CRS Compares House and Senate Energy Tax Bills
SEP. 16, 2008
RL34669
DOCUMENT ATTRIBUTES
- AuthorsLazzari, Salvatore
- Institutional AuthorsCongressional Research Service
- Code Sections
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2008-19873
- Tax Analysts Electronic Citation2008 TNT 182-26
Citations: RL34669
Order Code RL34669
September 16, 2008
Salvatore Lazzari
Specialist in Energy and Environmental Economics
Resources, Science and Industry Division
Side-by-Side Comparison of Energy Tax Bills in the House (H.R. 6049)
and Senate (S. 3478)
Summary
The House Democratic leadership's draft of broad-based energy policy legislation, the Comprehensive American Energy Security and Consumer Protection Act (no number), was announced on September 11, 2008. This plan allows oil and gas drilling in the Outer Continental Shelf (OCS) but it also incorporates energy tax provisions from energy tax bill H.R. 6049, which was previously approved by the House of Representatives.
In the Senate, legislative efforts center around S. 3478, the $40 billion energy tax bill offered by Finance Committee Chairman Max Baucus and ranking Republican Charles Grassley, and supported by the Democratic leadership there.
This report is a side-by-side comparison of energy tax bills H.R. 6049 and S. 3478.
Contents
H.R. 6049
S. 3478
List of Tables
Table 1. Side-by-Side Comparison of H.R. 6049, and S. 3478
Side-by-Side Comparison of Energy Tax Bills in the House (H.R. 6049)
and Senate (S. 3478)
The idea of using the tax code to achieve energy policy goals, and other national objectives, is not new but, historically, U.S. federal energy tax policy promoted the exploration and development -- the supply of -- oil and gas. The 1970s witnessed (1) a significant cutback in the oil and gas industry's tax preferences, (2) the imposition of new excise taxes on oil (some of which were subsequently repealed or expired), and (3) the introduction of numerous tax preferences for energy conservation, the development of alternative fuels, and the commercialization of the technologies for producing these fuels (renewables such as solar, wind, and biomass, and nonconventional fossil fuels such as shale oil and coalbed methane).
Comprehensive energy policy legislation containing numerous tax incentives, and some tax increases on the oil industry, was signed on August 8, 2005 (P.L. 109-58). The law, the Energy Policy Act of 2005, contained about $15 billion in energy tax incentives over 11 years, including numerous tax incentives for the supply of conventional fuels, as well as for energy efficiency, and for several types of alternative and renewable resources, such as solar and geothermal. The Tax Relief and Health Care Act of 2006 (P.L. 109-432), enacted in December 2006, provided for one-year extensions of some of these provisions. But some of these energy tax incentives expired on January 1, 2008, while others are about to expire at the end of 2008.
In early December 2007, it appeared that conferees had reached agreement on another comprehensive energy bill, the Energy Independence and Security Act, (H.R. 6) and particularly on controversial energy tax provisions. The Democratic leadership in the 110th Congress proposed to eliminate or reduce tax subsidies for oil and gas and use the additional revenues to increase funding for their energy policy priorities: energy efficiency and alternative and renewable fuels, i.e., reducing fossil fuel demand, rather than increasing energy (oil and gas) supply. In addition, Congressional leaders wanted to extend many of the energy efficiency and renewable fuels tax incentives that either had expired or were about to expire.
The compromise on the energy tax title in H.R. 6 proposed to raise taxes by about $21 billion to fund extensions and liberalization of existing energy tax incentives. However, the Senate on December 13, 2007 stripped the controversial tax title from its version of H.R. 6 and then passed the bill, 86-8, leading to the President's signing of the Energy Independence and Security Act of 2007 (P.L. 110-140), on December 19, 2007. The only tax-related provisions that survived were (1) an extension of the Federal Unemployment Tax Act surtax for one year, raising about $1.5 billion, (2) higher penalties for failure to file partnership returns, increasing revenues by $655 million, and (3) an extension of the amortization period for geological and geophysical expenditures from five to seven years, raising $103 million in revenues. The latter provision was the only tax increase on the oil and gas industry in the final bill. Those three provisions would offset the $2.1 billion in lost excise tax revenues going into the federal Highway Trust Fund as a result of the implementation of the revised Corporate Average Fuel Economy standards. The decision to strip the much larger $21 billion tax title stemmed from a White House veto threat and the Senate's inability to get the votes required to end debate on the bill earlier in the day. Senate Majority Leader Harry Reid's (D-Nev.) effort to invoke cloture fell short by one vote, in a 59-40 tally.
Since then, the Congress has tried several times to pass energy tax legislation, and several bills have passed the House, but not the Senate, where on several occasions, the failure to invoke cloture failed to bring up the legislation for consideration. Senate Republicans objected to the idea of raising taxes to offset extension of expiring energy tax provisions, which they consider to be an extension of current tax policy rather than new tax policy. In addition, Senate Republicans objected to raising taxes on the oil and gas industry, such as by repealing the Internal Revenue Code (IRC) § 199 deduction, and by streamlining the foreign tax credit for oil companies.1 The Bush administration repeatedly threatened to veto these types of energy tax bills, in part because of their proposed increased taxes on the oil and gas industry. At this writing, a renewed legislative effort is being made to enact energy tax legislation, and thus avoid the impending expiration of several popular energy tax incentives, such as the "wind" energy tax credit under IRC § 45, which since it was first enacted in 1992, was allowed to lapse three times only to be reinstated.2 In the House, congressional action on energy tax proposals is embodied in H.R. 6049, the House tax extenders bill, which was approved by the House on May 21, 2008, but failed a cloture vote in the Senate.3
H.R. 6049
H.R. 6049, the Energy and Tax Extenders Act of 2008, combines many of the energy tax incentives in prior bills including bills to extend expiring tax provisions, or provisions that are about to expire at the end of 2008. It is a $54 billion bill that would extend more than three dozen tax provisions, including nearly a dozen energy tax incentives, at an estimated cost of nearly $17 billion in lost federal tax revenue over 10 years. It also contains $10 billion in non-energy tax extenders to cover the expansion of the refundable child tax credit, a new standard for deduction of property taxes, alternative minimum tax relief, and an extension of already expired provisions, such as the research and development tax credit. It does not include tax increases on the oil and gas industry. The House-approved version of H.R. 6049 is a scaled-back version of the bill approved on May 15 by the House Ways and Means Committee. H.R. 6049 was originally slated to be part of the Democratic leadership's broad-based energy policy legislation, the Comprehensive American Energy Security and Consumer Protection Act (no number), which, among other things, allows oil and gas drilling in the Outer Continental Shelf (OCS).4 The Republican leadership in the House has introduced their own broadly-based energy tax bill, H.R. 6566, which also extends and expands some of the energy tax incentives and contains no tax increases (offsets). The energy tax provisions in this bill are, however, smaller and somewhat narrower than those in the recently announced Democratic proposal.
