House Passes Energy Tax Legislation

On February 27, 2008, the House passed the Renewable Energy and Energy Conservation Tax Bill of 2008 (HR 5351) by a vote of 236 to 182. The legislation includes an extension and modification of the credit for production of electricity from renewable resources, extension and modification of the energy investment credit, extension and modification of special rules with respect to qualifying electric transmission transactions, extension of the $500 energy efficient existing homes credit while dropping geothermal heat pump property and adding biomass fuel property, extension and modification of the residential energy efficient property credit to include small wind energy property and qualified geothermal heat pump property in addition to solar and fuel cell property, extension of the alternative motor vehicle credit to plug-in hybrids and allowing the credit for AMT purposes, extension and modification of the alternative fuel vehicle refueling credit, modification of the limits on automobile depreciation, extension of the energy efficient commercial buildings deduction, extension and modification of the energy efficient appliance credit, creation of a five-year recovery period for qualified energy management devices, extension of credits for biodiesel and extension and modification of the renewable diesel credit, limitation of credits to U.S. production, expansion of the alcohol fuels credit to cellulosic alcohol, extension of transportation fringe benefit to bicycle commuters, restructuring of the New York Liberty Zone tax credits, authorization of new clean renewable energy bonds, and authorization of qualified energy conservation bonds.

In order to pay for the estimated ten-year $18 billion cost of these provisions, the legislation denies the Code Sec. 199 domestic production deduction to integrated oil companies and freezes the deduction at 6 percent for other oil, gas, and related production; clarifies the determination of foreign oil and gas extraction income; and accelerates certain corporate estimated tax payments. The legislation also authorizes studies of the carbon footprint of Internal Revenue Code provisions and biofuels production.

It is not clear that the legislation has enough support in the Senate to pass, and the White House has expressed its opposition to the legislation, primarily directed at some of the revenue raisers.