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Smith Asks for Clear Guidelines on Nonconventional Fuel Credit

NOV. 27, 2000

Smith Asks for Clear Guidelines on Nonconventional Fuel Credit

DATED NOV. 27, 2000
DOCUMENT ATTRIBUTES
  • Authors
    Smith, Sam
  • Institutional Authors
    Pennsylvania House of Representatives
  • Cross-Reference
    For a summary of Rev. Proc. 2000-47, 2000-46 IRB 482, see Tax Notes,

    Oct. 30, 2000, p. 617; for the full text, see Doc 2000-27635 (4

    original pages), 2000 TNT 209-11 Database 'Tax Notes Today 2000', View '(Number', or H&D, Oct. 27, 2000, p. 1093.
  • Code Sections
  • Subject Area/Tax Topics
  • Index Terms
    fuel, nonconventional, credit
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2000-32230 (2 original pages)
  • Tax Analysts Electronic Citation
    2000 TNT 246-41

 

=============== SUMMARY ===============

 

Rep. Sam Smith of the Pennsylvania House of Representatives, Harrisburg, Pa., has urged the IRS to develop clear eligibility guidelines for determining whether a project qualifies for the section 29 credit. (For a summary of Rev. Proc. 2000-47, 2000-46 IRB 482, see Tax Notes, Oct. 30, 2000, p. 617; for the full text, see Doc 2000-27635 (4 original pages), 2000 TNT 209-11 Database 'Tax Notes Today 2000', View '(Number', or H&D, Oct. 27, 2000, p. 1093.) According to Rep. Smith, the IRS should keep in mind the type of projects that Congress intended the credit to qualify for, such as new fuel technologies in which the investment would be uneconomical without the tax credit. He also warns that barriers shouldn't be constructed that unreasonably restrain or restrict the more conventional fuel suppliers from also competing in the marketplace.

 

=============== FULL TEXT ===============

 

November 27, 2000

 

 

Internal Revenue Service

 

Attn: CC: MSP: R (Rev. Proc. 2000-47)

 

Room 5228 (PSI:BrG)

 

P.O. Box 7604

 

Ben Franklin Station

 

Washington, D.C. 20044

 

 

Re: U.S. Treasury Department's Revenue Procedure 2000-47,

 

October 26, 2000

 

 

Dear Sirs:

[1] I am writing in my capacity as a member of the Pennsylvania House of Representatives, representing the 66th Legislative District that encompasses parts of Clearfield and Indiana Counties and all of Jefferson County. My district also includes a substantial portion of the Pennsylvania coal fields.

[2] This letter responds to the U.S. Treasury Department's request for comments on implementation of Section 29 of the Internal Revenue Code which provides a federal income tax credit for fuels produced from unconventional sources, including synthetic fuels produced from coal. Since I represent a sizeable number of bituminous coal operators, I have an obvious interest in the outcome of this request.

[3] I certainly support the intent of Congress when it established the credits as part of the 1980 Crude Oil Windfall Profits Tax Act. The need for the credits was based on the country's concern at that time over its growing dependence on foreign energy sources and the rising costs of those imports. Against this background, the credits were seen as an incentive to stimulate development of alternative energy sources, thereby reducing our reliance on foreign sources.

[4] My concern, though, is not with the laudable objectives of Section 29 but rather with its application. I have received numerous complaints from a number of coal operators alleging that some companies are inappropriately receiving the credits for projects not intended by Congress. For example, some have charged that projects using "raw" coal have qualified simply by spraying the substance with petroleum mixtures or emulsions.

[5] If these charges are true, this is an obvious abuse of the intent of the law and certainly does not contribute to our goal of energy independence. It also provides an unfair "subsidy" to those who claim the credit while placing nonsubsidized operators at a distinct competitive disadvantage.

[6] In order to eliminate these abusive practices, the Internal Revenue Service should develop clear eligibility guidelines for determining whether a project meets the objectives of the law and qualifies as a legitimate project for purposes of receiving the tax credit. In developing the criteria, the Service should keep in mind the type of projects intended by Congress to qualify for the credits -- new fuel technologies in which the investment would be uneconomic in the absence of the tax credit and technologies that, over time, would become self sustaining and economically viable.

[7] Please keep in mind that the Commonwealth of Pennsylvania recently deregulated its electric generating market. As a result, electric utilities have placed a premium on buying fuel that will generate electricity at the lowest cost per kilowatt hour. Since over 80 percent of Pennsylvania's annual coal production is used by the electric. Utility sector, the marketing of coal has become extremely competitive. It is, therefore, essential that we have a level playing field on which all operators can freely compete.

[8] These comments are not intended to marginalize the need for the country to lessen its reliance on foreign imports and become more energy self sufficient. With oil prices skyrocketing and given our current dependency on foreign sources, our need to free ourselves from the vagaries of the international energy market is as legitimate today as it was two decades ago. However, in our efforts to encourage investments in alternative energy sources we must ensure that barriers are not constructed that unreasonably restrain or restrict our more conventional fuel suppliers from also competing in the marketplace.

[9] Thank you for your consideration of these comments.

Sincerely,

 

 

Sam Smith

 

STATE REPRESENTATIVE

 

66th Legislative District

 

Harrisburg, Pennsylvania
DOCUMENT ATTRIBUTES
  • Authors
    Smith, Sam
  • Institutional Authors
    Pennsylvania House of Representatives
  • Cross-Reference
    For a summary of Rev. Proc. 2000-47, 2000-46 IRB 482, see Tax Notes,

    Oct. 30, 2000, p. 617; for the full text, see Doc 2000-27635 (4

    original pages), 2000 TNT 209-11 Database 'Tax Notes Today 2000', View '(Number', or H&D, Oct. 27, 2000, p. 1093.
  • Code Sections
  • Subject Area/Tax Topics
  • Index Terms
    fuel, nonconventional, credit
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2000-32230 (2 original pages)
  • Tax Analysts Electronic Citation
    2000 TNT 246-41
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