The Senate Tuesday overwhelmingly passed an $18 billion package to extend tax credits for renewable fuels and energy efficiency, many of which are due to expire at the end of the year. But rather than accept the Senate tax bill, the House Wednesday adopted a different strategy — raising the likelihood that the ongoing disagreement between the two houses over tax policy will not be resolved before Congress adjourns.

The energy tax credit extenders package, which had been blocked eight times in less than a year, cleared the Senate by a 93-2 vote as part of a broader bill (HR 6049) that extends other business and personal tax credits and provides protection for millions of Americans from the Alternative Minimum Tax (AMT).

The legislation was sent to the House, where lawmakers were warned not to tinker with the Senate bill. “If they try to mess with our package, it will come back here, it will die and we will have snatched defeat from the jaws of victory,” Senate Majority Leader Harry Reid (D-NV) said, as reported by CQ Today.

“Senate leaders clearly warned their House counterparts that the Senate’s compromise deal was fragile and that any House attempt to alter the provisions would likely fail if returned to the Senate,” said energy analysts Christine Tezak and K. Whitney Stanco of Stanford Group Co. Nevertheless, “House leaders plan to sidestep the Senate’s compromise bill and address tax legislation in [three] separate bills of their own.” This could result in another game of “ping-pong” between the two houses, pushing the tax credit extenders package to a post-election, lame-duck session.

“We’ve been trying for nearly two years to prevent these incentives from lapsing, and I believe we finally have the bipartisan, bicameral support to finally get the job done. And I’m pleased that the White House said today that it supports passage of this legislation,” said Senate Energy Committee Chairman Jeff Bingaman (D-NM). While President Bush indicated his support for the Senate bill, he was less than pleased that the tax credit extenders would be paid for by freezing benefits for oil and gas producers.

The Senate-approved package provides a one-year extension of the production tax credit (PTC) for wind and refined coal, and a two-year extension of the PTC for biomass and geothermal facilities. It also extends the 30% investment tax credit for solar energy property and qualified fuel cell property through 2016, extends the credit for residential solar property for eight years through 2016, and removes the credit cap (currently $2,000) for solar electric investments. Moreover, it renews tax credits for energy-efficient upgrades of existing homes, and extends a tax credit for energy-efficient new homes (up to $2,000).

While both Democrats and Republicans support more production of renewable energy and increased energy efficiency, they have been at odds over whether the cost of the tax credit extenders needed to be offset by spending cuts or revenue increases. Democrats argued in favor of the offsets, while Republicans argued otherwise.

To help pay for the energy tax credit extenders, the Senate bill tightens the tax benefits for the oil and gas industries on income earned overseas. It also freezes (rather than repeals) the tax deduction that oil and gas companies receive for their domestic manufacturing operations, and requires producers to make increased payments to the Oil Spill Liability Fund.

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