S. 3478
In the Senate, legislative efforts center around S. 3478, the Energy Independence and Investment Act of 2008, a $40 billion energy tax bill offered by Finance Committee Chairman Max Baucus and ranking Republican Charles Grassley. While most of the tax incentives in the bill are extensions of existing policy and are not controversial, the legislation will need to be paid for through new sources of revenue. One proposed offset -- which has been previously blocked by Republicans -- would repeal the IRC § 199 manufacturing deduction for the five major oil and gas producers, raising $13.9 billion over 10 years. The bill also would be paid for through a new 13% excise tax on oil and natural gas pumped from the Outer Continental Shelf, a proposal to eliminate the distinction between foreign oil and gas extraction income and foreign oil-related income, and an extension and increase in the oil spill tax through the end of 2017. In total, tax increases on the oil and gas industry would account for $31 billion of the $40 billion total cost of the legislation. The final major offset would come from a requirement on securities brokers to report on the cost basis for transactions they handle to the Internal Revenue Service, a provision expected to raise about $8 billion in new revenues over 10 years.
A side-by-side comparison of H.R. 6049 and S. 3478 is in Table 1. Revenue cost estimates come from the Joint Committee on Taxation.
Table 1. Side-by-Side Comparison of H.R. 6049, and S. 3478
Provision
Current Law
Senate Bill (S. 3478)
House Bill (H.R. 6049)
Comments
_____________________________________________________________________
FOSSIL FUELS SUPPLY
_____________________________________________________________________
Provision
PERCENTAGE DEPLETION FOR MARGINAL OIL AND GAS WELLS
Current Law
Independent producers can claim a higher depletion rate(up to
25%, rather than the normal 15%) for up to 15 barrels per day of oil
(or the equivalent amount of gas) from marginal wells ( "stripper"
oil/gas and heavy oil). The percentage depletion allowance is limited
to 100% of taxable income from each property, but this
limitation is suspended through December 31, 2007 for marginal oil
and gas. The percentage depletion allowance is also limited to 65% of
taxable income from all properties [IRC § 613A(c)(6);
[IRC § 613A(c)(6)(H); [IRC § 613A(d)].
Senate Bill (S. 3478)
Sec. 213. The proposal extends for three years (through
December 31, 2010) the suspension on the taxable income limit for
purposes of depreciating a marginal oil or gas well. The estimated
cost of this proposal is $364 million over ten years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
PETROLEUM REFINERIES
Current Law
Assets used in petroleum refining are generally depreciated over
10 years. But, a temporary provision allows the expensing of refinery
property which either increases total capacity by 5% or which
processes nonconventional feedstocks at a rate equal or greater to
25% of the total throughput of the refinery [IRC § 168(e)(3)].
Senate Bill (S. 3478)
Sec. 212. This bill extends the refinery expensing
contract requirement and the placed-in-service requirement for two
years. The proposal also qualifies refineries directly processing
shale or tar sands. The estimated cost of this proposal is $894
million over ten years.
House Bill (H.R. 6049)
No provision.
Comments
This is one of the several tax incentives for the oil industry
created by The Energy Policy Act of 2005(EPACT05, P.L. 109-58).
_____________________________________________________________________
CARBON MITIGATION AND COAL
_____________________________________________________________________
Provision
CREDIT FOR INVESTMENT IN CLEAN COAL FACILITIES
Current Law
A 15% investment credit is provided for advanced coal projects
and a 20% credit is provided for qualified coal gasification
projects, respectively. The credit is for coal gasification projects
which use an integrated gasification combined cycle (IGCC)
technology. The total credits available for qualifying advanced coal
projects is limited to $1.3 billion, with $800 million allocated to
IGCC projects and the remaining $500 million to projects using other
advanced coal-based generation technologies [IRC § 48A and IRC
§ 48B].
Senate Bill (S. 3478)
Sec. 111 and 112. The bill provides $2.5 billion in new
total tax credits for the creation of advanced coal electricity
projects and certain coal gasification projects that demonstrate the
greatest potential for carbon capture and sequestration (CCS)
technology. Of these $2.5 billion of total incentives, $2 billion
would be earmarked for advanced coal electricity projects and $500
million for coal gasification projects. These tax credits will be
awarded by Treasury through an application process, with applicants
that demonstrate the greatest CO2 sequestration percentage receiving
the highest priority. Projects must capture and sequester at least
65% of the facility's CO2 emissions or that their coal gasification
project would capture and sequester at least 75% of the facility's
CO2 emissions. The estimated cost of this proposal is $2.373 billion
over ten years.
House Bill (H.R. 6049)
Sec. 111. The bill would provide $1.5 billion of tax
credits for the creation of advanced coal electricity projects and
certain coal gasification projects that demonstrate the greatest
potential for carbon capture and sequestration (CCS) technology. Of
these $1.5 billion of incentives, $1.25 billion would be awarded to
advanced coal electricity projects and $250 million would be awarded
to certain coal gasification projects. The award process and criteria
to be used by the Treasury Department is the same as in S. 3478. This
proposal is estimated to cost $1.422 billion over 10 years.
Comments
This tax credit was also one of the several energy tax
incentives created by EPACT05.
_____________________________________________________________________
Provision
CO2 CAPTURE TAX CREDIT
Current Law
No provision.
Senate Bill (S. 3478)
Sec. 115. The proposal provides a $10 credit per ton for
the first 75 million metric tons of CO2 captured and transported from
an industrial source for use in enhanced oil recovery and $20 credit
per ton for CO2 captured and transported from an industrial source
for permanent storage in a geologic formation. Qualifying facilities
must capture at least 500,000 metric tons of CO2 per year. The credit
applies to CO2 stored or used in the United States. The estimated
cost of this proposal is $1.119 billion over ten years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
CARBON AUDIT OF TAX CODE
Current Law
No provision.
Senate Bill (S. 3478)
Sec. 116. The bill directs the Secretary of the Treasury
to request that the National Academy of Sciences undertake a
comprehensive review of the tax code to identify the types of
specific tax provisions that have the largest effects on carbon and
other greenhouse gas emissions and to estimate the magnitude of those
effects. This proposal has no revenue effect.
House Bill (H.R. 6049)
Same as S. 3478.
_____________________________________________________________________
Other Coal Tax Provisions
_____________________________________________________________________
Provision
BLACK-LUNG EXCISE TAX
Current Law
An excise tax is imposed on coal mined domestically and sold by
the producer, at the rate of $1.10 per ton for coal from underground
mines and $0.55 per ton for coal from surface mines (the aggregate
tax per ton is capped at 4.4% of the amount sold by the producer).
