Source: http://congressionalresearch.com/RL34674/document.php?study=Side-by-Side+Comparison+of+Energy+Tax+Provisions+of+H.R.+6899+and+S.+3478
Timestamp: 2018-01-21 09:00:18
Document Index: 783414383

Matched Legal Cases: ['§199', '§45', '§199', '§199', '§199', '§199', '§199', '§199', '§199', '§613', '§613', '§ 613', '§168', '§48', '§48', '§4121', '§4121', '§451', '§45', '§45', '§38', '§25', '§54', '§45', '§179', '§142', '§168', '§25', '§45', '§45', '§30', '§30', '§30', '§168', '§6426', '§6427', '§40', '§40', '§211', '§40', '§7704', '§4051', '§132', '§168', '§199', '§199', '§199', '§4041', '§4081', '§4611', '§901', '§4611']

Side-by-Side Comparison of Energy Tax
Provisions of H.R. 6899 and S. 3478
Specialist in Energy and Environmental Economics
Side-by-Side Comparison of the Energy Tax Provisions
in H.R. 6899 and S. 3478
The Comprehensive American Energy Security and Consumer Protection Act,
H.R. 6899, was introduced on September 15, 2008, and approved by the House on
September 16, 2008. This plan allows oil and gas drilling in the Outer Continental
Shelf (OCS), and it incorporates most of the energy tax provisions from an energy
tax bill, H.R. 5351, and some of H.R. 6049, both of which were previously approved
by the House of Representatives but failed to be taken up by the Senate.
In the Senate, legislative efforts on energy tax incentives and energy tax
extenders 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 Senate Democratic leadership. In the Senate, controversy over tax
increases on the oil and gas industry, particularly over proposed repeal of the tax
code’s §199 deduction for the major integrated oil companies, continues; it remains
unclear whether an energy tax bill with this provision will pass a cloture vote to limit
debate, and thus be taken up.
This report is a side-by-side comparison of energy tax bills H.R. 6899 and S.
Energy Tax Provisions in H.R. 6899...................................3
S. 3478..........................................................5
Table 1. Side-by-Side Comparison of S. 3478 and the Energy Tax Provisions
of H.R. 6899 .................................................7
Side-by-Side Comparison of the Energy Tax
Provisions in H.R. 6899 and 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
In early December 2007, it appeared that congressional conferees had reached
agreement on another comprehensive energy bill, the Energy Independence and
Security Act (H.R. 6), and particularly on the 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, that
is, 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 the comprehensive energy bill (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 thus avoid the impending expiration of several popular energy tax incentives,
such as the “wind” energy tax credit under Internal Revenue Code (IRC) §45, which,
since its enactment in 1992, has lapsed three times only to be reinstated.1 Several
energy tax 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 (IRC)
§199 deduction, and by streamlining the foreign tax credit for oil companies.2 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. Frustrated
with the lack of action on energy tax legislation over the last two years, House
Democrats introduced and approved several such bills, such as H.R. 5351, which was
approved by the House on February 27, 2008. House Speaker Pelosi and other
Democrats sent President Bush a letter February 28, 2008, urging him to reconsider
his opposition to the Democratic renewable energy plan, arguing that their energy tax
plan would “correct an imbalance in the tax code.”3
At this writing, a renewed legislative effort is being made to enact energy tax
legislation, although the two chambers were moving in different directions on how
1 See. U.S. Library of Congress. Congressional Research Service. Extension of Expiring
Energy Tax Provisions. CRS Report RL32265 by Salvatore Lazzari.
2 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.
3 Several times the House has approved energy tax legislation, and several times in the
Senate such legislation failed a cloture vote and thus could not be brought to the floor for
debate. The latest was H.R. 6049, the House tax extenders bill, which was approved by the
House on May 21, 2008, but failed three cloture votes in the Senate. 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
to bring the legislation to the floor. In the House, energy tax provisions are part of
H.R. 6899, House Democratic leadership’s latest draft of broad-based energy policy
legislation, the Comprehensive American Energy Security and Consumer Protection
Act. Passed on September 16, 2008, the bill would expand oil and gas drilling
offshore by allowing oil and gas exploration and production in areas of the outer
continental shelf that are currently off limits, except for waters in the Gulf of Mexico
off the Florida coast. Under the bill, states could allow such drilling between 50 and
100 miles offshore, while the federal government could permit drilling from 100 to
200 miles offshore.4 Revenue from the new offshore leases would be used to assist
the development of alternative energy, and would not be shared by the adjacent
coastal states. The bill would also repeal the current ban on leasing federal lands for
oil shale production if states enact laws providing for such leases and production.
H.R. 6899 also would enact a renewable portfolio standard, a requirement that power
companies generate 15% of their energy from renewable sources by 2020.
The energy tax provisions in H.R. 6899 (Title XIII, the Energy Tax Incentives
Act of 2008) are largely the same as those in H.R. 5351, an approximately $18 billion
energy tax package that was approved by the House on February 27, 2008. They also
include some of the measures in H.R. 6049, another energy tax bill that was also
approved by the House.5 H.R. 5351 is, in turn, a smaller version of the energy tax title
that was dropped from H.R. 3221 in December 2007, but larger than the $16 billion
bill approved by the Ways and Means Committee in 2007 (H.R. 2776). However,
because H.R. 6899 incorporates some of the incentives of H.R. 6049, its total cost
is higher than the cost of H.R. 5351: about $19 billion over 10 years, instead of $18
4 The House Democratic leadership’s energy proposal is centered around opening the Outer
Continental Shelf to oil and gas development. 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 U.S. Library of Congress. Congressional
Research Service. Offshore Oil and Gas Development: Legal Framework. CRS Report
RL33404, by Adam Vann. May 3, 2006. For a comparison of different proposals see U. S.
Library of Congress. Congressional Research Service. Outer Continental Shelf Leasing:
Side-by-Side Comparison of Five Legislative Proposals. CRS Report RL34667 by Marc
Humphries. September 15, 2008
5 As noted, the House has approved several energy tax bills over the last two years, only to
have them stall in the Senate. H.R. 6049, for instance, was approved by the House on May
21, 2008 only to fail several cloture votes in the Senate (see footnote #3).
H.R. 6899 includes several tax incentives for renewable energy that would
reduce revenue by an estimated $19 billion over 10 years.6 At a cost of $6.9 billion
over 10 years, it extends a renewable energy production tax credit, covering wind
facilities for one additional year, through 2009, and certain other renewable energy
production for three years, through 2011, while capping credits for facilities that
come into service after 2009. The bill extends for eight years, through 2016, a credit
for investing in solar energy and fuel cells, at a cost of $1.8 billion. It also extends
the energy-efficient commercial building deduction for five years, the credit for
efficiency improvements to existing homes for one year, and a credit for
energy-efficient appliances for three years.
