The $700 Billion Bailout Bill Goes Green?

Remember that $700 billion bailout bill? You may have heard that it had lots of add-ons; so-called sweeteners to convince recalcitrant congressmen and women to vote yes. Two of the more memorable descriptions I heard last week include: “decorated like a Christmas tree;” and “larded up with pork.”  One of the so-called sweeteners--to the tune of about 18 billion additional dollars--was the Energy Improvement and Extension Act of 2008.  Was it a green sweetener? Let’s take a look.

I suppose Congress could have used the bailout to mandate energy investment. Perhaps they could have required that financial firms being bailed out use a percentage of their future investments for green tech.  Instead they took the less direct, “add-on” approach. And the add-ons were numerous. Some were green, others not so much. Here’s how I rate them.

       ➢    This symbol indicates a “green rating.”
       X    This symbol indicates a “non-green rating.” Not necessarily bad, just not green.
       ?    And this symbol indicates that it could be green or it could not depending upon how it is applied. For example, a provision that favors biofuel production could be green or non-green depending upon how the biofuel is produced.

Renewable Energy Incentives

Renewable energy was definitely a winner. Production tax credits (PTC) for renewable energy projects were due to expire at the end of the year and a bill to extend these credits has been stuck in Congress all year. Not anymore – they were passed with the bailout. Specifically, the bill:

➢    Extends the PTC for wind for one year and for biomass, hydropower, and geothermal for two years.

➢    Adds a two-year PTC for wave and tidal energy.

➢    Extends the investment tax credit (ITC) for solar, fuel cell and small wind property for eight years. 

➢    Adds a new ITC for combined heat and power systems and for residential wind and geothermal heat pumps.  

➢    Increases the ITC limit on fuel cell property to $1,500.  Removes $2,000 limit on solar tax credit.  Increases and extends through 2016 the tax credit for residential energy efficiency.

Carbon Mitigation and Coal Provisions

Congress also sweetened the deal for the coal industry.

X    Extends the PTC for refined coal for one year.

X    Expands the ITC for advanced coal-based generation technology and increases maximum credit amounts allocable to $2.55 billion.

➢    Increases the ITC rate for power generation projects using integrated gasification combined cycle technology.

➢    Adds a temporary increase in coal excise tax; funding of Black Lung Disability Trust Fund.

?     Includes special rules for refund of the coal excise tax to certain coal producers and exporters.

➢    Adds a tax credit for carbon dioxide sequestration.

➢    Requires a carbon audit of the tax code to estimate the magnitude of the code’s impact on greenhouse gas emissions.

Transportation and Domestic Fuel Security Provisions 

Energy security is a major concern, so transportation fuels were a focus.

➢    Includes cellulosic biofuel in bonus depreciation for biomass ethanol plant property.

➢    Extends and increases the income and excise tax credits for biodiesel and renewable diesel for one year.

?    Clarifies that credits for fuel are designed to provide an incentive for United States production.

?    Extends and modifies the alternative fuel credit. This measure combined with the tax credit for carbon capture and sequestration promotes coal to liquid transportation fuels.

➢    Allows a new tax credit for the production of qualified plug-in electric drive motor vehicles.

➢    Excludes heavy truck idling reduction devices and advanced insulation used in certain heavy trucks and trailers from excise tax.

X    Extends and expands tax credits for conversion of oil shale and tar sands into liquid transportation fuels.

X    Extends suspension of taxable income limit on percentage depletion for oil and natural gas produced from marginal properties. 

➢    Allows employees to exclude reimbursements for bicycle commuting expenses from gross income.

➢    Increases and extends the tax credit for residential and commercial alternative fuel refueling property expenditures.

?    Treats certain income and gains relating to alcohol, biodiesel, and alternative fuels and mixtures as qualifying income for publicly traded partnerships.

Energy Conservation and Efficiency Provisions 

Energy conservation also got a nod – almost always a green item.

➢    Specifies terms for qualified energy conservation bonds.

➢    Extends the tax credit for non-business energy property expenditures through 2008. Includes energy-efficient biomass fuel stoves as property eligible for such tax credit.

➢    Extends through 2013 the tax deduction for energy efficient commercial building expenditures.

➢    Modifies tax credit amounts for energy efficient household appliances produced after 2007.

➢    Allows an accelerated 10-year recovery period for the depreciation of qualified smart electric meters and smart electric grid systems.

➢    Extends through FY2012 the authority to issue tax-exempt green building and sustainable design projects bonds.

➢    Allows special depreciation for certain reuse and recycling property.

Revenue Provisions

And here are some provisions that only an energy/tax wonk dreams about.

?    Tightens the rules by which oil and gas companies pay taxes on income earned overseas.

?    Requires mandatory basis reporting by investment brokers for transactions involving publicly traded securities.

?    Limits the tax deduction for domestic manufacturing activities of major American oil and gas companies.

➢   Increases and extends the Oil Spill Liability Trust Fund tax.

?    Increases the estimated tax payment for certain large corporations.