Federal Solar Tax Credit, PTC Expansion Hopes Look Dim

As of last night, the odds for passage of a proposed federal solar tax credit for the residential market are looking quite bleak. After months without progress on the FSC/ETI, the so-called Corporate Tax Bill, Congress is now in Conference Committee, trying to resolve differences between the House and Senate versions of the bill. In making final compromises, it looks as though some strong renewable energy measures included in the Senate version are likely to be left out.

The underlying corporate tax bill is designed to bring about the lifting of European Union trade sanctions on some U.S. products (now at 9 percent) by repealing an export tax break that has been ruled a violation of World Trade Organization rules. Since this issue must be resolved by Congress, many industry and policy sources view passage of the corporate tax bill as the best, and perhaps only, vehicle to get some important legislation for renewable energy passed. The U.S. House of Representatives passed their version (H.R. 4520) earlier this summer which contains a three-year extension of the production tax credit (PTC) – an item crucial for the continued health of the wind power industry. The PTC was expired for most of this year leading to many stalled projects and a deflated industry. It has since been revived, albeit for just one year, through the latest round of middle class tax cuts recently signed into law by President George W. Bush. The U.S. Senate passed their own version (S. 1637) of the Corporate Tax Bill months ago and this is the one solar advocates have had their eye on. It contains a 15 percent residential solar tax credit, as well as a means to extend the PTC and expand it to solar, geothermal, and open-loop biomass. This expansion would be great for geothermal and open-loop biomass, but in the case of solar, it’s written so that you can’t take both the 10 percent investment tax credit and the PTC, according to Colin Murchie, Director of Government Affairs for the Solar Energy Industries Association. There are some last minute efforts underway to strike this provision, which would moot the credit for low-capacity-factor solar technologies,” Murchie said. The residential solar tax credit, authored by Rep. JD Hayworth (R-AZ) and Sen. Wayne Allard (R-CO), would ‘cost’ the Treasury just $100 million over ten years, while going directly to consumers who purchase solar energy systems for their homes, according to the Solar Energy Industries Association (SEIA). “The residential solar tax credit can help consumers reduce their high heating bills this winter,” said Rhone Resch, Executive Director of SEIA. “At the same time, it can drive more solar energy jobs to U.S. workers. We urge the Conferees to include the residential solar tax credit in their final bill.” That isn’t likely to happen, though. Murchie said that Representative Bill Thomas, Republican Chairman of the conference committee has made his intentions clear: a bill as “clean” as possible, with no amendments in the final version. Items that were in the Senate version are being thrown out by the Republican-controlled conference committee. This includes the federal tax credit – though expansion of the PTC to other renewable energy sources seems likely, this credit is not usable by consumers, and its wording is problematic for large power plants. “It doesn’t look good,” Murchie said. “All amendments are being defeated in the House. We’re pushing hard, and looking into our backup options.” Despite these likely losses for renewable energy, Murchie said that there’s a chance the entire bill might be defeated due to contentious Tobacco “buy-out” legislation. “With the tobacco regulations in the bill, the entire bill may still founder on the rocks no matter the status of the energy credits” Murchie said.
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