A New Plan to Pass the Renewable Energy Tax Credits
October 1st, 2008
Congress remains deadlocked in its efforts to renew several expiring and expired tax credits, including the renewable energy credits. Today, though, there are signs of movement as Senate leaders have now hatched a new plan to advance the tax package.
After the Senate passed comprehensive tax legislation on September 23rd, there was growing hope that Congress would finally be able to reach agreement on a tax package before Members go home to campaign for re-election. Unfortunately, additional changes made last week to the Senate-passed bill by House leaders created a new impasse.
Consequently, it appeared that House and Senate leaders had dug in their heels and little progress was expected this week. However, with the failure of the House to pass the financial bailout bill on Monday, lawmakers have been looking for ways to sweeten the package. Senate leaders have decided that adding the Senate-passed tax measure — which includes the renewable energy tax provisions — to the financial rescue legislation might just do the trick.
We reported last week that the Senate bill, which passed by a vote of 93 to 2, included extension of several renewable energy tax incentives, protection of millions of Americans from the Alternative Minimum Tax (AMT), extensions of expiring and expired family and business tax cuts (including the Research and Development Tax Credit), a disaster tax package that included additional benefits for the Midwest and the Gulf Coast, and mental health parity legislation.
While the renewable energy tax incentives were offset with other revenue raisers in the bill, the entire package was not fully offset. The issue of offsets has been the ongoing sticking point with the Blue Dog coalition of Democrats in the House of Representatives. The Blue Dogs strongly support the pay-as-you-go rule, which requires extensions of tax breaks to be paired with revenue increases or spending cuts.
Consequently, the Senate-passed legislation was a non-starter in the House of Representatives. Last week, House Democratic leaders broke the Senate compromise into four separate bills which were passed by the House and sent back to the Senate. These four measures include the mental health parity legislation with offsets (HR 6983), a one-year AMT patch without offsets (HR 7005), a disaster tax package without offsets (HR 7006), and an extenders bill with offsets that includes both energy and non-energy provisions (HR 7060).
This approach fell flat in the Senate. On Monday, Senate Majority Leader Harry Reid tried to call up the House-passed bill to expand tax credits for renewable energy. Republicans objected, in part because the bill would offset more of the cost than they were willing to accept.
With the failure of the financial rescue bill in the House on Monday, Senate leaders have ramped up efforts to save the package. Majority Leader Harry Reid and Minority Leader Mitch McConnell announced last night that they had agreed to add, among other items, the Senate-passed tax package to the bailout bill. Their hope is that these added provisions will attract additional Republican House support for the bailout legislation without losing the Blue Dog Democrats.
The inclusion of the Senate tax extenders bill seems likely to irritate House Democratic leaders. When the bailout and the extenders were separate issues, House Majority Leader Steny Hoyer refused to allow the Senate tax bill to reach the House floor because it does not comply with the pay-as-you-go rule. Hoyer had said Monday that the House would adjourn without considering the Senate bill.
The Senate plans to vote on the combined tax package and financial bailout bill this evening. With the strong support from both party leaders, the Senate is expected to pass the package with a comfortable margin. Then, all eyes will turn toward the House.
Helios Strategies, and its renewable energy clients, urges in the strongest possible terms that Senate and House leaders work to reach a final tax package agreement before the 110th Congress adjourns for the year. The delay in passage of the bill has already had a chilling impact on renewable energy projects across the country. This situation will grow much worse if Congress leaves town for the election without having these provisions signed into law.