The Senate appears to have reached a deal on a major tax package that includes the extension of tax credits for renewable energy that are set to expire at the end of this year.
Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa), chair and ranking member of the Senate Finance Committee, announced on Tuesday that they have come to agreement on a tax package that would provide $17 billion in renewable energy tax breaks. The bill would also adjust the alternative minimum tax, extend the child tax credit and several business tax cuts, and provide $7 billion in tax relief for those affected by the Midwestern floods and the Gulf Coast hurricanes.
“This month, the Senate can act to create jobs, break America’s dependence on foreign oil, support working families, and help businesses thrive,” said Baucus in a statement [PDF]. “This agreement will lead America toward clean, homegrown energy and the good-paying jobs that come with it.”
The bill extends the investment tax credit for solar and wind for eight years. It extends the production tax credit (PTC) for wind for one year, and the PTC for solar, biomass, and hydropower for two years. The residential energy-efficient property credit is also extended through 2016, and the definition of the systems that qualify for that credit is expanded to include small wind investment and geothermal heat pumps. There is also a credit for plug-in electric vehicles, and $1.5 billion in tax credits for carbon capture and sequestration (CCS) demonstration projects. (Read a summary of the bill [PDF].)
Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) have indicated that they support the bill — major progress, since the renewable tax-credit extensions have failed repeatedly in the Senate this year, despite passing in the House.
The sticking point for the Senate in the past has been how to fund the extensions. Republicans objected previously to “pay-fors” that would have removed tax breaks for the oil industry and closed a tax loophole for hedge funds. Moderate Democrats in the Senate insisted that the source of funding had to be specified. In this compromise, GOP leaders agreed to freeze a tax break for oil and gas companies at the current rate. The bill would also tighten the rules on taxes that oil and gas companies pay on income earned overseas, and make adjustments to the funding system for the Oil Spill Liability Trust Fund.
If the Senate passes the legislation, differences will have to be worked out between this bill and the House bill that passed in May.