The measure provides for the allocation of $2.625 billion in energy conservation
bonds, $1.75 billion in clean renewable energy bonds, and $1.75 billion in energy
security bonds to finance the installation of natural gas pumps at gas stations; all
would be tax-credit bonds, which provide a tax credit in lieu of interest, and projects
financed through the bonds would have to comply with Davis-Bacon requirements.
It also creates a new tax credit for plug-in electric vehicles, an accelerated recovery
period for smart electric meters and grid systems, and provides $1.1 billion in tax
credits for carbon capture and sequestration projects. The tax title also includes one
non-energy tax subsidy: a $1.1 billion provision to restructure the New York Liberty
Zone tax incentives to allow for new transportation projects.
H.R. 6899 is fully offset, raising $19 billion in taxes, including many of the
same energy tax increases on oil companies also previously approved by the House.
The energy tax provisions in H.R. 6899 are entirely offset, mainly by denying the
IRC §199 manufacturing deduction to certain major integrated oil companies
(including oil companies controlled by foreign governments — including CITGO )
and freezing the deduction for all other oil and gas producers at the current rate of
6%.7 Earlier §199 repeal proposals had been criticized for seeking to end the
deduction only for U.S.-based major companies, while exempting
Venezuelan-controlled CITGO because, not being a crude oil producer, it does not
meet the definition of a “major integrated oil and gas producer.” The entire provision
would raise $13.9 billion over 10 years. Additional revenue — about $4.0 billion
over 10 years — would come from a provision to streamline the tax treatment of
6 U.S. Congress. Joint Committee on Taxation. Estimated Revenue Effects of Title VIII of
H.R. 6899, The “Energy Tax Incentives Act of 2008,” as Passed by the House of
Representatives on September 16, 2008. JCX-68-08. September 17, 2008.
7 First enacted in 2004, this provision allows a deduction, as a business expense, for a
specified percentage of the qualified production activity’s income 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. For the domestic oil and gas industry, the deduction applies
to oil and gas or any primary product thereof, provided that such product was
“manufactured, produced, or extracted in whole or in significant part in the United States.”
Note that extraction is considered to be manufacturing for purposes of this deduction, which
means that domestic firms in the business of extracting oil and gas qualify for the deduction.
This deduction was enacted under the American Jobs Creation Act of 2004 (P.L. 108-357,
also known as the “JOBS” bill).
foreign oil-related income so it is treated the same as foreign oil and gas extraction
In addition to the H.R. 6899, the Republican leadership in the House has
introduced its own 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
H.R. 6899.
extenders 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. Senate Majority Leader Harry Reid
said on September 12 that S. 3478 is “must-pass” legislation. Reid told reporters the
energy tax package, which includes extensions of tax incentives for renewable
energy, should be prioritized even ahead of the broader energy policy bills being
considered, and the rest of the non-energy tax extenders package. Reid said he hopes
to bring the bill to the floor during the week of September 15, but noted that the
schedule depends on whether Senate Republicans will agree to move to the8
While most of the tax incentives in the bill are extensions of existing policy and
are not controversial, the legislation would 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
The tax offsets, or tax increases in S. 3478 are not without controversy,
however, particularly the repeal of the IRC §199 manufacturing deduction for the five
major oil and gas producers, as discussed previously. Several times the House has
approved energy tax legislation, and several times in the Senate such legislation
failed a cloture vote and thus could not be brought to the floor for debate.
As noted above, Republicans have in the past objected to the idea of raising
taxes to offset extension of expiring energy tax provisions, which they consider to be
8 Bureau of National Affairs. Daily Tax Report. “Reid Says ‘Must Pass’ Energy Legislation
Should be Handled Before Tax Extenders.” September 15, 2008. P. G-5.
an extension of current tax policy rather than new tax policy. In addition, some
Senate Republicans have objected to raising taxes on the oil and gas industry,
particularly by repealing the IRC §199 deduction. The Bush Administration
threatened to also veto any energy tax bill that would increase taxes on the oil and gas
industry. At this writing, it appears that inclusion of the §199 deduction repeal as an
offset might preclude the energy tax bill from coming to the Senate floor — some
believe that it would fail another cloture vote — so this provision might not survive
the process.9
Finally, the debate in the Senate over energy tax incentives and energy tax
extenders is seen as potentially involving three other separate proposals: (1) The
Gang of 20 proposal or “New Energy Reform Act of 2008”(this has not yet been
introduced); (2) A Bingaman/Baucus bill (also not formally introduced); and (3) the
Republican “Gas Price Reduction Act” (introduced by Senator McConnell as Senate
Amendment 5108).
A side-by-side comparison of H.R. 6899 and S. 3478 is in Table 1.10 Revenue
estimates were generated by the Joint Committee on Taxation.
9 Bureau of National Affairs. Daily Tax Report. “Plan to Bring Tax Extenders to Floor
Scraps Section 199 Deduction Repeal for Oil Firms.” September 17, 2008. P. G-13.
10 A side-by-side comparison of H.R. 6049 and S. 3478 is in CRS Report RL34669, by
Salvatore Lazzari, September 16, 2008.
ProvisionCurrent LawSenate Bill S. 3478House Bill H.R. 6899Comments
Independent producers can claim a higherSec. 213. The proposal extends forNo provision.
rginal Oil and Gasdepletion rate(up to 25%, rather than thethree years (through December 31,
normal 15%) for up to 15 barrels per day of oil2010) the suspension on the taxable
(or the equivalent amount of gas) fromincome limit for purposes of
marginal wells ( “stripper” oil/gas and heavydepreciating a marginal oil or gas
oil). The percentage depletion allowance iswell. The estimated cost of this
limited to 100% of taxable income from eachproposal is $364 million over 10
property, but this limitation is suspendedyears.
through December 31, 2007 for marginal oil
and gas. The percentage depletion allowance is
also limited to 65% of taxable income from all
iki/CRS-RL34674properties [IRC§613A(c)(6);[IRC§613A(c)(6)(H); [IRC§ 613A(d)].
s.or RefineriesAsset used in petroleum refining are generallySec. 212. This bill extends theNo provision.This is one of the several
leakdepreciated over 10 years. But, a temporaryrefinery expensing contracttax incentives for the oil
provision allows the expensing of refineryrequirement and theindustry created by The
://wikiproperty which either increases total capacityplaced-in-service requirement forEnergy Policy Act of
httpby 5% or which processes nonconventionalfeedstocks at a rate equal or greater to 25% oftwo years. The proposal alsoqualifies refineries directly2005(EPACT05, P.L.109-58).
