Advanced Energy Perspectives

For Congress, It’s a Race to the Finish, with Tax Extenders Back on the Table

Posted by Dylan Reed and Arvin Ganesan

Dec 3, 2015 12:57:39 PM



The world’s eyes are focused on Paris this week with the beginning of 2015 Climate Conference, also referred to as COP21. In what could be considered a case of counter-programming, Congress has pushed legislation indicating disapproval of EPA’s Clean Power Plan (CPP), thereby sending a signal that future Congresses could invalidate the centerpiece of U.S. commitments made by President Obama. At the same time, an energy package is moving forward in the House, and tax extenders are back on the table for legislative action. EPA also updated the Renewable Fuel Standard this week, reducing the volume requirements for corn-based ethanol. This action immediately turned into controversy, and just like any EPA action these days, is about to go through the legal gauntlet. With end of the year fast approaching, the tryptophan from Thanksgiving turkey clearly did not slow anyone down.

Political, not practical, action against the Clean Power Plan

Congress has received the most media attention as of late for its effort to pass resolutions under the Congressional Review Act (CRA), which allows Congress, with the President’s signature, to invalidate a federal regulation that has been put into place. Both the Senate and House passed a resolution to disapprove of the CPP. But with the White House issuing a veto threat, the CRA effort will surely die, as there is not enough support to overturn a veto. This endgame is unsurprising: Since it was passed in 1996, the CRA has been used only once to reverse a regulation.

The CRA votes are timed to be a political move countering the President’s efforts in Paris to negotiate a global climate accord. Even Sen. Shelley Moore Capito (R-WV), the resolution’s sponsor, believes that the CRA resolution is largely symbolic and will not change policy in the short term.

Republicans are also looking at the annual appropriations spending bill as an opportunity to thwart the CPP. They will likely attempt to tack on “policy riders” as amendments to the bill, and one is likely to be an anti-CPP provision. The White House has been willing to budge on environmental amendments in the past, as with regulations on endangered species and methane. However, for the administration, the CPP is non-negotiable. Former Rep. Jim Moran (D-VA) believes (sub. required) Obama will be open to some riders, but not on the CPP and the equally high-priority “Waters of the U.S.” rule. “I think those [riders] are poison pills,” he said.

House energy package to pass, not become law

Moving to an area of more policy than politics, the House Energy and Commerce bill, HR 8, passed on mostly partisan vote and will head to the Senate. Committee Chairman Rep. Fred Upton (R-MI) intended a bipartisan effort on this bill, but lost the support of Democrats who said it did not do enough to mitigate climate change. The White House also issued a veto threat earlier this week, citing the lack of investment in energy efficiency. As we have noted, however, the bill does have a provision requiring that states consider whether to allow utilities rate recovery for procuring cloud-based software services. This could be a boon for advanced energy companies. From what we are hearing from aides close to the vote, this provision finds support among Democrats, but is not enough to boost the bill’s prospects.

Tax extenders likely to pass by year’s end

And it would not be a federal affairs update without tax extenders. According to multiple reports over the past several days, Congress is close to passing a large tax extenders package, which would include extension of the investment tax credit (ITC) and production tax credit (PTC). The extenders deal would reportedly phase out the ITC and PTC over five years, though details of the phase-out, including at what rate the value of the credits would decrease, are unclear. Notably, “commence construction” language is expected to be applied to the ITC, a primary objective of the solar sector that will also benefit other technologies like fuel cells. It is also important to note that any tax deal including the ITC and PTC will be a part of a much larger package, which could have items even more controversial than advanced energy tax credits. Just last year, Congress nearly passed a similar deal, but Democrats torpedoed the bill because the entire deal did not include enough benefits for working families to balance the business-friendly provisions. This disagreement is in evidence in discussions about the final package again this year.

As a result, reports of progress have been contradictory. Bloomberg BNA reported that staff and members have agreed on about 90% of the deal, with the chairs of the committee overseeing tax issues in the Senate and House – Sen. Orrin Hatch (R-UT) and Rep. Kevin Brady (R-TX), respectively – seemingly committed to finalizing a deal by the year’s end. However, just yesterday, Julia Lawless, spokeswoman for Hatch, said: “There is no deal on bipartisan tax extenders legislation. Members are continuing discussions to develop a workable package that will provide responsible tax relief for American families and job creators.”

Congress set a self-imposed deadline of December 18 for all legislation, in order for members to leave town for the holiday break. But Congress will likely attach any extenders package to a spending bill that will keep the government open. The deadline for legislation to avoid a shutdown is December 11, with votes likely to occur on or very close to that day. Stay tuned.

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Topics: Federal Policy Update


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