Republicans Split Over Renewing Alternative-Energy Tax Breaks

  • Senate Republicans say they’ll consider it; House opposed
  • Pressure could build to renew other specialized tax breaks

House Speaker Paul Ryan, a Republican from Wisconsin, exits after a news conference in Washington on Sept. 15, 2016.

Photographer: Andrew Harrer/Bloomberg

House and Senate Republican leaders are at odds over whether to renew expiring alternative-energy tax breaks during Congress’s lame-duck session after the Nov. 8 election.

Senate Majority Leader Mitch McConnell says he is committed to taking a look at the possibility. But House Speaker Paul Ryan and his lieutenants have signaled they won’t go along with continuing what has been a perennial late-session ritual of extending targeted tax incentives that are set to expire.

Congress last year made permanent many of the tax breaks that carried annual expiration dates, but a number were omitted from that law, including some related to renewable energy. Some lawmakers contend that one energy-related credit was left out accidentally and have been pushing for a fix.

Now, a few House Republicans are joining Democrats in starting to call for lame-duck action on favored tax breaks.

Boosting Propane

Representative Charles Boustany of Louisiana, chairman of the House Ways and Means tax policy subcommittee, said on Monday that he’s introducing a bill to extend a tax credit for the sale of alternative fuels, including propane. "The propane industry alone has brought more than $600 million to the state,” he said.

Boustany, who is running for a Senate seat, said that this credit, set to expire Dec. 31, allows a 50 cents per-gallon credit on alternative fuels for use in motor vehicles, boats and airplanes.

For now, House leaders are trying to hold firm, insisting they want to focus on more sweeping changes to the tax code, rather than short-term actions. 

“Congress made a large package of these provisions permanent last year, negating the need to relook at them every year," Ryan spokeswoman AshLee Strong said in an e-mailed statement Tuesday. "Any provisions not made permanent will be a discussion for comprehensive tax reform next year in the House’s ‘Better Way’ agenda.”

House Ways and Means Chairman Kevin Brady of Texas echoed that. 

"Chairman Brady has made it clear he does not want to move forward with the extenders process and believes we must take action on pro-growth tax reform," said Emily Schillinger, a committee spokeswoman.

‘Taking a Look’

Even so, when McConnell was asked last week if he was open to addressing some of the expiring energy-related tax breaks, he said yes. 

"We’re committed to taking a look at that before the end of the year," he told reporters.

One of the highest profile breaks at issue is the Section 48C investment tax credit for advanced energy manufacturing projects and facilities, tied mostly to producing energy from the sun, such as investment in geothermal and fuel cells, and also wind.

When Congress extended the investment tax credit for wind and solar last year, geothermal energy and fuel cells were left out of the mix. Senate Minority Leader Harry Reid of Nevada has said the omission was because of a "mistake in the drafting."

There have been attempts this year to correct that, including trying to add the credits to a Federal Aviation Administration re-authorization bill. But those efforts were unsuccessful.

Racehorses and Broadway

While the leftover renewable energy provisions are getting much of the attention, smaller provisions often manage to hitchhike on year-end tax extender bills, especially when there is a time crunch because any one senator can delay the process for days and imperil other legislative priorities.

Among the provisions expiring in December is a thoroughbred racehorse tax break authored by McConnell of Kentucky, as well as a tax break for Hollywood films, TV and live theater productions backed by Democratic Senator Chuck Schumer of New York, home to the Broadway theater district, and Republican Senator Roy Blunt of Missouri, who has touted the benefits of live theater in cities like Branson.

Other expiring tax breaks include one for Puerto Rican rum, another for motorsport racetrack construction, and still more for real estate.

Ryan, Brady and other House Republicans have said they prefer to eliminate these temporary, mostly special-interest provisions, as well as the uncertainty that constant renewals bring. To allow one or two exceptions, Brady suggested, could open up a slew of other demands to address other extenders.

“I believe those provisions that are temporary need to be part of the overall tax reform discussion,” Brady told Bloomberg BNA on Sept. 19. “I believe if you allow one extender it will grow to 10, and then we’re back into that same circus at the end of the year that frankly has created real problems in the past.”

‘No Decision’

Still, energy-related tax breaks are important to lawmakers on both sides of the aisle. And in the Senate, other top Republicans are joining McConnell in saying they’ll consider some level of tax extender action during the lame-duck session.

"No decisions have been made on whether remaining tax provisions will be acted on before the year’s end," said Julia Lawless, a spokeswoman for the Senate Finance Committee, which is chaired by Orrin Hatch of Utah. "Chairman Hatch will continue to talk with members and the congressional leadership on how best to move forward."

If Congress doesn’t act this year, some of the breaks could be renewed retroactively next year, as in the past.

A number of outside groups are already gearing up to help keep Ryan of Wisconsin and House Republicans bound to their position. 

A coalition that includes Taxpayers for Common Sense, Friends of the Earth, and R Street Institute on Tuesday sent a letter to Hatch, Brady, and their Democratic counterparts urging them to reject a number of energy breaks set for renewal this year.

The self-identified "Green Scissors" coalition wrote that the expiring incentives include "giveaways for a range of polluting industries, including energy sources like municipal solid waste and wood biomass that are often more harmful to air quality and the climate than the fossil fuels they would replace."

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