Senate Adopts Clean Energy Tax Package

On April 10, 2008, the U.S. Senate passed legislation with significant provisions supporting the renewable-energy industry. The Clean Energy Tax Stimulus Act of 2008, which must be voted on in the House before being sent to the President, modifies and extends the incentives for energy-efficient technologies and renewable energy that were introduced in the Energy Policy Act of 2005 (see EBN Vol. 14, No. 9); many of these incentives were set to expire at the end of 2008.

For existing homes, the new legislation would take the 10% investment tax credit for energy-efficiency improvements and extend it to property “placed in service” (the day an asset becomes available for use) through 2009. A tax credit for energy-efficient new homes would be available through 2010. Owners of commercial buildings would be able to deduct the cost of energy-efficiency improvements by up to $2.25/ft2 ($24.20/m2) through 2009. Also through 2009, homeowners would be able to claim a personal tax credit (without the current $2,000 cap) for property that uses solar energy to generate electricity or heat water. A credit for energy-efficient appliances would be extended to products manufactured in 2008, 2009, and 2010.

On April 10, 2008, the U.S. Senate passed legislation with significant provisions supporting the renewable-energy industry. The Clean Energy Tax Stimulus Act of 2008, which must be voted on in the House before being sent to the President, modifies and extends the incentives for energy-efficient technologies and renewable energy that were introduced in the Energy Policy Act of 2005 (see EBN Vol. 14, No. 9); many of these incentives were set to expire at the end of 2008.

For existing homes, the new legislation would take the 10% investment tax credit for energy-efficiency improvements and extend it to property “placed in service” (the day an asset becomes available for use) through 2009. A tax credit for energy-efficient new homes would be available through 2010. Owners of commercial buildings would be able to deduct the cost of energy-efficiency improvements by up to $2.25/ft² ($24.20/m²) through 2009. Also through 2009, homeowners would be able to claim a personal tax credit (without the current $2,000 cap) for property that uses solar energy to generate electricity or heat water. A credit for energy-efficient appliances would be extended to products manufactured in 2008, 2009, and 2010.

Utility-scale facilities that generate electricity from solar energy, wind energy, geothermal energy, hydropower, micro-hydropower (150 kW – 5 MW; including marine and hydrokinetic energy), closed-loop biomass, open-loop biomass, landfill gas, and trash combustion would have through 2009 to qualify for the renewable-energy-production tax credit. Another utility-scale incentive—the solar-energy and fuel-cell investment tax credits—would extend through 2016, enabling taxpayers to claim a 10% credit for the purchase of stationary microturbines and a 30% business credit for the purchase of fuel-cell power plants and qualified solar-energy property. The bill would also authorize an additional $400 million (on top of the currently allocated $1.2 billion) in Clean Renewable Energy Bonds (CREBs) and extend the authority to issue such bonds through 2009. (CREBs reduce the cost of renewable-energy investments for publicly-owned utilities and electric cooperatives that cannot benefit from tax credits.)

Clean-energy advocates hope that Congress and the White House can unify behind a tax package that benefits renewable energy. However, two major issues stand in the way of further progress. First, the Senate bill resists appropriating funds from oil and gas subsidies to pay for the incentives, rivaling a bill approved by the House earlier this year that would redirect oil and gas subsidies to renewable energy. Second, the Senate's tax package is part of a larger bill—the Housing Stimulus Bill—that the White House currently opposes. Until these issues are settled, less significant “extender bills,” such as one introduced by the Senate Finance Committee on April 17, 2008, may prevent disruption to the renewable-energy markets and support green-building initiatives by providing at least one more year of clean-energy incentives.

– Rachel Navaro