House and Senate negotiators have agreed to spare the electric-vehicle tax credit and wind production tax credit in their compromise package, according to a Republican familiar with the process.
As part of the $1.5 trillion House tax bill, the $7,500 electric-vehicle tax credit would have been eliminated and a the wind production tax credit would have been curtailed. The Senate bill didn’t do either, and that is part of the package set for release, said the person, who asked not to be identified discussing the details before the bill is unveiled.
Separately, House and Senate negotiators agreed to retain Senate language on the treatment of master limited partnerships used by oil, gas and pipeline companies. MLPs are taxed as partnerships but have ownership interests that are traded like stock, allowing projects to attract lower-cost capital. And negotiators would ax the corporate alternative minimum tax, adopting a House provision after coal-mining executives and other corporate leaders balked, according to three people familiar with the talks.
Senate Majority Whip John Cornyn, a Texas Republican, said the final compromise bill sticks with the Senate approach he authored. Under that language, income from master limited partnerships would qualify for a pass-through deduction.
Still undecided is a provision in the Senate bill that imposes a minimum tax on foreign transactions for JPMorgan Chase & Co., Bank of America Corp. and other large multinational companies that threatens to erode the value of solar and wind tax credits.
As written the provision, known as Base Erosion Anti-Abuse Tax provision, or BEAT, threatens to erode the value of solar and wind credits that renewable energy developers sell, drying up a $12 billion tax-equity market, but bill negotiators are trying to address it, said Senator John Thune, a South Dakota Republican who serves on the Senate tax-writing committee.
“We’re working on it,” he said in an interview. “Nothing’s finalized yet but we recognize that is a problem created by the BEAT and we are trying to ensure those types of projects aren’t adversely affected.”
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The vehicle tax credit, adopted as part of the 2009 stimulus bill, helps automakers from Detroit to Yokohama betting big on an electric future with plans to spend billions of dollars on new pure-electric models to be rolled-out in the coming years despite limited sales of the vehicles to date.
Availability of the credit has been capped at the first 200,000 qualifying vehicles sold by each manufacturer. No automaker has reached that cap yet. Tesla Inc. sold about 127,000 Model S sedans and Model X sport utility vehicles through August, according to researcher IHS Markit.
Congressional analysts estimate repealing the measure could save $200 million over the next decade.
Wind Phaseout
Separately, under the deal passed by Congress in 2015, the wind production tax credit begins phasing out this year before expiring in 2020. A separate, and unaffected, solar industry tax credit phases out before expiring in 2022.
Under the House bill, the wind industry’s 2.3-cent-per-kilowatt hour tax credit would have been cut to 1.5 cents. The measure also proposed to harden a deadline for its phaseout — changes estimated by congressional analysts to cut more than $11 billion in benefits to the industry over the next decade.
But that idea drew opposition from senators of both parties, most notably Iowa Republican Chuck Grassley.
“We’re in a transition period already, even if you don’t have a tax bill, on wind,” Grassley said this month. “Wind is in transition, so it shouldn’t be changed if we have a tax bill.”
Source: Bloomberg
