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Orphan energy tax credits face tough odds despite industry push

The renewable energy industry is lobbying for extensions to several key tax credits excluded from the GOP's recently enacted tax law, but Congress looks unlikely to include them in an upcoming omnibus bill.

The federal tax overhaul that President Donald Trump signed into law in December 2017 largely preserved credits for large-scale wind and solar projects. And the Bipartisan Budget Act enacted in February prolonged credits for new nuclear power plants and carbon capture and sequestration projects and provided a five-year retroactive extension of tax credits for qualifying small wind and solar facilities, geothermal heat pumps, fuel cells and combined heat and power facilities that will run through 2021.

But both the tax and budget bills failed to extend credits for smaller-scale renewable technologies and efficiency upgrades for homes and commercial buildings. With the GOP recently completing a major upgrade to the U.S. tax code, industry experts are skeptical that lawmakers, particularly in the U.S. House of Representatives, have an appetite for tackling further extensions to discrete energy incentives.

The House Ways and Means Committee held a hearing on March 14 to evaluate recently expired tax credits, including several related to energy. At the start of that hearing, Committee Chairman Kevin Brady, R-Texas, asked whether Congress should "keep temporary provisions that are a relic of the old broken system" in light of the recent tax code overhaul. Those and other comments from GOP lawmakers at the hearing cast a potentially ominous shadow on the fate of so-called "orphan" energy tax extenders left out of recent legislation.

"The tone of the questioning in the hearing suggests a level of skepticism among House tax-writers that many of these temporary measures are all still necessary," said Liam Donovan, an energy principal with Bracewell LLP's government relations practice. "And I think that reflects Chairman Brady's view that there should be a high bar to merit further extensions."

Groups supporting the orphan energy credits testified at the March 14 hearing. Lisa Jacobson, president of the Business Council for Sustainable Energy, said the tax code lacks long-term policies to support certain renewable technologies, including biomass, landfill gas, waste-to-energy facilities, hydropower, and marine and hydrokinetic energy. The head of American Natural Gas, LLC also appeared at the hearing to promote a five-year extension of the alternative fuel excise tax credit, which provides a 50 cents per gasoline gallon equivalent credit for natural gas used as transportation fuel.

Congress is expected to roll out an omnibus spending bill for the rest of the 2018 fiscal year soon. Extender proponents have hoped the omnibus bill will be a vehicle for prolonging certain energy credits, but even defenders in Congress are cautious.

The omnibus could include some energy credit extensions, but "I think the challenge is the House of Representatives," U.S. Sen. Maria Cantwell, the top Democrat on the Senate Energy and Natural Resources Committee, said March 14 at the American Council on Renewable Energy's policy forum in Washington, D.C.

Donovan said he would be surprised to see energy tax provisions in the omnibus bill, in part because of the tight timeline for passing the legislation. Current funding for the federal government expires after March 23. But Donovan added that "definitely more opportunity" exists for energy tax extenders in other large must-pass bills, including reauthorization legislation for the Federal Aviation Administration.