By Cordia Scott Hennaman, MNE Tax
The US Senate Finance Committee is set on May 26 to consider the Clean Energy For America Act, sponsored by Chairman Ron Wyden (D-OR), which would eliminate a number of temporary tax credits and replace them with emissions-based, technology-neutral credits to spur investment in so-called ‘clean’ technology.
The current system of energy incentives in the US is too complex and far less effective than it should be, with more than 40 different energy tax incentives, including permanent subsidies for “Big Oil,” according to the bill.
“Energy policy is tax policy, and the federal tax code is woefully inadequate to address our energy challenges. It’s a hodgepodge of more than 40 temporary credits that don’t effectively move us toward the goals of reducing carbon emissions and lowering electricity bills for American families. Simply extending the status quo will not get the job done,” Wyden said. “The Clean Energy for America Act tosses those 40 temporary credits aside, replacing them with emissions-based, technology-neutral credits to turbocharge investment in clean electricity, clean transportation and energy conservation. It would both put us on the path to achieving our emissions reductions goals and create good-paying jobs, and should be the linchpin of our clean energy efforts as we consider President Biden’s jobs package.”
More than half of the current tax credits are too short-term to effectively stimulate investments and offer different subsidies to different technologies with no clear policy rationale, according to the bill’s authors. The Clean Energy for America Act creates a simpler set of long-term, performance-based energy tax incentives that are technology-neutral and promote clean energy in the United States, they said.
With that purpose in mind, the bill provides an emissions-based, technology-neutral tax credit for the production of clean electricity. It would be open to all resources – renewable, fossil fuel, “or anything in between” – but would only apply to facilities with zero or net negative carbon emissions.
Any new zero-emission facility could choose either a production tax credit of up to 2.5 cents per kilowatt hour or an investment tax credit of up to 30 percent, as well. Investments in grid improvements would qualify for the full-value investment tax credit, according to the bill.
In terms of incentives for energy conservation, it offers performance-based tax credits for energy efficient homes and a tax deduction for energy efficient commercial buildings – with larger incentives given for the more energy conserved.
The bill also offers incentives for clean transportation with long-term incentives for battery and fuel cell electric vehicles and electric vehicle charging. It offers a technology-neutral tax credit for domestic production of clean transportation fuel, as well. It would be available to all resources, but only for fuels that are at least 25 percent cleaner than average, according to the bill.
It specified that projects receiving taxpayer assistance must comply with federal labor requirements. And it eliminates tax incentives for fossil fuels, shaping the tax code to only reward clean energy.
“This proposal is important because it simplifies our tax code and shifts tax incentives away from oil and gas to clean energy,” said Sen. Debbie Stabenow, D-Mich, one of the bill’s cosponsors, said.
Cordia Scott Hennaman
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