The House is expected to take up and approve legislation this week that would provide $18 billion in tax breaks to boost renewable energy production, including authorization for $5.6 billion of taxable tax-credit bonds.
"The bill extends and expands tax incentives for renewable electricity, energy, and fuel, as well as for hybrid cars, and energy-efficient homes, buildings, and appliances," House Speaker Nancy Pelosi, D-Calf., Majority Leader Steny H. Hoyer, D-Md., and Ways and Means chairman Charles B. Rangel, D-N.Y., said in a prepared statement last week. "By strengthening our renewable energy sector, the bill will help create the next generation of good-paying, green-collar jobs and bring down energy prices in the long term."
The House could take up the bill as soon as Wednesday, but no firm decision has been made, according to an aide in the speaker's office.
To pay for the renewable energy tax package, the measure would repeal $18 billion in tax breaks currently available to the oil and gas industry. But the offset provision is expected to draw sharp opposition from Republicans and could kill the bill in the Senate - the fate of a similar energy tax package abandoned last year.
That proposal totaled nearly $22 billion in renewable energy tax incentives - including authorization for $5.5 billion of tax-credit bonds - but was dropped from energy legislation approved in December after Republicans opposed the revenue-raising provisions. The measure passed the House, but could not win enough support to cut off debate so that it could be voted on in the Senate.
After the package was dropped, House and Senate Democratic leaders said they would try again this year and they plan to make good on that promise this week. However, with no change in the political landscape, the bill is expected to win House approval and face the same difficulties in the Senate.
"Our expectation is that it will pass" the House, said Joe Nipper, senior vice president for government relations with the American Public Power Association, which lobbies Congress on behalf of the municipal power industry. "While nothing is certain, that same package came over to the Senate before and was not approved primarily because of the revenue offset, so we don't have the impression that that has changed."
But APPA hopes that Congress finds a way to get the bill enacted into law, either by finding another way to offset the cost of the proposal, only paying for a portion of the bill's cost, or, similar to a recently enacted economic stimulus bill, not paying for the energy tax package at all.
The bill is important to public power providers, which issue tax-exempt bonds to finance construction and maintenance of their facilities, because it includes a provision that would allow municipal utilities and electric cooperatives to issue up $2 billion of clean renewable energy bonds, or CREBs, for projects that generate electricity from wind, biomass, or other renewable sources. Public power providers would issue 60% of the $2 billion and cooperatives would issue the remaining 40%.
CREBs were created in 2005 and Congress has authorized $1.2 billion of them to date. Tax-credit bonds provide the holder with an income tax credit in lieu of tax-exempt interest payments.
The CREBs provision in the tax bill, which is estimated to cost $640 million over 10 years, would differ from previous CREB authorizations, which were divided between governmental entities and electric cooperatives with no separate category for public power utilities. APPA asked for the proposed change because it would allow public power projects to get more bond allocations.
Earlier this month, the Internal Revenue Service, which oversees the CREB program, awarded about $400 million of allocations to 312 projects, but only about 40 public power projects were funded. APPA has argued that its projects are generally too big for many to receive CREB funding because the IRS funds smaller projects first before providing funding medium and larger projects that tend to generate more cost-effective green electricity, Nipper said.
To address this issue, the tax bill would allow the IRS to divide up CREB funding among all the eligible public power projects that apply.
"In addition to separating out a pool of bonds that are specifically for public power projects, [the legislation] modifies the allocation methodology that [the IRS] has to use, so instead of smallest to largest, every eligible public power project would get some portion of the bonds on a pro-rata basis," Nipper said. "And while that may not allow any single project to get full CREB funding, it does at least allow medium and larger size CREB projects to get a substantial amount of CREB funding."
The tax legislation also includes authorization of $3.6 billion for energy conservation bonds that would be issued by states, localities, and tribal governments to finance initiatives to reduce greenhouse gas emissions. That proposal is estimated to cost $1.9 billion over 10 years.
Projects financed under the bond programs would be required to pay prevailing wages, in accordance with the Davis-Bacon Act, a Depression-era labor law mandating that prevailing wages be paid on federally funded construction projects. Republicans tend to oppose the provision, while Democrats typically insist on it.