide told The Hill that the chairman’s mark was designed to be a bipartisan proposal, and to expect that the final measure will have the credit in it.

“It is no secret that I have been a strong supporter of renewable energy and the PTC in the past, but I’m going to have to talk with my colleagues,” Wyden told reporters.

Other provisions aimed at encouraging renewable fuels and energy-efficient homes and vehicles survived in the first bill.

Making the cut were credits for plug-in electric vehicles, alternative fuel vehicle refueling property, cellulosic biofuel production, renewable diesel, coal production on American Indian land, construction of new energy-efficient homes, alternative fuel production and fuel cell motor vehicles.

All of those incentives would be extended for two years except for the fuel cell credit, which would only get a one-year extension.

In all, extending the 45 provisions in the bill for two years would cost in the neighborhood of $67 billion over a decade. The cost of reviving those incentives won’t require offsets, Finance aides said, as long as they merely extend previous policies.

Wyden said that he hopes to use this round of tax extenders as a springboard to tax reform and vowed that he will not seek another reauthorization if Democrats hold the Senate and he remains chairman in the next Congress.

“I am determined this will be the last extenders bill on my watch. It’s high time we focus on creating a new, 21st-century tax code, because the status quo is unacceptable,” Wyden said.