the total throughput of the refineryprocessing shale or tar sands. The
[IRC§168(e)(3)].estimated cost of this proposal is
$894 million over 10 years.
nvestment inA 15% investment credit is provided forSec. 111 & 112. The bill providesSec. 811 & 812. Similar to S.This tax credit was also
n Coal Facilitiesadvanced coal projects and a 20% credit is$2.5 billion in new total tax credits3478, except that the totalone of the several energy
provided for qualified coal gasificationfor the creation of advanced coalcredits are only $1.1 billion:tax incentives created by
projects, respectively. The credit is for coalelectricity projects and certain coal$950 million for advanced coalEPACT05.
gasification projects which must use angasification projects thatprojects, and $150 million for
integrated gasification combined cycle (IGCC)demonstrate the greatest potentialcoal gasification projects. This
technology. The total credits available forfor carbon capture and sequestrationproposal is estimated to cost
qualifying advanced coal projects is limited to(CCS) technology. Of these $2.5$1.044 billion over 10 years.
$1.3 billion, with $800 million allocated tobillion of total incentives, $2 billion
IGCC projects and the remaining $500 millionwould be earmarked for advanced
to projects using other advanced coal-basedcoal electricity projects and $500
generation technologies [IRC §48A and IRCmillion for coal gasification
§48B].projects. These tax credits will be
awarded by Treasury through an
iki/CRS-RL34674application process, with applicants
g/wthat demonstrate the greatest CO2
s.orsequestration percentage receiving
leakthe highest priority. Projects must
capture and sequester at least 65%
://wikiof the facility’s CO2 emissions ortheir coal gasification project must
httpcapture and sequester at least 75%
of the facility’s CO2 emissions. The
estimated cost of this proposal is
$2.373 billion over 10 years.
ax CreditNo provision.Sec. 115. The proposal provides aNo provision.
$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 10 years.
rbon Audit of Tax CodeNo provision.Sec. 116. The bill directs theSec. 815. Identical to S. 3478.
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.
Authorizes $1.5 million for the
study. This proposal has no revenue
iki/CRS-RL34674 effect.
g/wer Coal Tax Provisions
leakck-Lung Excise TaxAn excise tax is imposed on coal minedSec. 113. The bill would enact theSec. 813. The House bill inSee CRS Report
domestically and sold by the producer, at thePresident’s FY2009 proposal toidentical to the Senate bill. TheRS21935.
://wikirate of $1.10 per ton for coal frombring the Black Lung Disabilityproposal is estimated to raise
httpunderground mines and $0.55 per ton for coalfrom surface mines (the aggregate tax per ton isTrust Fund out of debt. ThePresident’s Budget proposes that the$1.287 billion over 10 years.
capped at 4.4% of the amount sold by thecurrent excise tax rate should
producer). Reduced tax rates apply after thecontinue to apply beyond 2013 until
earlier of December 31, 2013 or the date onall amounts borrowed from the
which the Black Lung Disability Trust Fundgeneral fund of the Treasury have
has repaid, with interest, all amounts borrowedbeen repaid with interest. After
from the general fund of the Treasury. Taxrepayment, the reduced excise tax
receipts are deposited in the Black Lungrates of $0.50 per ton for coal from
Disability Trust Fund, and used to payunderground mines and $0.25 per
compensation, medical and survivor benefits toton for coal from surface mines
eligible miners and their survivors and to coverwould apply (aggregate tax per ton
costs of program administration. The Trustcapped at 2% of the amount sold by
Fund is permitted to borrow from the Generalthe producer). Rates are extended
Fund any amounts necessary to makethrough 2018. The proposal is
authorized expenditures if excise tax receiptsestimated to raise $1.287 billion
do not provide sufficient funding [IRC§4121].over 10 years.
ck-Lung Excise Tax onSince 2000 (which is when the IRS issuedSec. 114. The bill creates a newSec. 814. This provision isSee CRS Report
ported CoalNotice 2000-28), the black lung excise tax hasprocedure under which certain coalidentical to that in the SenateRS22881.
not been imposed on exported coal (i.e.,producers and exporters may claimbill. The estimated cost of this
domestically produced coal sold and destineda refund of these excise taxes thatproposal is $199 million over
for export). The courts have determined that thewere imposed on coal exported10 years.
Export Clause of the U.S. Constitution preventsfrom the United States. Under this
the imposition of the coal excise tax onprocedure, coal producers or
exported coal and, therefore, any taxesexporters that exported coal during
collected on such exported coal in the past arethe period beginning on or after
subject to a claim for refund. [IRC§4121.October 1, 1990 and ending on or
bill, may obtain a refund from the
Treasury of excise taxes paid on
such exported coal and any interest
accrued from the date of
iki/CRS-RL34674overpayment. The estimated cost ofthis proposal is $199 million over
g/w10 years.
leakElectricity Restructuring Provisions
r Disposition ofUnder present tax law, the sale of electricitySec. 401. The bill extends theSec. 805. Identical to the SenateThe eight-year
://wikinsmission Assetstransmission or distribution facilities ispresent-law eight-year deferral ofbill. This proposal is revenuerecognition rule was
httpgenerally considered to be an involuntarygain on sales of transmissionneutral over 10 years.introduced by EPACT05.
conversion, and gain from the sale orproperty by vertically integrated
disposition of such assets is recognized overelectric utilities to FERC-approved
eight years, rather than taxed all at once in theindependent transmission
year of the sale [IRC §§451, 1033, 1245, 1250].companies. The rule applies to sales
before January 1, 2010. This
proposal is revenue neutral over 10
RenewableElectricity producers may claim a tax credit ofSec. 101 &102. The Senate billSec. 801 &802. The House billCurrent tax credit is
els1.5¢/kWh (in 1992 dollars; generally 2.0¢ inextends the placed-in-service datealso has a three-year extensiongenerally available for
current dollars) for electricity produced from by three years, through Decemberof the placed-in-service date10 years after placed-in-
wind energy, “closed-loop,” and open-loop31, 2011. The bill expands the typesthrough December 31, 2011,service, but new
biomass, and other renewable resources as wellof facilities qualifying for the creditbut for wind, the extension isequipment has to be
as for refined coal. Placed-in-service date isto new biomass facilities and thosefor only one year through 12-placed-in-service by 12-
December 31, 2008 [IRC§45]. that generate electricity from marine31-2009. It also adds marine31-2008. So this tax
renewables (e.g., waves and tides).renewables (e.g., waves andcredit would not be
The bill updates the definition of antides) and hydrokinetic energyavailable on new
open-loop biomass facility, theas a qualified resource. The billinvestments after 12-31-
definition of a trash combustionwould repeal the current phase-2008, unless it is
facility, and the definition of aout mechanism, replacing itextended.
