Tax Breaks for Oil, Wind, Electric Cars Survive in Senate Bill
(Bloomberg) -- Tax breaks cherished by both the fossil fuel and renewable energy industries emerged unscathed in a tax plan unveiled in the U.S. Senate, according to details of the bill released Thursday evening by the chamber’s main tax writing committee.
Republicans opted to leave tax subsidies for the energy industry almost entirely in place in their broad re-write of the tax code which the Senate Finance Committee expects to start considering amendments to on Monday. That means drillers would still be allowed to take accelerated deduction of "intangible drilling costs" for expenses such as supplies and repairs.
A production tax credit for energy from wind and other renewables worth billions of dollars would also continue as is. That’s a break from a bill in the U.S. House of Representatives expected on the floor as soon as next week that would reduce the value of that credit by more than a third and also includes a provision that would make it harder for wind farms still under construction to receive the credit.
The Senate bill allows the subsidy, which provides a $23 per-megawatt-hour credit, to phase down and expire in 2020, in keeping with a deal reached by Congress in 2015 that also included a lifting of the nearly 40-year-old oil export embargo.
"Wind’s okay," South Dakota Senator John Thune, the chamber’s No. 3 Republican and a Finance Committee member, said in an interview. "We think that’s kind of settled now."
The Senate strategy also means that a $7,500 tax credit for electric-vehicle purchases that has benefited companies such as Tesla Inc. and General Motors Co., won’t be eliminated, and that a nuclear tax credit seen benefiting Southern Co. won’t be extended.
"From an energy standpoint it’s an epic head fake," said Liam Donovan, a tax lobbyist at Bracewell LLP. "I don’t think anybody in town would have guessed the Senate mark would be silent on energy, particularly after the waves that were made in the House."
The Senate bill is scheduled for a Finance Committee vote on Monday, where it could be altered during the amendment process. Any differences in the bills in the Senate and House would likely be decided by congressional negotiators behind closed doors, if both chambers are able to pass their broad tax overhauls.
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