Reduced tax rates apply after the earlier of December 31, 2013, or
the date on which the Black Lung Disability Trust Fund has repaid,
with interest, all amounts borrowed from the general fund of the
Treasury. Tax receipts are deposited in the Black Lung Disability
Trust Fund, and used to pay compensation, medical and survivor
benefits to eligible miners and their survivors and to cover costs of
program administration. The Trust Fund is permitted to borrow from
the General Fund any amounts necessary to make authorized
expenditures if excise tax receipts do not provide sufficient funding
[IRC § 4121].
Senate Bill (S. 3478)
Sec. 113. The bill would enact the President's FY 2009
proposal to bring the Black Lung Disability Trust Fund out of debt.
The President's Budget proposes that the current excise tax rate
should continue to apply beyond 2013 until all amounts borrowed from
the general fund of the Treasury have been repaid with interest.
After repayment, the reduced excise tax rates of $0.50 per ton for
coal from underground mines and $0.25 per ton for coal from surface
mines would apply (aggregate tax per ton capped at 2% of the amount
sold by the producer). The bill also includes the President's
proposal to restructure Black Lung Trust Fund debt. The proposal is
estimated to raise $1.287 billion over ten years.
House Bill (H.R. 6049)
Same as the Senate bill.
Comments
For background on the black lung excise tax see CRS Report
RS21935, The Black Lung Excise Tax on Coal.
_____________________________________________________________________
Provision
BLACK-LUNG EXCISE TAX ON EXPORTED COAL
Current Law
Since 2000 (which is when the IRS issued Notice 2000-28), the
black lung excise tax has not been imposed on exported coal, i.e.,
domestically produced coal sold and destined for export. The courts
have determined that the Export Clause of the U.S. Constitution
prevents the imposition of the coal excise tax on exported coal and,
therefore, any taxes collected on such exported coal in the past are
subject to a claim for refund [IRC § 4121].
Senate Bill (S. 3478)
Sec. 114. The bill creates a new procedure under which
certain coal producers and exporters may claim a refund of these
excise taxes that were imposed on coal exported from the United
States. Under this procedure, coal producers or exporters that
exported coal during the period beginning on or after October 1, 1990
and ending on or before the date of enactment of the bill, may obtain
a refund from the Treasury of excise taxes paid on such exported coal
and any interest accrued from the date of overpayment. The estimated
cost of this proposal is $199 million over ten years.
House Bill (H.R. 6049)
Same as S. 3478.
Comments
See CRS Report RS22881, Coal Excise Tax Refunds: United
States v. Clintwood Elkhorn Mining Co.
_____________________________________________________________________
ELECTRICITY RESTRUCTURING PROVISIONS
_____________________________________________________________________
Provision
SALE OR DISPOSITION OF TRANSMISSION ASSETS
Current Law
Under present tax law, the sale of electricity transmission or
distribution facilities is generally considered to be an involuntary
conversion, and gain from the sale or disposition of such assets is
recognized over 8 years, rather than taxed all at once in the year of
the sale [IRC § 451, 1033, 1245, 1250].
Senate Bill (S. 3478)
Sec. 402. The bill extends the present-law eight-year
deferral of gain on sales of transmission property by vertically
integrated electric utilities to FERC-approved independent
transmission companies. The rule applies to sales before January 1,
2010. The estimated cost of this proposal is revenue-neutral over ten
years.
House Bill (H.R. 6049)
Same as Senate bill.
Comments
The eight-year recognition rule was introduced by EPACT05.
_____________________________________________________________________
RENEWABLE AND ALTERNATIVE FUELS
_____________________________________________________________________
Provision
ELECTRICITY FROM RENEWABLE FUELS
Current Law
Electricity producers may claim a tax credit of 1.5¢/kWh (in
1992 dollars; generally 2.0¢ in current dollars) for electricity
produced from wind energy, "closed-loop," and open-loop biomass, and
other renewable resources as well as for refined coal.
Placed-in-service date is December 31, 2008 [IRC § 45].
Senate Bill (S. 3478)
Sec. 101 and 102. The Senate bill extends the
placed-in-service date by three years, through December 31, 2011. The
bill expands the types of facilities qualifying for the credit to new
biomass facilities and those that generate electricity from marine
renewables (e.g., waves and tides). The bill updates the definition
of an open-loop biomass facility, the definition of a trash
combustion facility, and the definition of a non-hydroelectric dam.
The bill also extends the refined coal credit, while removing the
market value test and increasing coal emissions standards. The
estimated cost of this proposal is $15.414 billion over ten years.
House Bill (H.R. 6049)
Sec. 101 and 102. The House bill extends the
placed-in-service date through December 31, 2009 (for wind
facilities), and through December 31, 2011 (for certain other
qualifying facilities: closed-loop biomass; open-loop biomass;
geothermal; small irrigation; hydro power; landfill gas; and trash
combustion facilities). With respect to marine renewables (e.g.,
waves and tides), this provision is the same as in S. 3478. The bill
would cap the aggregate amount of tax credits to an amount that has a
present value equal to 35% of the facility's cost. The bill clarifies
the availability of the production tax credit with respect to certain
sales of electricity to regulated public utilities and updates the
definition of an open-loop biomass facility, the definition of a
trash combustion facility, and the definition of a nonhydroelectric
dam. This proposal is estimated to cost $7.046 billion over ten
years.
Comments
Current tax credit is generally available for 10 years after
placed-in-service, but new equipment has to be placed-in-service by
December 31, 2008. So this tax credit would not be available on new
investments after December 31, 2008, unless it is extended.
_____________________________________________________________________
Provision
BUSINESS USE OF RENEWABLE TECHNOLOGIES
Current Law
A permanent 10% tax credit is provided for investments in solar
and geothermal equipment used to generate electricity (including
photovoltaic systems), or solar equipment used to heat or cool a
structure, and for process heat. The 30% credit for solar, fuel cells
and the 10% credit for micro-turbines is available through
12-31-2009. Geothermal energy reservoirs also qualify for a 15%
percentage depletion allowance. Depreciation recovery period for
renewable technologies is 5 years. Fuel cells do not qualify for tax
subsidies [IRC § 45,46,48, 613(e)].
Senate Bill (S. 3478)
Sec. 103 & 107. S. 3478 extends the 30% investment tax
credit for solar energy property and qualified fuel cell property, as
well as the 10% investment tax credit for micro turbines, for eight
years (through 12-31-2016). The bill adds small commercial wind,
geothermal heat pumps, and combined heat and power systems (at a 10%
credit rate) as a category of qualified investment. The bill also
increases the $500 per half kilowatt of capacity cap for qualified
fuel cells to $1,500 per half kilowatt and allows these credits to be
used to offset the alternative minimum tax (AMT). The estimated cost
of this proposal is $1.919 billion over ten years.