non-hydroelectric dam. The bill alsowith a cap on the present value
extends the refined coal credit,of the credits, which cannot
iki/CRS-RL34674while removing the market valueexceed 35% of the facility’s
g/wtest and increasing coal emissionscost. The bill clarifies the
s.orstandards. The estimated cost of thisavailability of the production
leakproposal is $15.414 billion over 10tax credit with respect to certain
years.sales of electricity to regulated
://wikipublic utilities and updates thedefinition of an open-loop
httpbiomass facility, trash
combustion facility, and
nonhydroelectric dam. This
proposal is estimated to cost
$6.893 billion over 10 years.
siness Solar,A permanent 10% tax credit is provided forSec. 103 & 107. S. 3478 extendsSec.803. This provision isUnder current law,
othermal, Fuels Cells,investments in solar and geothermal equipmentthe 30% investment tax credit forsimilar to the Senate’s. Thisenergy-related income
ther Renewableused to generate electricity (includingsolar energy property and qualifiedproposal is estimated to costtax credits, and many of
photovoltaic systems), or solar equipment usedfuel cell property, as well as the$1.765 billion over 10 years.the non-energy tax
to heat or cool a structure, and for process heat.10% investment tax credit for microcredits, are aggregated
The 30% credit for solar, fuel cells and the 10%turbines, for eight years (throughand claimed as one
credit for micro-turbines is available through12-31-2016). The bill adds smallgeneral business credit,
12-31-2009. Geothermal energy reservoirs alsocommercial wind, geothermal heatwhich is also subject to
qualify for a 15% percentage depletionpumps, and combined heat andseveral limitations,
allowance. Depreciation recovery period forpower systems (at a 10% credit rate)including the alternative
renewable technologies is five years. Fuel cellsas a category of qualifiedminimum tax limitation.
do not qualify for tax subsidies [IRC§45,46,48,investment. The bill also increases[IRC§38]
613(e)].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 10
ial Solar andA 30% tax credit is provided for residentialSec. 104. The bill extends the creditSec.804. This provision is theThe payment of the
ables Used inapplications of solar generated electricityfor residential solar property forsame as in the Senate bill. ThisAMT may substantially
(photovoltaics) as well for solar water heating.eight years (through 2016), andproposal is estimated to costreduce, or even
This credit is available through 12-31-2008doubles it from $2,000 to $4,000.approximately $907 millioneliminate, this (as well as
(IRC§25D). The bill adds residential small windover 10 years. other) energy tax credits.
investment, capped at $4,000, and
iki/CRS-RL34674geothermal heat pumps, capped at
g/w$2,000, as qualifying property. The
s.orbill also allows the credit to be used
leakto offset the AMT. The estimated
cost of this proposal is $907 million
://wikiover 10 years.
httpable EnergyState and local governments may issue cleanSec. 105. The Senate bill increasesSec. 806. The House bill is
ndsrenewable energy bonds (“CREBS”) in order tothe maximum authorized amount ofsimilar to the Senate bill, but
finance renewable projects (wind, closed-loopCREBS issues to $2 billion tothe national limitation is $1.75
biomass, open-loop biomass, geothermal, smallfinance facilities that generatebillion instead of $2.0 billion.
irrigation, qualified hydro-power, landfill gas,electricity from renewables. This $2This proposal is estimated to
marine renewable and trash combustionbillion authorization is subdividedcost $497 million over 10
facilities). Unlike other state and local bonds,into thirds: 1/3 for qualifyingyears.
which are exempt from federal taxation, theseprojects of state/local/tribal
bonds provide a tax credit to the holdinggovernments; 1/3 for qualifying
taxpayer. Only $1.2 billion of such bonds mayprojects of public power providers;
be issued nationally; $0.75 billion byand 1/3 for qualifying projects of
governmental bodies. CREBS must be issuedelectric cooperatives. The bill also
before 12-31-2008 [IRC §54].provides an additional year for
current allocations to issue bonds.
is $551 million over 10 years.
lectricityA taxpayer producing electricity at a qualifyingSec. 402. This proposal increasesNo provision.A qualifying advanced
duction Tax Creditadvanced nuclear power facility can claim athe maximum allocation amount tonuclear facility is one for
credit equal to 1.8¢/kilowatt hour of electricity8,000 megawatts. Public-privatewhich the taxpayer has
produced for the eight-year period startingpartnerships will also be allowed toreceived an allocation of
when the facility is placed in service. Theutilize the credit. This proposal hasmegawatt capacity from
aggregate amount of credit that a taxpayer mayno revenue effect. the Secretary of the
claim in any year during the eight-year periodTreasury, in consultation
is subject to limitation based on allocatedwith the Secretary of
capacity and an annual limitation. A qualifyingEnergy. See CRS Report
advanced nuclear facility is one that is placed inRL33558.
service before January 1, 2021. The Secretary
of Treasury may allocate up to 6,000
megawatts of capacity [IRC§45I].
iki/CRS-RL34674siness Sector
g/wergy Efficiency inThe tax code provides a formula-based taxSec. 303. The bill extends theSec. 843. Same as the SenateQualifying property must
s.ormercial Buildingsdeduction, subject to a limit equal to $1.80 perenergy-efficient commercialbill. The estimated cost of thisbe installed as part of:
leaksq.ft. of the building, for all or part of the costbuildings deduction for five years,proposal is $891 million over(1) the interior lighting
of energy efficient commercial buildingthrough December 31, 2013. The10 years. system, (2) the heating,
://wikiproperty (i.e., certain major energy-savingsestimated cost of this proposal iscooling, ventilation and
httpimprovements made to domestic commercialbuildings) placed in service after December 31,$891 million over 10 years. hot water systems, or (3)the building envelope,
2005 and before January 1, 2009 [IRC §179D].and it must reduce total
annual energy and power
costs of the building by
50% or more in
reference building that
requirements of building
standards by the society
nds for Green BuildingsState and local governments have the authoritySec. 307. The bill extends theSec. 846. Identical to the
ainable Designto issue tax-exempt bonds for green buildingsauthority to issue qualified greenSenate provision. The estimated
and sustainable design projects [IRC§142].building and sustainable designcost of this proposal is $45
project bonds through the end ofmillion over 10 years.
