Senate Finance Committee Chairman Max Baucus (D-MT) unveiled his long-awaited energy tax reform proposal on Wednesday, December 18, 2013, as part of the committee's comprehensive effort to reform the country's tax code. The proposal released is separate from other attempts to pass a "tax extenders" bill for expiring incentives, but the two are related in that the proposal seeks to reform energy incentives generally. The proposal is one of several released by the Senate Finance Committee, covering a variety of topics.
At the heart of the Baucus proposal is the creation of a single incentive for the production of "clean" electricity (as opposed to the multiple incentives that exist in the current tax code) and another for "clean" transportation fuels. These incentives would be available to renewables and fossil fuels and the size of the credit would be determined by how clean the product is. The credit would be available in the form of a production tax credit or an investment tax credit.
All existing tax credits for electricity and transportation fuel would be terminated and covered by these two new credits as the committee is trying to address concerns that the current tax code picks winners and losers. Finally, these incentives would be phased out once the greenhouse gas intensity of each market has achieved a 25 percent reduction, providing stability over the current system of temporary extensions.
Of note, Senator Baucus, who is retiring from the Senate and was nominated by President Obama earlier this month to be the next U.S. ambassador to China, worked closely on this proposal with Senator Ron Wyden (D-OR), the likely successor to the Finance Committee Chair position.
The committee is now seeking comments on the proposal. Interested parties are recommended to submit any comments prior to January 31, 2014. For additional information on this proposal, or the current outlook for comprehensive tax reform, please contact Andy Ehrlich or Andrew Wheeler.