TAX ALERT |
Authored by RSM US LLP
Senate Finance Committee chair Ron Wyden and 24 additional Democratic Senators recently introduced revised legislation with the stated intention of overhauling the federal energy tax code, creating jobs and combating climate change. The Clean Energy for America Act aims to consolidate the current energy tax incentives into emissions-based provisions that incentivize clean electricity, clean transportation and energy conservation. The incentives would be available to all energy technologies as long as they meet emissions reduction goals.
To incentivize clean electricity, the bill proposes an emissions-based, technology-neutral tax credit for facilities with zero or net negative carbon emissions. New zero-emission facilities would be able to elect either the production tax credit of up to 2.5 cents per kilowatt-hour, or the investment tax credit of up to 30%. Investments to improve the grid, such as stand-alone energy storage and high-capacity transmission lines, would also qualify for the investment tax credit.
To incentivize clean transportation, the bill proposes long-term incentives for battery and fuel cell electric vehicles and electric vehicle charging. It also proposes a technology-neutral tax credit for domestic production of clean transportation fuels that are at least 25% cleaner than average, with clean fuels required to reach net zero by 2030 in order to qualify.
To incentivize energy conservation, the bill proposes performance-based tax incentives for energy efficient homes and for energy efficient commercial buildings. The value of the tax incentives would increase as more energy is conserved.
Further, with the desire to ensure that clean energy jobs are good-paying jobs, the bill would require projects above residential size to comply with federal labor requirements in order to receive tax credits.
While not every tax bill introduced by Congress is newsworthy, the Clean Energy for America Act is of interest in light of President Biden’s push for infrastructure legislation and his pledge to reduce greenhouse gas emissions. Although the Clean Energy for America Act is so far just proposed legislation with no bipartisan support, it provides insight into senate democrats’ vision for energy tax policy. While this is one of several bills aimed at amending the clean energy tax credits, it is possible that some of the proposals in this bill may eventually be enacted into law.
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This article was written by Debbie Gordon, Trina Pinneau and originally appeared on 2021-04-23.
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