2012. The bill also clarifies the
application of the reserve account
rules to multiple bond issuances.
is $45 million over 10 years.
ergy ManagementCurrent law provides no special tax incentivesSec. 306. The bill providesSec. 845. Similar to the Senate
for meters, thermostats, and other energyaccelerated depreciation for smartbill except that the recovery
management devices that allow utilities orelectric meters and smart electricperiod would 10 years instead
consumers to monitor, control energy use; suchgrid systems, allowing taxpayers toof seven years. The estimated
property is depreciable over 20 years if used inrecover the cost of this propertycost of this proposal is $921
a business [IRC §168].over seven years. The estimated costmillion over 10 years.
of this proposal is $1.716 billion
ial Sector
ergy-Efficiency RetrofitsThere is a 10% credit, up to a $500 maximumSec. 302. The bill retroactivelySec. 842. The bill retroactivelyThis credit was enacted
iki/CRS-RL34674xisting Homeslifetime credit,- for energy efficiencyextends the tax credits forextends the tax credits foras part of EPACT05, but
g/wimprovements in the building envelope ofenergy-efficient retrofits to existingenergy-efficient existing homesit expired at the end of
s.orexisting homes and for the purchase ofhomes for 2009, 2010 and 2011,for two years (through2007.
leakhigh-efficiency heating, cooling, and waterand includes energy-efficientDecember 31, 2009) and
heating equipment. Efficiency improvementsbiomass fuel stoves as a new classincludes energy-efficient
://wikiand/or equipment must be placed in serviceof energy-efficient property eligiblebiomass fuel stoves as a new
httpbefore December 31, 2007. Selected energyefficiency equipment and items qualify forfor a consumer tax credit of $300.The proposal also clarifies theclass of energy-efficientproperty eligible for a
specific tax credits ranging from $50-$300efficiency standard for waterconsumer tax credit of $300.
[IRC §25C].heaters. The estimated cost of thisThis proposal is estimated to
proposal is $2.509 billion over 10cost $1.067 billion over 10
nstruction of Energy-A tax credit as high as $2,000 is available toSec. 304. The bill extends the newNo provision.
Homeseligible contractors for the construction ofenergy efficient home tax credit for
qualified new energy-efficient homes if thethree years, through December 31,
homes achieve an energy savings of 50% over2011. The estimated cost of the
the 2003 International Energy Conservationproposal is $143 million over 10
Code (IECC). The amount of the new energy-years.
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]
nufacture of Energy-A credit is available for the eligible productionSec. 305. The bill modifies theSec. 844. This provision is The maximum amount
e Appliances(manufacture) of certain energy-efficientexisting energy-efficient applianceidentical to that in S. 3478. Theof the new credit
dishwashers, clothes washers, and refrigerators.credit and extend this credit forestimated cost of this proposalallowable to a taxpayer
The total credit amount is equal to the sum ofthree years, through the end ofis $322 million over 10 years.is capped at $75 million
the credit amount separately calculated for each2010. The estimated cost of thisper tax year for all
of the three types of qualified energy-efficientproposal is $322 million over 10qualifying appliances
appliance. The credit for dishwasher is $3years. manufactured during that
multiplied by the percentage by which the year . In each subsequent
efficiency of the 2007 standards (not yetyear the cap is reduced
known) exceeds that of the 2005 standards (theby the amount (if any) of
credit may not exceed $100 per dishwasher).the credit used in any
The credit for clothes washers is $100 forprior tax year. Of that
clothes washers that meet the requirements of$75 million (or reduced)
the Energy Star program in effect for clothescap, no more than $20
washers in 2007. The credit for refrigeratorsmillion of credit amount
iki/CRS-RL34674ranges from $75-$175 each [IRC §45M].in a single tax year mayresult from the
g/wmanufacture of
s.orrefrigerators to which the
leak$75 applicable amount
applies (i.e., refrigerators
://wikiwhich are at least 15
httppercent but no more than
20 percent below 2001
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 taxpayer’s
receipts for the preceding
three tax years.
alified EnergyNo provision.Sec. 301. The bill creates a newSec. 841. The provision is
nservation Bonds category of tax credit bonds tosimilar to that in S. 3478,
finance state and local governmentexcept that the national
initiatives designed to reducelimitation is $2.625 billion.
greenhouse emissions. There is aThis proposal is estimated to
national limitation of $3 billion,cost $895 billion over 10 years.
allocated to states, municipalities
$1.025 billion over 10 years.
vanced Technology Vehicles
Plug-In HybridThe Energy Policy Act of 2005 (P.L. 109-58)Sec. 204 & 205. The Senate billSec. 824. The bill establishes aToyota reached its limit
created a new system of tax credits for fourestablishes a new credit for qualifiednew credit for each qualifiedin 2006; Honda in 2007.
types of advanced-technology vehicles (ATVs):plug-in electric drive vehicles. Theplug-in electric drive vehicleThus, purchasers of
hybrid vehicles, fuel cell vehicles, advancedbase amount of the credit is $2,500.placed in service during eachhybrid vehicles from
lean-burn vehicles, and other alternative fuelIf the qualified vehicle drawstaxable year by a taxpayer. Thethese manufacturers no
vehicles. The credit for hybrids range frompropulsion from a battery with atbase amount of the credit islonger qualify for the tax
iki/CRS-RL34674$250 to $3,400 per vehicle and are availableleast 6 kW hours of capacity, the$3,000. If the qualified vehiclecredits. The two bills
g/wthrough December 31, 2009, but eachcredit amount is increased by $400,draws propulsion from a batteryessentially add plug-in
s.ormanufacturer has a 60,000 lifetime vehicleplus another $400 for each kW hourwith at least 5 kilowatt hours ofhybrid vehicles as a new
leaklimit. [IRC §30B]. of battery capacity in excess of 6capacity, the credit amount istechnology to the
kWhours. Taxpayers may claim theincreased by $200, plus anotherexisting system of tax
://wikifull amount of the allowable credit$200 for each kilowatt hour ofcredits, but with their
httpup to the end of the first calendarquarter after the quarter in which thebatter/capacity in excess of 5kilowatt hours up to 15 kilowattown separate tax creditstructure.
total number of qualified plug-inhours. Taxpayers may claim the
electric drive vehicles sold in thefull amount of the allowable
U.S. is at least 250,000. The creditcredit up to the end of the first
is available against the alternativecalendar quarter after the
minimum tax (AMT). The estimatedquarter in which the
cost of this proposal is $755 millionmanufacturer records 60,000
over 10 years. sales. The credit is reduced in
following calendar quarters.
