If you are looking for information to share at the Thanksgiving table about how the tax bills pending in Congress will affect the advanced energy industry, you’re in luck. A whirlwind November brought proposals from House and Senate Republican leadership, each stuffed with changes to the tax code that could help – or hurt – advanced energy growth. In just three weeks, the House passed its version of the tax bill, and the Senate moved its version through committee before heading back home for the holiday. As these bills now stand, the advanced energy industry has a lot to gain and lose. Here is a roundup of what to look for in tax legislation, as it affects a growing $200 billion industry that supports more than 3 million workers across the United States.
As we have covered here before, the House tax bill both offers and undermines market certainty for different segments of the advanced energy industry. On the upside, this bill harmonizes the tax code for a variety of advanced energy technologies, including fuel cells, geothermal, microturbines, and combined heat and power – the so-called “orphaned” technologies. We noted in 2015 that these technologies were left out of the tax extenders passed for wind and solar at the time (part of a deal that lifted the ban on crude oil exports as well). Now, two years later, the House is making good on including these technologies. Unfortunately, the House is now reneging on the 2015 deal by disrupting the phasedown schedule for wind energy and tightening the qualification requirements for tax credits, potentially killing wind and solar projects counting on current rules. The House version also repeals tax credits for electric vehicles, which currently have a per-manufacturer cap, automatically expiring when each automaker reaches its quota. You can read AEE’s full statement here.
The Senate seems more eager to provide market certainty for the full spectrum of advanced energy technologies. The bill that passed the Finance Committee includes no provisions affecting energy, leaving the wind and solar extensions and phasedowns in place. But amendments filed by Senators suggest that equal treatment for orphaned technologies may still make it into the bill, while no amendments have been filed that would hurt wind, solar, or electric vehicle technologies. In addition, Sen. Grassley (R-Iowa) – along with Senators Heller (R-Nev.) and Portman (R-Ohio) – expressed interest in running a separate energy tax bill before the end of the year to achieve the goals of those amendments. As Sen. Toomey (R-Pa.) put it in committee, businesses need market certainty to make investments for the future and hire more workers.
Despite all this legislative activity, no tax bill will get to President Trump’s desk easily. With the current Senate makeup, it only takes three Republican votes added to the Democrats’ to vote down a bill, and the Democrats have been resolute in their opposition to this bill. That ensures 48 “no” votes for starters, with a surprising competitive special election in Alabama placing one of the GOP seats in doubt. Meanwhile, several Republicans have expressed concern about the bill. Sen. Ron Johnson (R-Wis.) has said he will vote against the bill, based on its treatment of small businesses compared to large. Senators Corker (R-Tenn.), Flake (R-Ariz.), and Lankford (R-Okla.) have flagged their displeasure with adding to the deficit and nation’s ever-increasing debt. In order to reduce the impact on the deficit, Republican leadership is considering repeal of the individual health insurance mandate. This partial Obamacare repeal would cast additional votes into doubt, including Senators Collins (R-Maine), McCain (R-Ariz.), and Murkowski (R-Alaska), who voted against full Obamacare repeal earlier this year.
Even if the Senate manages to pass a tax bill, a conference committee will have to resolve the many differences between the versions passed by the two branches, including those affecting advanced energy business prospects.
Make no mistake: There is a lot at stake for the advanced energy industry, including electric vehicle growth and wind and solar projects, with billions of dollars in investment and tens of thousands of jobs in the balance. We will continue to work with Congress to ensure that the advanced energy industry provides jobs and powers the U.S. economy.
Advanced energy is a $200 billion-a-year industry in the United States. Read about this growing industry in AEE's Advanced Energy Now 2017 Market Report.