New Hampshire, USA --
For those clamoring for (and against) the year-end-expiring
legislation, and anyone in favor of some tax-code simplification, today
the government has offered an early holiday present: proposed reform for
some key areas including the production tax credit (PTC) and investment
tax credit (ITC).
"Our current set of energy tax incentives is overly complex and picks winners and losers with no clear policy rationale," wrote Sen. Max Baucus
(D-Mont.), chairman of the Senate Finance Committee. "We need a system
of energy incentives that is more predictable, rational, and
technology-neutral to increase our energy security and ensure a clean
and healthy environment for future generations."
The new discussion draft (here's the short version and a longer version)
proposes to swap out the "existing patchwork" of energy tax incentives
with two new tax credits: one for electricity and one for transportation
fuels, and both of them technology-neutral and performance-based. For
the electricity one, the amount of credit would be based on "the
cleanliness of the generating technology," defined as greenhouse gas
emissions of a facility vs. its output. Recipients could choose to
receive it as an annual production tax credit or an investment tax
credit claimed upon facility operation. That single overreaching tax
credit would expire once the "cleanliness" of the nation's electricity
supply "increases significantly."
This single "clean electricity tax credit" would involve the following criteria:
- A facility producing electricity that's about 25 percent cleaner than the industry average would get a tax credit, with the amount escalating depending on how big that gap is.
- If claimed as a production tax credit, the maximum for a "zero-emissions facility" would be 2.3 cents/kWh of generation, claimed on a single facility that starts after January 1, 2017 — and effective for up to 10 years. (Goodbye, annual will they/won't they PTC extension.)
- If claimed as an investment tax credit, the maximum is 20 percent of the cost of the investment. That's smaller than the current 30 percent ITC, but it gets extended beyond its current 2016 expiration.
The choice about consolidating tax credits, extending some and
eliminating others comes down to a desire to support "areas that appear
to have the largest bang-for-the-buck in reducing air pollution and
enhancing energy security," while seeking to avoid "overlapping
regulations and spending programs, compliance costs, and the potential
for fraud or abuse," according to the proposal.
The Senate Finance Committee proposes that both the production tax
credit (PTC, Section 45) and the investment tax credit (ITC, section
48), as well as the Section 25D credit for residential renewable energy
use, would be extended through 2016. For fuels, three tax credits would
also be extended through 2016: Section 40, 40A, and 6426 credits for
transportation-grade, renewable, and alternative fuels. (A previous
Baucus discussion draft in November
proposed repealing an accelerated depreciation credit for renewables
and two fuel production tax incentives, generally seen as a blow to
renewable energy development.) Eleven other energy-related tax
incentives will be repealed or allowed to expire, including the 2009-era
manufacturing tax credit and several others for energy efficiency,
hybrid and electric vehicles.
Comments are now being accepted by the Senate Finance Committee,
which asks to receive them up to January 31, 2014. The committee even
lists what it says it expects and would mull over: an alternative tax
credit structure to "discourage energy production that is not clean,"
whether through a subsidy for clean technologies or a tax or fee on more
polluting ones; making the new credits available to facilities that
come online before 2016; and qualifying a facility if upgraded to reduce
its emissions including carbon-capture retrofits.
http://www.renewableenergyworld.com/rea/news/article/2013/12/us-proposes-energy-tax-reform-heres-what-it-means-for-renewables
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