The credit is available against
(AMT). This proposal is
estimated to cost $1.056 billion
The tax credits for advanced lean-burn vehiclesSec. 205. The bill extends the leanNo provision.
nology Vehiclesis the same as for hybrids; the credit for fuelburn, heavy hybrid, and alternative
cell vehicles may be as high as $4,000 for cars,fuel vehicle tax credit through
and $40,000 for heavy-duty trucks; the credit2011,and reduces the fuel cell credit
for advanced alternative fuel vehicles is up toto $7,500 at the end of 2009. The
80% of marginal costs, limited to $32,000. credit is available against the
[IRC §30B]alternative minimum tax (AMT).
is $527 million over 10 years.
A tax credit is provided equal to 30% of theSec. 208. The bill extends the 30%Sec. 828. The provision in H.R.The credit provides a tax
tionscost of any qualified alternative fuel vehiclealternative refueling property credit6899 is similar to the provisioncredit to businesses (e.g.,
refueling property installed to be used in a trade(capped at $30,000) for three years,in S. 3478. The bill increasesgas stations) that install
or business or at the taxpayer’s principalthrough 2012. The provisionthe 30% alternative refuelingalternative fuel pumps,
residence. The credit would be limited toprovides a tax credit to businessesproperty credit (capped atsuch as fuel pumps that
$30,000 for retail clean-fuel vehicle refueling(e.g., gas stations) that install$30,000) to 50% (capped atdispense E85 fuel.
property, and $1,000 for residential clean-fuelalternative fuel pumps, such as fuel$50,000). The bill also extends
vehicle refueling property. The property mustpumps that dispense fuels such asthis credit through the end of
iki/CRS-RL34674be placed in service before1-1-2010 (1-1-2015E85, compressed natural gas and2010, 2017 for certain natural
g/wfor hydrogen property) [IRC§30C.]hydrogen. The bill also adds electricgas type fuels. The estimated
s.orvehicle recharging property to thecost of this proposal is $226
leakdefinition of alternative refuelingmillion over 10 years.
property. The estimated cost of this
://wikiproposal is $256 million over 10years.
ergy Security BondsNo provisionNo provision.Sec. 828. The bill creates a
new type of tax-credit bond
known as “energy security”
bonds and provides for the
allocation of $1.75 billion in
bonding authority. The bill
requires 100% of the available
project proceeds to be used for
“qualfied purposes,” which
would include the making of
for natural gas refueling
properties at retail gas stations.
The bill stipulates that a loan
could be no more than
$200,000 for a property located
at any one retail gas station and
stipulates that loans could not
cover more than 50% of the
cost of the property and its
installation. Allocations would
be made by the Treasury
Department among qualified
issuers, including states and
political subdivisions or
instrumentalities thereof. The
bill requires that 50% of the
limitation be allocated only for
loans for natural gas refueling
statistical areas. The measure
iki/CRS-RL34674also directs the department toattempt to ensure that at least
g/w10% of the motor fuel stations
s.orreceive loans from the proceeds
leakof the bonds. The measure’s
provisions would apply to
://wikibonds issued by Dec. 31, 2017.
httpIt also coordinates the energy
security tax-credit bonds with
the refueling credit. This
$76 million over ten years.
ic Fuel AlcoholAlcohol fuels qualify for production andSec. 201. The bill makes this benefitSec. 821. The House bill
duction blending tax credits (either income or excise taxavailable for the production of otherprovision is identical to that in
credits) and refunds. The credit for ethanol iscellulosic biofuels in addition tothe Senate bill.
$0.51per gallon. In addition, there is an ethanolcellulosic ethanol. This proposal is
small producer credit of $0.10 per gallon, up toestimated to be revenue neutral over
15 million gallons annually. Facilities that10 years.
produce cellulosic ethanol are also 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].
ExciseThe tax code imposes excise taxes on motorSec. 207. The bill extends theNo provision.
x Creditsfuels at varying rates, but also provides taxalternative fuel excise tax credit
credits (at varying amounts) against these taxesthrough December 31, 2011 for all
for various types of alternative fuels; it alsofuels except for hydrogen (which
provides small producer tax credits for some ofmaintains its current-law expiration
the fuels such as ethanol and bio-diesel. Thedate of September 30, 2014). Upon
credits generally expire at the end of 2008 [IRCdate of enactment, for liquid fuel
§6426, §6427]. derived from coal through the
iki/CRS-RL34674(“coal-to-liquids”), to qualify as an
g/walterative fuel, the fuel must be
s.orproduced at a facility that separates
leakand sequesters at least 50% of its
CO2 emissions. The sequestration
://wikirequirement increases to 75% onDecember 31, 2011. This 75%
httpstandard 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
aviation fuels qualify for the credit.
The proposal is estimated to cost
$569 million over 10 years.
lumetric Excise TaxFuel ethanol qualifies for excise tax credits (orSec. 210. This bill extends VEETC,No provision.
ETC) for Fuelrefunds), at the rate of $0.51/gallon of ethanol;including the 10¢/gallon small
noland a small producer tax credit of $0.10/gallon.producer credit, through
The excise tax credit was established in the12/31/2011. The estimated cost of
American Jobs Creation Act of 2004. Per thethis proposal is $4.978 billion over
2008 farm bill, starting the year after which 7.510 years.
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,
all Producer Tax CreditAs noted above, in the case of ethanol, the taxSec. 211. S. 3478 creates a newNo provision.
thanolcode also provides a small producer tax creditsmall producer alcohol credit of 10
of $0.10/gallon, up to 15 million gallons [IRCcents per gallon for facilities that
§40A].produce ethanol through a process
that does not use a fossil-based
resource. The credit is available
$210 million over 10 years.
