The fate of the extensions of tax credits for renewable fuels and energy efficiency took a turn for the worse Friday as the House passed its own version of the tax package — ignoring warnings from the Senate not to tinker with its tax measure, which was approved earlier in the week.

By 257 to 166, the House passed a $62 billion package (HR 7060) that extends tax credits for energy and other businesses, as well as provides personal tax benefits. The energy portion of the bill includes $15 billion of tax incentives for investment in renewable energy, carbon capture and sequestration demonstration projects, energy efficiency and conservation. President Bush has threatened to veto the House tax bill.

The House action comes three days after the Senate overwhelmingly passed (93-2) an $18 billion package to extend expiring or expired tax credits for renewable fuels and energy efficiency (see Daily GPI, Sept. 25). It was 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.

The Senate leaders Tuesday had warned House tax writers that any changes to their bill would assure its certain death. “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.

The fate of the tax extenders legislation in Congress “is the $64,000 question now,” said Bill Wicker, spokesman for Sen. Jeff Bingaman (D-NM), chairman of the Senate Energy and Natural Resources Committee. “They seemed to have hit a wall. The House and Senate will have to meet each other in the middle” to get the measure passed before they adjourn, he said. If anything, Wicker believes the popular tax credits for renewable and efficiency will clear Congress because they’re completely offset by revenue raisers and are noncontroversial.

While the Senate passed the tax extenders in one piece of legislation, the House lawmakers have broken it up into “bite-size pieces” to avoid any further increases to the federal deficit, he said.

Rep. Charles Rangel (D-NY), chairman of the House Ways and Means Committee, Friday decried the “arrogance of the other body” in dictating what the House should consider “They’re the Gang of 60…This eagle [Congress] has to work with two wings,” not one, he said.

He challenged the Senate to “bring the bill over and we will accept it.” But Rangel noted that the Senate has yet to forward its tax extenders’ package to the House.

“We’ve done everything we could to take anything that [was] controversial out of this bill…I hope we can jump over the hurdles and get something done” before Congress adjourns.

This marked the sixth time that the House has sent a bill on tax extenders to the Senate, “but they keep moving the goal post,” said Rep. Richard Neal (D-MA), adding that the House measure includes “popular and forward-thinking incentives for energy.”

Rep. Dave Camp (R-MI) opposed the House extenders bill and urged lawmakers to accept the Senate version. The House tax package “will never pass the Senate and be enacted into law.” It will be “doomed in the other body” because House Democrats, particularly the conservative Blue Dog Democrats, have closely adhered to the pay-as-you-go rules that require that any tax increases be offset by either revenue raisers or spending cuts.

While he didn’t like being told what to do by the Senate either, Camp said, “with adjournment looming…it’s time to be realistic.” He noted that the House majority’s insistence on the pay-go rules “has painted us into this corner.”

Moreover, he said the House bill provides “less generous benefits” than the Senate’s measure with respect to energy. “This bill’s life expectancy is exceedingly short.”

Even assuming the House wanted to “embrace” the Senate’s tax version, Rangel said the House couldn’t do so because the Senate hasn’t sent over its bill for House consideration “How could we possibly do anything until [they] send it over here?”

“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.

Both the House and Senate bills provide a one-year extension of tax benefits for wind energy through Dec. 31, 2009. While the Senate bill provides a two-year extension of the production tax credit (PTC) for biomass and geothermal, the House measure extends the tax credits for 2 3/4 years (through Sept. 30, 2011) to certain qualifying facilities: closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas and waste-to-energy facilities. The House bill also provides tax benefits to a new group — marine renewables.

The House measure would cap the aggregate amount of tax credits that can be earned for these qualifying facilities placed in service after Dec. 31, 2009 to an amount that has a present value equal to 35% of the facility’s cost.

Both bills would extend the 30% investment tax credit for solar energy property through the end of 2016. They also extend the credit for residential solar property for eight years, and remove the annual credit cap (currently $2,000) for solar electric property, as well as extend the tax credit for energy-efficient new homes.

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 and House bills tighten the tax benefits for the oil and gas industries on income earned overseas. They also freeze (rather than repeal) the tax deduction that oil and gas companies receive for their domestic manufacturing operations, and require producers to make increased payments to the Oil Spill Liability Fund.

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