The latest draft legislation from Michigan Republican Rep. Dave Camp would repeal various green energy tax handouts, as well as tax breaks for the oil and gas industry.
Camp’s nearly 1000-page draft bill would end a number of green energy subsidies, including tax credits for wind, biodiesel, electric cars and energy efficient homes and appliances. The House Ways and Means chairman’s move was welcomed by free-marketeers, but hotly contested by green energy producers.
“Chairman Camp’s proposal is an encouraging step toward common sense tax reform that Americans deserve,” said Tom Pyle, president of the American Energy Alliance (AEA), which opposes energy subsidies. “The Chairman should be commended for his efforts to save taxpayer dollars by ending wasteful green energy subsidies, including the wind PTC.”
AEA and other groups have heavily opposed the extension of wind energy tax credits in the past, and played a key role in the campaign to block their extension for another year after they expired at the end of 2013.
The wind PTC has been paying wind farms to produce power for the past 20 years or so, and coalitions of free-market groups and federal lawmakers argued that two decades of taxpayer support was enough.
“For over twenty years, the PTC has put an unnecessary burden on taxpayers by forcing them to prop up the self-proclaimed ‘infant’ wind industry,” Pyle added. “The wind industry demands ‘policy certainty’ for wind energy subsidies. Chairman Camp’s plan answers those calls by providing certainty that taxpayers will no longer be forced to foot the bill for Big Wind.”
“Retroactive tax increases undermine investors’ trust in the US investment environment,” said Tom Kiernan, CEO of the American Wind Energy Association. “To raise taxes retroactively on an industry that has invested up to $25 billion annually in this country and built 550 manufacturing facilities would be bad policy.”
Camp’s draft bill offers a stark contrast to energy tax reforms proposed by former Sen. Max Baucus. The Montana Democrat’s plan would have kept green energy tax credits, subsidizing power that was 25 percent cleaner than the average power plant for four years. Baucus’s plan would have also subsidized transportation fuels that are 25 percent cleaner than conventional gasoline, which would also be phased out.
Camp’s draft bill also targeted tax breaks enjoyed by the oil and gas industry, specifically by ending the “last-in-first-out”, or LIFO, accounting technique. LIFO allows companies to value their inventories at the most recent price paid when calculating their profits and taxable income.
The draft bill would preserve “master limited partnerships” that have helped finance energy infrastructure and leave intact a provision allowing immediate deductions of intangible drilling costs such as repairs and hauling supplies.
The Houston Chronicle reports that LIFO “has meant lower net profits — and, as a result, lower tax bills — for oil companies whose stockpiles of crude have climbed in price over the past decade.”
“Camp’s proposal also would end an oil and gas industry exception allowing them more latitude to deduct passive losses. And unlike Baucus’ approach, Camp’s draft would phase out the 10-year-old Sec. 199 domestic manufacturing deduction for all industries,” the Chronicle notes.
“There are serious flaws in this discussion draft regarding cost recovery and LIFO accounting that could hurt jobs, American energy production and our energy security,” said Jack Gerard, president of the American Petroleum Institute. “Higher taxes on energy and manufacturing would hit American families and workers by undermining private investment, job creation, energy production and government revenue.”
While the oil and gas industry criticized Camp’s proposed ending of LIFO and other cost recovery measures, the renewable fuels industry took the opportunity to lambaste “Big Oil” and air their own grievances about the proposal.
“While the draft plan falls well short of the goal of ensuring that the multi-trillion dollar global clean energy sector sets up shop in the United States, Chairman Camp should be commended for taking tough positions on many of the most distortive oil and gas subsidies in the federal tax code,” Brooke Coleman, executive director of the Advanced Ethanol Council.
Camp, however, said his tax plan was written with the input of many stakeholders.
“This legislation does not reflect ideas solely advanced by Democrats or ideas solely advanced by Republicans, nor is it limited to the halls of Congress,” said Camp. “Instead, this is a comprehensive plan that reflects input and ideas championed by Congress, the Administration and, most importantly, the American people.”
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