The just-concluded fight in Congress over taxes has mostly been viewed as an argument over the Bush-era tax cuts, but it was also a cliffhanger make-or-break deal for a variety of energy taxes.
In the package signed Friday afternoon by President Obama, chief among these is the subsidy for wind and solar projects known as the Treasury Grant Program, the most recent form of federal aid for renewable energy.
The aid was originally given as a tax credit, and when the recession hit, the credits became useless for most companies: they had no profits to take a credit against, so the recovery act of 2009 converted this to a grant.
The grant program was scheduled to expire on Dec. 31 because Congress figured the recession would be over by then and corporate profits would return, once again creating a market for the tax credits. The tax credit program is in place through 2012.
But the recession is still with us. So the bill that extended the Bush-era tax cuts for two years also included a one-year extension of the grant program.
That is especially important for wind projects, which have been tapering off in anticipation of the end of the grant program. Solar projects, with a shorter lead time, began their slowdown later but were also affected.
Lobbies for both industries, mindful that the House of Representatives will have a Republican majority in three weeks, stressed the bipartisan nature of support for the extension. “It took a year of tireless effort from the entire solar industry and our champions in Congress to get an extension,’’ said Rhone Resch, president and chief executive of the Solar Energy Industries Association.
The head of the American Wind Energy Association, Denise Bode, called it “a great holiday present for the 85,000 American workers in the wind energy industry, tens of thousands of whom will now be able to get back to work.’’
The other big winner was corn ethanol: producers got an extension of a 45-cent-per-gallon tax credit. That was opposed by many environmentalists and by other industries that use corn, including livestock producers. Given the growing fear of budget deficits, opponents thought they had a good shot at reducing the size of the tax break.
“The federal government should not waste another $6 billion on this needless subsidy,’’ a coalition that included the American Meat Institute, the National Taxpayers Union, the National Wildlife Federation and the Snack Food Association declared. Among the foes’ arguments was that with federal quotas in place for minimum use of ethanol, the subsidy would not increase the volume sold.
But the politics of ethanol have not changed, and Congress extended both the tax credit and a related tariff on imported oil, through the end of next year.
Bob Dinneen, the president and chief executive of the Renewable Fuels Association, said that Congress had “struck a blow to the oil status quo and extended important tax policies that will allow America’s ethanol industry to grow and evolve.’’
The package also reinstates a tax credit for biodiesel at $1 a gallon that lapsed at the end of last year.
Another provision of the tax bill with implications for gasoline use extends the more generous limit on transit benefits, which were enacted as part of the Recovery Act but which, like the Treasury grant program for wind and solar, had been scheduled to expire at the end of this month.
The provision allows employees to use pretax dollars or lets employers contribute pretax dollars, up to $230 a month for the expense of commuting by train, bus or van pool. If Congress had not acted, the limit would have reverted to $120 a month. But the new tax law extends that for one year. People who drive to work have the same $230 allowance, with no expiration date.
Also unresolved as the lame duck session goes into its final days of scrambling is the fate of the Diesel Emissions Reduction Act, which is to expire at the end of the month. The law provides money for cleaning up more than 14,000 old diesel engines every year in trucks, school buses and other applications. Clean air advocates say is a good idea because the diesel engines tend to last years longer than gasoline engines do.
Senator Tom Carper of Delaware, co-sponsor of the law that is expiring, said the program returned $13 in health benefits for every $1 spent. The Senate unanimously approved a renewal earlier this week but the House has not acted.
Another cliffhanger is new loan guarantees for nuclear projects. On Dec. 8 the House approved an additional $7 billion in loan guarantees for new nuclear projects as part of a “continuing resolution” that would finance most of the federal government’s operations, but the Senate will not act until next week.By MATTHEW L. WALD/NYT