iki/CRS-RL34674diesel Blender’s TaxRefundable income tax credits and excise taxSec. 202 & 203.The bill extends forSec. 822 & 823. The bill
g/w and Small Biodieselcredits are available for the blending andthree years (through December 31,extends for one year (through
s.orproduction of biodiesel. The basic credit is2011) the $1.00 per gallonDecember 31, 2009) the
leak$0.50/gallon ($1.00/gallon for virgin or “agri”production tax credits for biodiesel$1.00/gallon production tax
biodiesel) and is also provided on a volumetricand the small biodiesel producercredits for biodiesel and the
://wikibasis. Production of biodiesel by a smallcredit of 10¢ per gallon. The billsmall biodiesel producer credit
httpproducer qualifies for a $0.10/gallon credit upextends the $1.00 tax credit forof 10 ¢/ gallon, but does not
to 15 million gallons. These credits expire atvirgin biodiesel to recycledeliminate the current-law
the end of 2008 [IRC §40A, 6426, and 6427].biodiesel. Biodiesel that is importeddisparity in credit for biodiesel
and sold for export will not beand agri-biodiesel. The bill
eligible for the credit effective Mayalso clarifies that certain
15, 2008. The combined cost of thefuel-related tax credits are
biodiesel proposal and thedesigned to provide an
renewable diesel provision (pleaseincentive for U.S. production,
see the next item) is $2.256 billionwhich would apply to claims
over 10 years. for credit or payment made
after May 15. The combined
cost of this proposal and the
renewable diesel proposal
(discussed in the next item
below) is estimated be $401
able DieselRefundable income tax credits and excise taxSec. 202. The Senate bill extends forSec. 822. The bill extends forSome oil companies are
duction Tax Creditcredits are available for the blending andthree years (through December 31,one year (through Decemberadding animal fat or
production of renewable biodiesel. The basic2011) the $1.00 per gallon31, 2009) the $1.00 per gallonvegetable (soybean) oil
credit is $1.00/gallon. Renewable diesel isproduction tax credit for diesel fuelproduction tax credit for dieselas feedstocks along with
diesel fuel derived from biomass using acreated from biomass. It eliminatesfuel created from biomass. Itcrude oil in a
“thermal depolymerization process”(TDP).the requirement that renewablealso eliminates the requirementconventional refinery to
TDP is a new technology that uses heat anddiesel fuel must be produced using athat renewable diesel fuel mustproduce such fuels.
pressure to change the molecular structure ofthermal depolymerization process.be produced using a thermalUnlike biodiesel which
wastes, plastics, and food wastes such asAs a result, the credit will bedepolymerization process. As ablends the soybean oil
poultry carcasses and offal, and turn it into aavailable for any diesel fuel createdresult, the credit will beester after the diesel is
boiler fuel. In order to qualify for thefrom biomass without regard to theavailable for any diesel fuelmade, the oil is added
$1.00/gallon tax credits, the fuel must meetprocess used so long as the fuel iscreated from biomass withoutbefore as a feedstock.
EPA’s requirements for fuels and fuelsusable as home heating oil, as a fuelregard to the process used soThe resulting “co-
additives under §211 of the Clean Air Act, andin vehicles, or as aviation jet fuel.long as the fuel is usable asproduced fuel” comes
the requirements of the ASTM D975 and D396.The bill caps the $1 per gallonhome heating oil, as a fuel inout of the refinery as part
iki/CRS-RL34674These credits expire at the end of 2008 [IRC§40A, 6426, and 6427].production credit for renewablediesel for facilities that co-processvehicles, or as aviation jet fuel.The bill also clarifies that theof the regular diesel fuelmix, distributed through
g/wwith petroleum to the first 60$1 per gallon production creditpipelines (unlike
s.ormillion gallons per facility. Thefor renewable diesel is limitedbiodiesel), and sold as
leakestimated cost of the combinedto diesel fuel that is producedregular diesel fuel.
biodiesel proposal (previous item)solely from biomass. Diesel
://wikiand this proposal is $2.256 billionfuel that is created by
httpover 10 years.co-processing biomass with
other feedstocks (e.g.,
petroleum) will be eligible for
the 50¢/gallon tax credit for
alternative fuels. This provision
is estimated to raise $77 million
x Shelters forUnder current tax law, publicly tradedSec. 209. The bill allows publiclySec. 830. This provisionThe measure ensures that
partnerships are treated as corporations for taxtraded partnerships to treat incomeappears to be the same as theincome derived from
purposes, unless they have passive incomederived from the transportation andSenate bill’s provision. Thethose fuels would receive
(dividend, rents, etc.) and income from certainstorage of certain alternative fuels asestimated cost of this proposaltreatment similar to
mineral exploration and production, timber, and“qualifying income” for incomeis $76 million over 10 years.income from oil and gas.
other activities [IRC §7704].tests used to determine whether an
entity qualifies as a publicly traded
partnership. Currently, 90% of the
income of a publicly traded
partnership must be qualifying
income, or the entity is taxed as a
corporation, to which higher rates
apply. The bill covers fuels such as
alcohol fuels and mixtures, biodiesel
fuels and mixtures, and alternative
fuels and mixtures. The bill applies
to taxable years that begin after the
measure is enacted. The estimated
cost of this proposal is $78 million
scellaneous Transportation and Energy Provisions
Idling Units andA 12% tax is imposed on the sale price of theSec. 206. The bill provides anSec. 825. This provision is
vanced Insulationfirst retail sale of (1) truck bodies and chassisexemption from the heavy vehicleidentical to that in S. 3478.
suitable for use with a vehicle having a grossexcise tax for the cost of idling
iki/CRS-RL34674vehicle weight of over 33,000 pounds, (2) trucktrailer and semitrailer bodies and chassisreduction units, such as auxiliarypower units (APUs), which are
g/wsuitable for use with a vehicle having a grossdesigned to eliminate the need for
s.orvehicle weight over 26,000 pounds, and (3)truck engine idling (e.g., to provide
leaktractors of the kind chiefly used for highwayheating, air conditioning, or
transportation in combination with a trailer orelectricity) at vehicle rest stops or
://wikisemitrailer. The retail tax also generally appliesother temporary parking locations.
httpto the price and installation of parts orThe bill also exempts the
accessories sold on or in connection with, orinstallation of advanced insulation,
with the sale of, a taxable vehicle [IRC §4051].which can reduce the need for
transportation vehicles carrying
refrigerated cargo. Both of these
exemptions are intended to reduce
transportation sector. The estimated
cost of this proposal is $95 million
sportation FringeGross income includes any income fromNo provision.Sec. 827. The bill allows
efitswhatever source, including income in kind,employers to provide
such as fringe benefits, unless specificallyemployees that commute to
excluded. Certain employer-providedwork using a bicycle limited
transportation fringe benefits are excluded up tofringe benefits to offset the
certain amounts: up to $220/month for parkingcosts of such commuting (e.g.,
and van pool benefits, and up to $115/month ofbicycle storage). This proposal
transit passes [IRC §132].is estimated to cost $10 million
Investments in recycling property receive noSec. 308. S. 3478 allows recyclingNo Provision.Under the Crude Oil
special tax incentives and are generally treatedproperty to qualify for the 50%Windfall Profits Tax of
the same as other assets under the Modifiedspecial depreciation allowance,1980 (P.L. 96-223,
Accelerated Depreciation System, which allowsbasically equivalent to expensing ofrecycling equipment
for shortened recovery periods, bonus1/2 of the investment in suchqualified for a 10%
depreciation, and expensing under certainproperty. The estimated cost of thisinvestment tax credit, but
conditions [IRC §168, 179].proposal is $162 million over 10these generally expired
years.at the end of 1982.