House Bill (H.R. 6049)
Sec.103. This provision is similar to the Senate's except
that the extension is only through 12-31-2014. The House bill also
removes an existing limitation that prevents public utilities from
claiming the investment tax credit. This proposal is estimated to
cost $1.376 billion over 10 years.
Comments
Under current law, energy-related income tax credits, and many
of the non-energy tax credits, are aggregated and claimed as one
general business credit, which is also subject to several
limitations, including the alternative minimum tax limitation [IRC
§ 38].
_____________________________________________________________________
Provision
RENEWABLE ENERGY TECHNOLOGIES USED IN RESIDENCES
Current Law
A 30% tax credit is provided for residential applications of
solar generated electricity (photovoltaics) as well for solar water
heating. This credit is available through December 31, 2008 [IRC
§ 25D].
Senate Bill (S. 3478)
Sec. 104 and 106. The bill extends the credit for
residential solar property for eight years (through 2016), and
doubles it from $2,000 to $4,000. The bill adds residential small
wind investment, capped at $4,000, and geothermal heat pumps, capped
at $2,000, as qualifying property. The bill also allows the credit to
be used to offset the AMT. The estimated cost of this proposal is
$907 million over ten years.
House Bill (H.R. 6049)
Sec.104. The bill would extend the credit for residential
solar property for six years (through the end of 2014). Otherwise,
the provision in the House bill is the same as in the Senate bill.
This proposal is estimated to cost approximately $666 million over
ten years.
Comments
The payment of the AMT may substantially reduce, or even
eliminate, this (as well as other) energy tax credits.
_____________________________________________________________________
Provision
CLEAN RENEWABLE ENERGY BONDS
Current Law
State and local governments may issue clean renewable energy
bonds ("CREBS") in order to finance renewable projects (wind,
closed-loop biomass, open-loop biomass, geothermal, small irrigation,
qualified hydro-power, landfill gas, marine renewable and trash
combustion facilities). Unlike other state and local bonds, which are
exempt from federal taxation, these bonds provide a tax credit to the
holding taxpayer. Only $1.2 billion of such bonds may be issued
nationally; $0.75 billion by governmental bodies. CREBS must be
issued before 12-31-2008 [IRC § 54].
Senate Bill (S. 3478)
Sec. 105. The Senate bill increases the maximum
authorized amount of CREBS issues to $2 billion to finance facilities
that generate electricity from renewables. This $2 billion
authorization is subdivided into thirds: 1/3 for qualifying projects
of state/local/tribal governments; 1/3 for qualifying projects of
public power providers; and 1/3 for qualifying projects of electric
cooperatives. The bill also provides an additional year for current
allocations to issue bonds. The estimated cost of this proposal is
$551 million over ten years.
House Bill (H.R. 6049)
Sec. 106. The House bill is generally the same as the
Senate bill. This proposal is estimated to cost $548 million over 10
years.
_____________________________________________________________________
Provision
NUCLEAR ELECTRICITY PRODUCTION TAX CREDIT
Current Law
A taxpayer producing electricity at a qualifying advanced
nuclear power facility can claim a credit equal to 1.8¢/kilowatt
hour of electricity produced for the 8-year period starting when the
facility is placed in service. The aggregate amount of credit that a
taxpayer may claim in any year during the 8-year period is subject to
limitation based on allocated capacity and an annual limitation. A
qualifying advanced nuclear facility is one that is placed in service
before January 1, 2021. The Secretary of Treasury may allocate up to
6,000 megawatts of capacity [IRC § 45I].
Senate Bill (S. 3478)
Sec. 402. This proposal increases the maximum allocation
amount to 8,000 megawatts. Public-private partnerships will also be
allowed to utilize the credit. This proposal has no revenue effect.
House Bill (H.R. 6049)
No provision.
Comments
A qualifying advanced nuclear facility is one for which the
taxpayer has received an allocation of megawatt capacity from the
Secretary of Treasury, in consultation with the Secretary of Energy.
See CRS Report RL33558, Nuclear Energy Policy.
_____________________________________________________________________
ENERGY CONSERVATION AND ENERGY EFFICIENCY
_____________________________________________________________________
Business Sector
_____________________________________________________________________
Provision
ENERGY EFFICIENCY IN COMMERCIAL BUILDINGS
Current Law
The tax code provides a formula-based tax deduction, subject to
a limit equal to $1.80 per sq.ft. of the building, for all or part of
the cost of energy efficient commercial building property (i.e.,
certain major energy-savings improvements made to domestic commercial
buildings) placed in service after December 31, 2005 and before
January 1, 2009 [IRC § 179D].
Senate Bill (S. 3478)
Sec. 303. The bill extends the energy-efficient
commercial buildings deduction for five years, through December 31,
2013. The estimated cost of this proposal is $891 million over ten
years.
House Bill (H.R. 6049)
Same as the Senate bill.
Comments
Qualifying property must be installed as part of: (1) the
interior lighting system, (2) the heating, cooling, ventilation and
hot water systems, or (3) the building envelope, and it must reduce
total annual energy and power costs of the building by 50% or more in
comparison to a reference building that meets the minimum
requirements of Standard 90.1-200, Energy Standard for Buildings
Except Low-Rise Residential Buildings, of the American Society of
Heating, Refrigerating, and Air Conditioning Engineers and the
Illuminating Engineering Society of North America.
_____________________________________________________________________
Provision
BONDS FOR GREEN BUILDINGS AND SUSTAINABLE DESIGN PROJECTS
Current Law
State and local governments have the authority to issue
tax-exempt bonds for green buildings and sustainable design projects
[IRC § 142].
Senate Bill (S. 3478)
Sec. 307. The bill extends the authority to issue
qualified green building and sustainable design project bonds through
the end of 2012. The bill would also clarify the application of the
reserve account rules to multiple bond issuances. The estimated cost
of this proposal is $45 million over ten years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
ENERGY MANAGEMENT DEVICES
Current Law
Current law provides no special tax incentives for meters,
thermostats, and other energy management devices that allow utilities
or consumers to monitor, control energy use; such property is
depreciable over 20 years if used in a business [IRC § 168].
Senate Bill (S. 3478)
Sec. 306. The bill provides accelerated depreciation for
smart electric meters and smart electric grid systems, allowing
taxpayers to recover the cost of this property over seven years. The
estimated cost of this proposal is $1.716 billion over ten years.
House Bill (H.R. 6049)
Sec. 145. Same as the Senate bill, except that the
recovery period would be 10 years instead of 7 years. This proposal
is estimated to cost $921 million over 10 years.
_____________________________________________________________________
Residential Sector
_____________________________________________________________________
Provision
ENERGY-EFFICIENCY ITEMS IN EXISTING HOMES
Current Law
There is a 10% credit, up to a $500 maximum lifetime credit,
for energy efficiency improvements in the building envelope of
existing homes and for the purchase of high-efficiency heating,
cooling, and water heating equipment. Efficiency improvements and/or
equipment must be placed in service before December 31, 2007.
