Tuesday evening the Senate passed renewable energy tax incentives as part of the Jumpstart Our Business Strength (JOBS) Act. The legislation achieved full Senate approval on a 92 to 5 vote, which cuts taxes for U.S. factories and farms and is meant to head off more trade sanctions from Europe on those producers.
This is the first step toward ending EU sanctions imposed because of a World Trade Organization ruling against a U.S. export subsidy that lowers the rate of income tax imposed on goods that are manufactured in the United States and exported for sale in foreign markets. JOBS repeals the current tax regime ruled out of compliance and replaces it with a system that would bring the United States into compliance.
"Every day of delay means more sanctions freezing U.S. businesses out of the European markets, and more jobs in danger," says JOBS sponsor Sen. Chuck Grassley's, R-Iowa. "I hope the House will soon follow suit with similar legislation. We need to give permanent relief to the nation's job creators and the lift the sanctions burden from our exports."
Because of political delays, Senate passage comes after the European Union's sanctions began on March 1. The House hasn't passed a similar bill. The sanctions began as a 5% Euro tax on U.S. exports and increase 1% each month Congress doesn't repeal the current tax regime. The Euro tax currently stands at 7% but will increase if Congress delays.
Renewable provisions successfully passed
JOBS has been seen as a must pass legislation, making it tangled in political maneuvering to add amendments. Because the Senate is deadlocked on passing a comprehensive energy package, the body was able to agree on passing a number of renewable tax provisions. "It makes sense to use the tax code to develop alternative energy," Grassley says. "Cutting taxes is an effective way to encourage positive, environmentally conscious ways to produce electricity and fuel. This is a good, green energy tax package."
The energy tax incentive priorities passed in the legislation include:
- An extension of the wind energy production tax credit until Jan. 1, 2007. Grassley authored the Wind Energy Incentives Act of 1993, which established the first-ever wind energy production tax credit.
- An income tax credit and excise credit for biodiesel fuel mixtures. These new incentives would encourage the production of biodiesel, a clean-burning alternative fuel made from domestic renewable sources, such as soybean oil. The tax credit applies to biodiesel made from vegetable oil, animal fats, recycled oils, and other greases.
- An extension of the tax credit for the production of electricity from biomass, organic material from plants. The credit first became law in 1992. This bill expands the definition of biomass to include saw dust, tree trimmings, and agricultural byproducts.
- An expansion of the definition of an eligible small ethanol producer so small cooperative producers of ethanol will receive the same tax benefits as large companies. It also clarifies that the tax credit can flow through to the patrons of the cooperatives.
- Encouragement of the manufacture and use of super energy-efficient washing machines and refrigerators with a tax credit for the production of those appliances.
- New opportunities for energy production, a useful method of waste disposal and increased farm income by creating a production tax credit for electricity generated from agricultural animal waste.
- Tax incentives aimed at improving the energy efficiency of homes.
- A tax credit for the purchase of alternative motor vehicles, including electric cars, and an extension of the deduction for alternative vehicles, including hydrogen fuel-cell cars.
- In addition, the Volumetric Ethanol Excise Tax Credit Act would become law. This proposal substantially overhauls the fuel excise tax system by ensuring that every gallon of gasoline or gasoline blended with ethanol contributes a full 18.4 cents to the Highway Trust Fund. These initial steps begin restructuring tax incentives for ethanol so ethanol use would contribute to the Highway Trust Fund instead of unrelated government programs.
"Investing in alternative forms of clean-burning energy is good for the environment, good for national security and energy independence, good for job creation and economic development, and good for taxpayers," Grassley says. "I look forward to final congressional approval of these bipartisan alternative energy tax incentives."