The Senate Finance Committee today will outline options for reforming an array of permanent and temporary incentives affecting nearly all sectors of the energy industry as part of its effort to overhaul the tax code.
The staff white paper being released this morning is expected to address a broad swath of incentives, from oil and gas companies' ability to deduct drilling and labor costs to production or investment tax credits that are claimed by wind or solar developers. It joins other position papers prepared by committee staffers as part of a comprehensive tax reform effort that is gaining steam on Capitol Hill.
Finance Committee members will meet privately this morning to discuss the options aides have drawn up.
"They'll ask a lot of questions, and it will give us an idea of what to write -- what provisions we deal with and how -- that's the next step," Finance Chairman Max Baucus (D-Mont.) said yesterday of his expectations for the meeting.
Baucus earlier this week announced his intention to retire rather than seek re-election next year, increasing his urgency to get tax reform enacted before he leaves the Senate.
No incentive is safe as tax writers look for ways to lower the overall corporate tax rate by paring down the web of deductions, credits and loopholes that have been added to the tax code, Baucus said.
"My view is, the more that's on the table, the more there's buy-in and people will more easily participate," he told reporters yesterday.
Sen. Ron Wyden (D-Ore.), a senior Finance member and the chairman of the Energy and Natural Resources Committee, has been intimately involved in discussions about the future of energy tax policy. He declined to provide much detail yesterday on what the white paper would say but pointed to legislation to equalize renewable and fossil fuel companies' ability to establish master limited partnerships to attract investors.
"This bill moves in the direction of a principle I feel strongly about, and that is parity between various energy sources," Wyden told reporters.
The legislation from Sen. Chris Coons (D-Del.) and a bipartisan group of lawmakers in the House and Senate would allow clean energy and efficiency companies to establish MLPs, which are open only to coal, oil, gas and pipeline firms under existing law (Greenwire, April 24). It has broad support from stakeholders on all sides of the debate who say MLPs are an attractive way to raise money because they create shares that can be traded like traditional stock but are taxed as partnerships rather than corporations.
"He's certainly moving in the direction that I think the Finance approach on energy ought to go, and that is towards parity," Wyden added.
Another top issue for the Finance Committee will be the fate of numerous temporary tax incentives to promote renewable energy, efficiency, alternative fuels and other targeted sectors. January's "fiscal cliff" legislation extended a dozen of these tax breaks -- such as the wind production tax credit -- through the end of this year, but industries that benefit from them say more time is needed.
While credits like the PTC benefit from bipartisan support, especially among Republicans from windy states, a growing cadre of conservative lawmakers and interest groups is seeking to eliminate them.
Rep. Mike Pompeo (R-Kan.) is leading the effort in Congress to strip nearly all targeted tax credits from the code. He said yesterday that he would support extending MLPs to clean energy as part of a broader reform package that also eliminated the PTC and similar credits. Pompeo has not gone after some oil industry breaks, such as the intangible drilling costs deduction, judging those as standard business expensing practices available to a variety of industries.
Democrats like Coons, meanwhile, view the MLP as a complement to existing clean energy tax incentives, which they say should be extended for at least a few more years to let the supported industries fully mature.
Sen. Debbie Stabenow (D-Mich.), who chairs the Finance subpanel on energy, said during an event hosted by Politico yesterday morning that she would like to see the PTC and similar incentives extended for an additional five to 10 years. She noted that some incentives for the oil industry have been in place for nearly a century, compared with the wind PTC that was first established in 1992.
In a brief interview yesterday afternoon, Stabenow said she envisioned at least a five-year approach to temporary tax incentives, combined with a phaseout of the support in line with an approach floated last year by the wind industry. She said she would raise the issue during this morning's meeting.
"I think part of what gets us the economic boost is having some certainty and not doing this [short-term extension] every year," Stabenow said. "That's what's happened to oil, is they've had this embedded set of tax incentives for 100 years. They don't have to worry about renewals or tax extenders. So multiple years -- even if it's a phaseout after that -- makes sense."