Selected energy efficiency equipment and items qualify for specific
tax credits ranging from $50-$300 [IRC § 25C].
Senate Bill (S. 3478)
Sec. 302. The bill retroactively extends the tax credits
for energy-efficient retrofits to existing homes for 2009, 2010 and
2011, and includes energy-efficient biomass fuel stoves as a new
class of energy-efficient property eligible for a consumer tax credit
of $300. The proposal also clarifies the efficiency standard for
water heaters. The estimated cost of this proposal is $2.509 billion
over ten years.
House Bill (H.R. 6049)
Sec. 142. The bill retroactively extends the tax credits
for energy-efficient existing homes for one year (through December
31, 2008) and includes energy-efficient biomass fuel stoves as a new
class of energy-efficient property eligible for a consumer tax credit
of $300. This proposal is estimated to cost $1.061 billion over 10
years.
Comments
This credit was enacted as part of EPACT05, but it expired at
the end of 2007.
_____________________________________________________________________
Provision
CONSTRUCTION OF ENERGY-EFFICIENT NEW HOMES
Current Law
A tax credit as high as $2,000 is available to eligible
contractors for the construction of qualified new energy-efficient
homes if the homes achieve an energy savings of 50% over the 2003
International Energy Conservation Code (IECC). The amount of the new
energy-efficient home credit depends on the energy savings achieved
by the home relative to that of a 2003 IECC compliant comparable
dwelling unit. The credit expires at the end of 2008. [IRC § 45L]
Senate Bill (S. 3478)
Sec. 304. The bill extends the new energy efficient home
tax credit for three years, through December 31, 2011. The estimated
cost of the proposal is $143 million over ten years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
MANUFACTURE OF ENERGY-EFFICIENT HOME APPLIANCES
Current Law
A credit is available for the eligible production (manufacture)
of certain energy-efficient dishwashers, clothes washers, and
refrigerators. The total credit amount is equal to the sum of the
credit amount separately calculated for each of the three types of
qualified energy-efficient appliance. The credit dishwasher is $3
multiplied by the percentage by which the efficiency of the 2007
standards (not yet known) exceeds that, of the 2005 standards (the
credit may not, exceed $100 per dishwasher). The credit for clothes
washers is $100 for clothes washers that meet the requirements of the
Energy Star program in effect for clothes washers in 2007. The credit
for refrigerators ranges from $75-$175 each [IRC § 45M].
Senate Bill (S. 3478)
Sec. 305. The bill modifies the existing energy-efficient
appliance credit and extend this credit for three years, through the
end of 2010. The estimated cost of this proposal is $322 million over
ten years.
House Bill (H.R. 6049)
This provision is the same as in S. 3478.
Comments
The maximum amount of the new credit allowable to a taxpayer is
capped at $75 million per tax year for all qualifying appliances
manufactured during that year. In each subsequent year the cap is
reduced by the amount (if any) of the credit used in any prior tax
year. Of that $75 million (or reduced) cap, no more than $20 million
of credit amount in a single tax year may result from the manufacture
of refrigerators to which the $75 applicable amount applies (i.e.,
refrigerators which are at least 15 percent but no more than 20
percent below 2001 energy conservation standards). In addition to the
$75 million cap on the credit allowed, the overall credit amount
claimed for a particular tax year may not exceed 2% of the
_____________________________________________________________________
Provision
QUALIFIED ENERGY CONSERVATION BONDS
Current Law
No provision.
Senate Bill (S. 3478)
Sec. 301. The bill creates a new category of tax credit
bonds to finance state and local government initiatives designed to
reduce greenhouse emissions. There is a national limitation of $3
billion, allocated to states, municipalities and tribal governments.
The estimated cost of this proposal is $1.025 billion over ten years.
House Bill (H.R. 6049)
Sec. 141. The provision in the House bill is the same as
in S. 3478. This proposal is estimated to cost $1.027 billion over
ten years.
_____________________________________________________________________
TRANSPORTATION SECTOR
_____________________________________________________________________
Advanced Technology Vehicles
_____________________________________________________________________
Provision
NEW PLUG-IN HYBRID VEHICLES
Current Law
The Energy Policy Act of 2005 (P.L. 109-58) created a new system
of tax credits for four types of advanced-technology vehicles (ATVs):
hybrid vehicles, fuel cell vehicles, advanced lean-burn vehicles, and
other alternative fuel vehicles. The credit for hybrids range from
$250 to $3,400 per vehicle and are available through December 31,
2009, but each manufacturer has a 60,000 lifetime vehicle limit. [IRC
§ 30B].
Senate Bill (S. 3478)
Sec. 204 and 205. The Senate bill establishes a new
credit for qualified plug-in electric drive vehicles. The base amount
of the credit is $2,500. If the qualified vehicle draws propulsion
from a battery with at least 6 Kw hours of capacity, the credit
amount is increased by $400, plus another $400 for each kW hour of
battery capacity in excess of 6 kW hours. Taxpayers may claim the full
amount of the allowable credit up to the end of the first calendar
quarter after the quarter in which the total number of qualified
plug-in electric drive vehicles sold in the U.S. is at least 250,000.
The credit is available against the alternative minimum tax (AMT).
The estimated cost of this proposal is $755 million over ten years.
House Bill (H.R. 6049)
Sec. 127. This provision of H.R. 6049 is similar to that
in the Senate bill, but the base amount of the credit is $3,000
(instead of $2,500),the battery propulsion capacity is at least 5 kW
hours (instead of 6 kW hours), and the credit amount is increased by
$200, plus another $200 for each kW hour of battery capacity in
excess of 5 kW hours up to 15 kilowatt hours. Also, the manufacturer
limit is 60,000 sales instead of 250,000. The credit is available
against the alternative minimum tax (AMT). This proposal is estimated
to cost $1.056 billion over 10 years.
Comments
Toyota reached its limit in 2006; Honda in 2007. Thus,
purchasers of hybrid vehicles from these manufacturers no longer
qualify for the tax credits. The two bills essentially add plug-in
hybrid vehicles as a new technology to the existing system of tax
credits, but with their own separate tax credit structure.
_____________________________________________________________________
Provision
OTHER ALTERNATIVE TECHNOLOGY VEHICLES
Current Law
The tax credit for advanced lean-burn vehicles is the same as
for hybrids; the credit for fuel cell vehicles may be as high as
$4,000 for cars, and $40,000 for heavy-duty trucks; the credit for
advanced alternative fuel vehicles is up to 80% of marginal costs,
limited to $32,000 [IRC § 30B].