mestic ActivitiesBeginning on 1-1-2005, qualified Sec. 501. The bill repeals the IRCSec. 851. The provision in H.R.The inclusion of state-
nufacturing Deduction“manufacturing” businesses in the United§199 manufacturing deduction for5351 is identical to that in S.owned companies is
iki/CRS-RL34674States can claim a deduction for a certainmajor integrated and state-owned oil3478. The proposal isintended to extend the
g/wome Taxpercentage of their taxable incomes, subject toand gas companies, beginning on 1-estimated to raise $13.904denial of the §199
s.orcertain limits. The deduction was initially 3%,1-2009. It maintains the 6%billion over 10 years.deduction to foreign
leakis now 6%, and is scheduled to increase to 9%deduction rate for other oil and gasowned oil companies
in 2010. The definition of a domesticcompanies. The proposal is(such as CITGO, which
://wikimanufacturing activity is very broad andestimated to raise $13.904 billionis owned by the
httpgenerally includes all energy market activitiesexcept for the transmission and distribution ofover 10 years.government ofVenezuela). Such
electricity and natural gas. In particular, itcompanies are large but
includes oil and gas extraction and productionare not “integrated” oil
[IRC §199].companies — they do
not produce sufficient
amounts of crude oil —
and thus would
otherwise continue to
receive the deduction.
ise Taxes on Oil andAt the federal level there is no excise tax onSec. 502. The proposal establishes aNo provision.A type of windfall profit
tural Gasdomestic (or imported) oil and natural gas,13% excise tax on the removaltax on domestic crude oil
including oil and gas produced from the Outerprice of any taxable crude oil orproduction was in effect
Continental Shelf. Oil and gas companies arenatural gas produced from federalfrom April 1980 to
assessed excise taxes on oil purchased forsubmerged lands on the OCS in theAugust 1988. This tax,
refining (a 5¢/barrel tax that funds the Oil SpillGulf of Mexico pursuant to a federalwhich was actually an
Liability Trust Fund), and motor fuels exciseOCS lease. The removal price isexcise tax, not a profits
taxes on refined petroleum products that funddefined as the amount for which theor income tax, was part
various transportation and environmental trustbarrel of taxable crude oil orof a compromise
funds. In addition, oil companies paybarrel-of-oil equivalent of naturalbetween the Carter
severance taxes to some states where theygas is sold by the taxpayer. In theAdministration and the
extract minerals, and pay royalties (which arecase of sales between related parties,Congress over the
factor payments, not taxes) to landownersthe removal price is the constructivedecontrol of crude oil
including the federal government [IRC §4041,sales price of the oil or natural gas.prices. It is discussed and
§4081, §4611]. The proposal allows as a creditanalyzed in detail in CRS
against the excise tax an amountReport RL33305.
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
iki/CRS-RL34674enactment. The proposal isestimated to raise $11.663 billion
g/wover 10 years.
leakax Credits on OilUnited States businesses operating abroadSec. 503. The proposal eliminatesSec. 852. The House bill, whichMultinational oil
mpaniesgenerally pay taxes to foreign governments asthe distinction between FOGEI andis broader than the Senate bill)companies currently
://wikiwell as United States taxes, which are generallyassessed on worldwide income. A tax credit isFORI. FOGEI relates to upstreamproduction to the point the oil leavesmakes two specific changes tothe calculation of such income.allocate their incomebetween FOGEI and
httpallowed, subject to various limitations, againstthe wellhead. FORI is defined as allIt bars the use of twoFORI, which are subject
U.S. taxes for the amounts of these foreigndownstream processes once the oilmethodologies establishedto different taxation
taxes. Domestic oil companies operatingleaves the wellhead (i.e.,under a 2004 IRS field directiverules.
abroad are also subject to additional limitationtransportation, refining). Currently,for calculating FOGEI and
on their foreign oil and gas extraction incomeFOGEI and FORI have separateFORI, and would instead
(“FOGEI”) and foreign oil related incomeforeign tax credit limitations. Thisrequire companies to use an
(“FORI”) [IRC §§901-907]. proposal combines FOGEI and“arm’s length” price by using
FORI into one foreign oil basketthe independent market value at
and applies the existing FOGEIthe point nearest to the well at
limitation. The proposal is estimatedwhich an independent market
to raise $2.23 billion over 10 years. exists when calculating such
companies, when they pay
foreign taxes that are limited to
oil and gas companies, to treat
the entire amount of their taxes
on oil and gas extraction as
applying to their FOGEI, rather
than dividing the taxes between
their FOGEI and their FORI.
Because this provision would
subject such income to the
FOGEI limitation for
foreign-tax credits, it would
limit the credits claimed, and
thus increase the revenue
raised. This provision is
effective for tax years that
begin after the measure’s
enactment date. These changes
would raise an estimated $3.84
iki/CRS-RL34674billion over 10 years.
g/wbility TrustA 5¢-per-barrel excise tax is imposed onSec. 505. The proposal extends theNo provision.Although the tax had
s.orxdomestic and imported crude oil and petroleumoil spill tax through December 31,expired at the end of
leakproducts. The revenues from this tax go into the2017, increases the per barrel tax1994, Congress
Oil Spill Liability Trust Fund and are used tofrom 5 cents to 12 cents, and repealsreinstated the 5¢ per
://wikiclean up offshore oil spills [IRC §4611]. the requirement that the tax besuspended when the unobligatedbarrel tax effective onApril 1, 2006
httpbalance exceeds $2.7 billion. The(EPACT05, P.L.
proposal is estimated to raise $3.4109-58). The tax will
billion over 10 years.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
the Oil Spill Liability
Trust Fund is less than
$2 billion. The oil spill
tax will cease to apply
2014, regardless of the
mated Corporate TaxUnder current law, corporations with assets ofNo provision.Sec. 853. The bill further These provisions are
entsat least $1 billion are required to adjust theirincreases the payments due ingenerally used to shift
quarterly estimated corporate tax payments for July, August, or Septemberanticipated revenue from
certain quarters, including for July, August, and2013 by an additional 40one quarter to another in
September of 2013, which is the last quarter ofpercentage points, but only fororder to make measures
FY2013. Affected firms reduce their paymentscompanies that had anycomply with the
in the following quarter by a correspondingsignificant income for thepay-as-you-go budget
amount. preceding taxable year from therule.
iki/CRS-RL34674extraction, production,
g/wprocessing, refining,
s.ortransportation, distribution, or
leakretail sale of fuel or electricity.
e Received asSec. 403. The bill would allowNo provision.
://wikimages from the Exxon-commercial fishermen and other
httpldez Litigation 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.
is $49 million over 10 years.