A one-year extension through 2013 of the production tax credit for wind energy will be added to a Senate proposal to extend miscellaneous expiring tax breaks.
Senator Max Baucus, a Montana Democrat and chairman of the Senate Finance Committee, added the wind extension to what is now a $205.1 billion package of tax breaks scheduled for a committee vote today. Baucus had developed the proposal with Senator Orrin Hatch of Utah, the panel’s top Republican, marking a rare bipartisan agreement on tax policy.
“By working together here today, we’re proving we still have the capacity to do what our bosses, that is the American people, sent us here to do,” Baucus said. “That is: Get things done.”
In the changes made today, Baucus also dropped from the package a tax break for redeveloping contaminated sites and added an extension of a benefit for owners of motorsports racetracks.
Baucus also added a provision that would prevent the reach of the alternative minimum tax from expanding in 2013. The previous proposal had limited the reach of the parallel tax system for 2012 only.
The alternative minimum tax, initially designed to prevent high-income households from avoiding all taxes legally, disproportionately affects people in high-income states with heavy tax burdens, including New York, New Jersey and California.
The bill, known as the tax extenders package, would revive dozens of tax breaks that lapsed at the end of 2011 and extend them through 2013. Among those benefiting from the breaks are financial-services companies that operate outside the U.S., companies that conduct corporate research and some restaurant owners.
Companies including General Electric Co. (GE), Citigroup Inc. and Whirlpool Corp. (WHR) are among those lobbying for extensions of expired provisions. Some tax benefits, including those for investment in the District of Columbia, wouldn’t be extended under the plan.
Hatch said he would have preferred to eliminate more tax breaks and said lawmakers will have to make difficult choices in the future.
“It is a dry run for the fundamental tax reform that we know must come and will come,” he said.
The potential lapse of the wind tax credit has curtailed investment in wind energy. To qualify for the credit, wind turbines must be placed in service by the end of 2012, meaning that development of projects that can’t be accomplished by Dec. 31 has slowed.
For 2013, Baucus proposed changing that definition, so that wind and other alternative-energy projects could qualify for the credit if they start construction, not begin operation, by the end of the year.
Senator Tom Coburn, an Oklahoma Republican, yesterday said he would block a vote on the package. The panel meeting is still scheduled to occur. It was unclear what agreement, if any, Coburn and Baucus had reached.
Coburn filed amendments that would eliminate or limit tax breaks in the bill, including to prevent a tax credit for redevelopment of struggling areas to be used for Starbucks Corp. (SBUX) or DineEquity Inc. (DIN)’s International House of Pancakes.
Turning the committee’s proposal into law won’t happen quickly. Congress will leave Washington at the end of the week for a recess that will last until Sept. 10. The House of Representatives has been examining the list of expired breaks and doesn’t expect to consider the extensions until after the Nov. 6 election.
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