Senate Bill (S. 3478)
Sec. 205. The bill extends the lean burn, heavy hybrid,
and alternative fuel vehicle tax credit through 2011,and reduces the
fuel cell credit to $7,500 at the end of 2009. The credit is
available against the alternative minimum tax (AMT). The estimated
cost of this proposal is $527 million over ten years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
ALTERNATIVE-FUEL REFUELING STATIONS
Current Law
A tax credit is provided equal to 30% of the cost of any
qualified alternative fuel vehicle refueling property installed to be
used in a trade or business or at the taxpayer's principal residence.
The credit would be limited to $30,000 for retail clean-fuel vehicle
refueling property, and $1,000 for residential clean-fuel vehicle
refueling property. The property must be placed in service before
January 1-2010 (January 1, 2015 for hydrogen property) [IRC §
30C].
Senate Bill (S. 3478)
Sec. 208. The bill extends the 30% alternative refueling
property credit (capped at $30,000) for three years, through 2012.
The provision provides a tax credit to businesses (e.g., gas
stations) that install alternative fuel pumps, such as fuel pumps
that dispense fuels such as E85, compressed natural gas and hydrogen.
The bill also adds electric vehicle recharging property to the
definition of alternative refueling property. The estimated cost of
this proposal is $256 million over ten years.
House Bill (H.R. 6049)
Sec. 131. The bill increases the 30% alternative
refueling property credit (capped at $30,000) to 50% (capped at
$50,000). The bill also extends this credit through the end of 2010.
This proposal is estimated to cost $156 million over ten years.
Comments
The credit provides a tax credit to businesses (e.g., gas
stations) that install alternative fuel pumps, such as fuel pumps
that dispense E85 fuel.
_____________________________________________________________________
Biofuels
_____________________________________________________________________
Provision
CELLULOSIC ETHANOL PRODUCTION FACILITIES
Current Law
Under current law, taxpayers' facilities that produce cellulosic
ethanol are allowed the 50% bonus depreciation if such facilities are
placed in service before January 1, 2013. The farm bill (P.L.
110-246) also included a new, temporary cellulosic bio-fuels
production tax credit for up to $1.01 per gallon, available through
December 31, 2012 [IRC § 168].
Senate Bill (S. 3478)
Sec. 201. The bill makes this benefit available for the
production of other cellulosic biofuels in addition to cellulosic
ethanol. This proposal is estimated to be revenue neutral over 10
years.
House Bill (H.R. 6049)
Same as the Senate bill.
_____________________________________________________________________
Provision
ALTERNATIVE FUELS EXCISE TAX CREDITS
Current Law
The tax code imposes excise taxes on motor fuels at varying
rates, but also provides tax credits (at varying amounts) against
these taxes for various types of alternative fuels; it also provides
small producer tax credits for some of the fuels such as ethanol and
bio-diesel. The credits generally expire at the end of 2008 [IRC
§ 6426, § 6427].
Senate Bill (S. 3478)
Sec. 207. The bill extends the alternative fuel excise
tax credit through December 31, 2011, for all fuels except for
hydrogen (which maintains its current-law expiration date of
September 30, 2014). Upon date of enactment, for liquid fuel derived
from coal through the Fischer-Tropsch process ("coal-to-liquids"), to
qualify as an alterative fuel, the fuel must be produced at a
facility that separates and sequesters at least 50% of its CO2
emissions. The sequestration requirement increases to 75% on December
31, 2011. This 75% standard may be implemented prior to December 31,
2011, subject to certification of feasibility. The proposal further
provides that biomass gas versions of liquefied petroleum gas and
liquefied or compressed natural gas, and aviation fuels qualify for
the credit. The proposal is estimated to cost $569 million over 10
years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
VOLUMETRIC EXCISE TAX CREDIT (VEETC) FOR FUEL ETHANOL
Current Law
Fuel ethanol qualifies for excise tax credits (or refunds), at
the rate of $0.51/gallon of ethanol; and a small producer tax credit
of $0.10/gallon. The excise tax credit was established in the
American Jobs Creation Act of 2004. Per the 2008 farm bill, starting
the year after which 7.5 billion gallons of ethanol are produced
and/or imported in the United States, the value of the credit is
reduced to $0.45/gallon. The credit is currently authorized through
December 31, 2010 [IRC § 40, 6426, § 6427]].
Senate Bill (S. 3478)
Sec. 210. This bill extends VEETC, including the
10¢/gallon small producer credit, through 12/31/2011. The
estimated cost of this proposal is $4.978 billion over ten years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
SMALL PRODUCER TAX CREDIT FOR FUEL ETHANOL
Current Law
In the case of ethanol, the tax code provides a small producer
tax credit of $0.10/gallon, up to 15 million gallons [IRC § 40A].
Senate Bill (S. 3478)
Sec. 211. S. 3478 creates a new small producer alcohol
credit of 10 cents per gallon for facilities that produce ethanol
through a process that does not use a fossil-based resource. The
credit is available through December 31, 2011. The estimated cost of
this proposal is $210 million over 10 years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
BIODIESEL BLENDER'S TAX CREDIT and SMALL BIODIESEL PRODUCER
CREDIT
Current Law
Refundable income tax credits and excise tax credits are
available for the blending and production of biodiesel. The basic
credit is $0.50/gallon ($1.00/gallon for virgin or "agri" biodiesel)
and is also provided on a volumetric basis. Production of biodiesel
by a small producer qualifies for a $0.10/gallon credit up to 15
million gallons. These credits expire at the end of 2008 [IRC §
40A, 6426, and 6427].
Senate Bill (S. 3478)
Sec. 202. The bill extends for three years (through
December 31, 2011) the $1.00 per gallon production tax credits for
biodiesel and the small biodiesel producer credit of 10¢ per
gallon. The bill eliminates the current-law disparity in credit for
biodiesel and agri-biodiesel. Biodiesel that is imported and sold for
export will not be eligible for the credit effective May 15, 2008.
The combined cost of the biodiesel proposal and the renewable diesel
provision (please see the next item) is $2.256 billion over ten
years.
House Bill (H.R. 6049)
Sec. 123. The bill extends for one year (through December
31, 2009) the $1.00/gallon production tax credits for biodiesel and
the small biodiesel producer credit of 10 ¢/ gallon. The bill
eliminates the current-law disparity in credit for biodiesel and
agri-biodiesel. The estimated cost of the combined biodiesel and the
renewable diesel provision (please see the next item) is $456 million
over 10 years
_____________________________________________________________________
Provision
RENEWABLE DIESEL PRODUCTION TAX CREDIT
Current Law
Refundable income tax credits and excise tax credits are
available for the blending and production of renewable biodiesel. The
basic credit is $1.00/gallon. Renewable diesel is diesel fuel derived
from biomass using a "thermal depolymerization process" (TDP). TDP is
a new technology that uses heat and pressure to change the molecular
structure of wastes, plastics, and food wastes such as poultry
carcasses and offal, and turn it into a boiler fuel. In order to
qualify for the $1.00/gallon tax credits, the fuel must meet EPA's
requirements for fuels and fuels additives under § 211 of the
Clean Air Act, and the requirements of the ASTM D975 and D396. These
credits expire at the end of 2008 [IRC § 40A, 6426, and 6427].
Senate Bill (S. 3478)
Sec. 202. The senate bill extends for three years
(through December 31, 2011) the $1.00 per gallon production tax
credit for diesel fuel created from biomass. It eliminates the
requirement that renewable diesel fuel must be produced using a
thermal depolymerization process. As a result, the credit will be
available for any diesel fuel created from biomass without regard to
the process used so long as the fuel is usable as home heating oil,
as a fuel in vehicles, or as aviation jet fuel. The bill caps the $1
per gallon production credit for renewable diesel for facilities that
co-process with petroleum to the first 60 million gallons per
facility. The estimated cost of the combined biodiesel proposal
(previous item) and this proposal is $2.256 billion over ten years.
House Bill (H.R. 6049)
Sec. 123. The bill extends for one year (through December
31, 2009) the $1.00 per gallon production tax credit for diesel fuel
created from biomass. It also eliminates the requirement that
renewable diesel fuel must be produced using a thermal
depolymerization process. As a result, the credit will be available
for any diesel fuel created from biomass without regard to the
process used so long as the fuel is usable as home heating oil, as a
fuel in vehicles, or as aviation jet fuel. The bill also clarifies
that the $1 per gallon production credit for renewable diesel is
limited to diesel fuel that is produced solely from biomass. Diesel
fuel that is created by co-processing biomass with other feedstocks
(e.g., petroleum) will be eligible for the 50¢/gallon tax credit
for alternative fuels. The estimated cost of the combined biodiesel
and this proposal is $456 million over 10 years.
Comments
Some oil companies are adding animal fat or vegetable (soybean)
oil as feedstocks along with crude oil in a conventional refinery to
produce such fuels. Unlike biodiesel which blends the soybean oil
ester after the diesel is made, the oil is added before as a
feedstock. The resulting "coproduced fuel" comes out of the refinery
at part of the regular diesel fuel mix, distributed through pipelines
(unlike biodiesel), and sold as regular diesel fuel.
_____________________________________________________________________
Provision
TAX SHELTERS FOR ALTERNATIVE FUELS
Current Law
Under current tax law, publicly traded partnerships are treated
as corporations for tax purposes, unless they have passive
income(dividend, rents, etc.) and income from certain mineral
exploration and production, timber, and other activities [IRC §
7704].
Senate Bill (S. 3478)
Sec. 209. The proposal permits publicly traded
partnerships to treat the income derived from the transportation, or
storage of certain alternative fuels as qualifying income for
purposes of the publicly traded partnership rules. The estimated cost
of this proposal is $78 million over 10 years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Miscellaneous Transportation and Energy Provisions
_____________________________________________________________________
Provision
TRUCK IDLING UNITS AND ADVANCED INSULATION
Current Law
A 12% tax is imposed on the sale price of the first retail sale
of (1) truck bodies and chassis suitable for use with a vehicle
having a gross vehicle weight of over 33,000 pounds, (2) truck
trailer and semitrailer bodies and chassis suitable for use with a
vehicle having a gross vehicle weight over 26,000 pounds, and (3)
tractors of the kind chiefly used for highway transportation in
combination with a trailer or semitrailer. The retail tax also
generally applies to the price and installation of parts or
accessories sold on or in connection with, or with the sale of, a
taxable vehicle [IRC § 4051].
Senate Bill (S. 3478)
Sec. 206. The bill provides an exemption from the heavy
vehicle excise tax for the cost of idling reduction units, such as
auxiliary power units (APUs), which are designed to eliminate the
need for truck engine idling (e.g., to provide heating, air
conditioning, or electricity) at vehicle rest stops or other
temporary parking locations. The bill also exempts the installation
of advanced insulation, which can reduce the need for energy
consumption by transportation vehicles carrying refrigerated cargo.
Both of these exemptions are intended to reduce carbon emissions in
the transportation sector. The estimated cost of this proposal is $95
million over ten years.
House Bill (H.R. 6049)
Sec. 128. The provision in the House bill is identical to
that in the Senate bill.
_____________________________________________________________________
Provision
TRANSPORTATION FRINGE BENEFITS
Current Law
Gross income includes any income from whatever source, including
income in kind, such as fringe benefits, unless specifically
excluded. Certain employer-provided transportation fringe benefits
are excluded up to certain amounts: up to $220/month for parking and
van pool benefits, and up to $115/month of transit passes [IRC §
132].
Senate Bill (S. 3478)
No provision.
House Bill (H.R. 6049)
Sec. 130. The bill allows employers to provide employees
that commute to work using a bicycle limited fringe benefits to
offset the costs of such commuting (e.g., bicycle storage). This
proposal is estimated to cost $10 million over 10 years.
_____________________________________________________________________
Provision
RECYCLING PROPERTY
Current Law
Investments in recycling property receive no special tax
incentives and are generally treated the same as other assets under
the Modified Accelerated Depreciation System, which allows for
shortened recovery periods, bonus depreciation, and expensing under
certain conditions [IRC § 168, 179].
Senate Bill (S. 3478)
Sec. 308. S. 3478 allows recycling property to qualify
for the 50% special depreciation allowance, basically equivalent to
expensing of 1/2 of the investment in such property. The estimated
cost of this proposal is $162 million over ten years.
House Bill (H.R. 6049)
No provision.
Comments
Under the Crude Oil Windfall Profits Tax of 1980 (P.L. 96-223,
recycling equipment qualified for a 10% investment tax credit, but
these generally expired at the end of 1982.
_____________________________________________________________________
TAX INCREASES (OFFSETS) AND OTHER PROVISIONS
_____________________________________________________________________
Provision
DOMESTIC ACTIVITIES MANUFACTURING DEDUCTION UNDER THE
CORPORATE INCOME TAX
Current Law
Beginning on January 1, 2005, qualified "manufacturing"
businesses in the United States can claim a deduction for a certain
percentage of their taxable incomes, subject to certain limits. The
deduction was initially 3%, is now 6%, and is scheduled to increase
to 9% in 2010. The definition of a domestic manufacturing activity is
very broad and generally includes all energy market activities except
for the transmission and distribution of electricity and natural gas.
In particular, it includes oil and gas extraction and production [IRC
§ 199].
Senate Bill (S. 3478)
Sec. 501. The bill repeals the IRC § 199
manufacturing deduction for major integrated and state-owned oil and
gas companies, while maintaining the 6% rate for other oil and gas
companies. The proposal is estimated to raise $13.904 billion over 10
years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
EXCISE TAXES ON OIL AND NATURAL GAS
Current Law
At the federal level there is no excise tax on domestic (or
imported) oil and natural gas, including oil and gas produced from
those Outer Continental Shelf regions where production is not banned
by law. Oil and gas companies are assessed excise taxes on oil
purchased for refining (a 5¢/barrel tax that funds the Oil Spill
Liability Trust Fund), and motor fuels excise taxes on refined
petroleum products that fund various transportation and environmental
trust funds. In addition, oil companies pay severance taxes to some
states where they extract minerals, and pay royalties (which are
factor payments, not taxes) to landowners including the federal
government [IRC § 4041, § 4081, § 4611].
Senate Bill (S. 3478)
Sec. 502. The proposal establishes a 13% excise tax on
the removal price of any taxable crude oil or natural gas produced
from federal submerged lands on the OCS in the Gulf of Mexico
pursuant to a federal OCS lease. The removal price is defined as the
amount for which the barrel of taxable crude oil or barrel-of-oil
equivalent of natural gas is sold by the taxpayer. In the case of
sales between related parties, the removal price is the constructive
sales price of the oil or natural gas. The proposal allows as a
credit against the excise tax an amount equal to royalties paid under
federal law with respect to taxable crude oil or natural gas, with
the credit not to exceed the tax paid. The excise tax would apply to
crude oil or natural gas removed after the date of enactment. The
proposal is estimated to raise $11.663 billion over 10 years.
House Bill (H.R. 6049)
No provision.
Comments
A type of windfall profit tax on domestic crude oil production
was in effect from April 1980 to August 1988. This tax, which was
actually an excise tax, not a profits or income tax, was part of a
compromise between the Carter Administration and the Congress over
the decontrol of crude oil prices. It is discussed and analyzed in
detail in CRS Report RL33305, The Crude Oil Windfall Profit Tax of
the 1980s: Implications for Current Energy Policy.
_____________________________________________________________________
Provision
FOREIGN TAX CREDITS ON OIL COMPANIES
Current Law
United States businesses operating abroad generally pay taxes to
foreign governments as well as United States taxes, which are
generally assessed on worldwide income. A tax credit is allowed,
subject to various limitations, against U.S. taxes for the amounts of
these foreign taxes. Domestic oil companies operating abroad are also
subject to additional limitation on their foreign oil and gas
extraction income ("FOGEI") and foreign oil related income ("FORI")
[IRC §§ 901-907].
Senate Bill (S. 3478)
Sec. 503. The proposal eliminates the distinction between
FOGEI and FORI. FOGEI relates to upstream production to the point the
oil leaves the wellhead. FORI is defined as all downstream processes
once the oil leaves the wellhead (i.e. transportation, refining).
Currently, FOGEI and FORI have separate foreign tax credit
limitations. This proposal combines FOGEI and FORI into one foreign
oil basket and applies the existing FOGEI limitation. The proposal is
estimated to raise $2.23 billion over ten years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
Provision
OIL SPILL LIABILITY TRUST FUND EXCISE TAX
Current Law
A 5¢-per-barrel excise tax is imposed on domestic and
imported crude oil and petroleum products. The revenues from this tax
go into the Oil Spill Liability Trust Fund and are used to clean up
offshore oil spills [IRC § 4611].
Senate Bill (S. 3478)
Sec. 505. The proposal extends the oil spill tax through
December 31, 2017, increases the per barrel tax from 5 cents to 12
cents, and repeals the requirement that the tax be suspended when the
unobligated balance exceeds $2.7 billion. The proposal is estimated
to raise $3.4 billion over ten years.
House Bill (H.R. 6049)
No provision.
Comments
Although the tax had expired at the end of 1994, Congress
reinstated the 5¢ per barrel tax effective on April 1, 2006
(EPACT05, P.L. 109-58). The tax will remain in effect from this date
until the Oil Spill Liability Trust Fund reaches an unobligated
balance of $2.7 billion. Thereafter, the oil spill tax will be
reinstated 30 days after the last day of any calendar quarter for
which the IRS estimates that, as of the close of that quarter, the
unobligated balance of the Oil Spill Liability Trust Fund is less
than $2 billion. The oil spill tax will cease to apply after December
31, 2014, regardless of the Oil Spill Trust Fund balance.
_____________________________________________________________________
Provision
INCOME RECEIVED AS DAMAGES FROM THE EXXON-VALDEZ
LITIGATION
Senate Bill (S. 3478)
Sec. 403. The bill would allow commercial fishermen and
other individuals whose livelihoods were negatively impacted by the
1989 Exxon Valdez oil spill to average any settlement or
judgment-related income that they receive in connection with pending
litigation in the federal courts over three years for federal tax
purposes. The bill would also allow these individuals to use these
funds to make contributions to retirement accounts. This estimated
cost of this proposal is $49 million over 10 years.
House Bill (H.R. 6049)
No provision.
_____________________________________________________________________
FOOTNOTES
1 Enacted in 2004 as an export tax incentive, this provision allows a deduction, as a business expense, for a specified percentage of the qualified production activity's income (or profit) subject to a limit of 50% of the wages paid that are allocable to the domestic production during the taxable year. The deduction was 3% of income for 2006, is currently 6%, and is scheduled to increase to 9% when fully phased in by 2010.
2 See. U.S. Library of Congress. Congressional Research Service. Extension of Expiring Energy Tax Provisions. CRS Report RL32265 by Salvatore Lazzari.
3 Several times recently, the Senate has been prevented from taking action on energy tax legislation due to the failure to invoke cloture on the motion to proceed to the House energy tax extenders bills. The first was June 10, when the motion failed by a vote of 50-44; the second was on June 17, when the motion failed by a vote of 52-44; the third was July 29, when the cloture motion failed by a vote of 53 to 43. In addition, on July 30 the Senate rejected by a vote of 51 to 43 a motion to invoke cloture on a motion to proceed to debate S. 3335, Senator Baucus' energy tax bill.
4 The OCS areas -- the Atlantic OCS, Gulf of Mexico (GOM) OCS, Pacific OCS, and Alaska OCS -- are the offshore lands under the jurisdiction of the U.S. government. Federal law allows or confirms state boundaries and jurisdiction over the continental shelf areas up to 3 nautical miles from the coastline, except that (in the GOM) Texas and Florida offshore boundaries extend up to 9 nautical miles from the coastline. Exclusive federal jurisdiction over resources of the shelf applies from state boundaries out to 200 miles from the U.S. coastline For a more detailed definition of the OCS and various governmental jurisdictions see CRS Report RL33404, Offshore Oil and Gas Development: Legal Framework, by Adam Vann.
END OF FOOTNOTES
DOCUMENT ATTRIBUTES
- AuthorsLazzari, Salvatore
- Institutional AuthorsCongressional Research Service
- Code Sections
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2008-19873
- Tax Analysts Electronic Citation2008 TNT 182-26
