# Side-by-Side Comparison of Energy Tax Provisions of H.R. 6899 and S. 3478

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## Record

- **Collection:** Congressional research report
- **Document type:** CRS Report
- **Published:** September 18, 2008
- **Citation:** RL34674

## Text

Side-by-Side Comparison of Energy Tax
Provisions of H.R. 6899 and S. 3478
-name redactedSpecialist in Energy and Environmental Economics
September 18, 2008

Congressional Research Service
7-....
www.crs.gov
RL34674

CRS Report for Congress
Prepared for Members and Committees of Congress

Side-by-Side Comparison of Energy Tax Provisions of H.R. 6899 and S. 3478

Summary
The Comprehensive American Energy Security and Consumer Protection Act, H.R. 6899, was
introduced on September 15, 2008, and approved by the House on September 16, 2008. This plan
allows oil and gas drilling in the Outer Continental Shelf (OCS), and it incorporates most of the
energy tax provisions from an energy tax bill, H.R. 5351, and some of H.R. 6049, both of which
were previously approved by the House of Representatives but failed to be taken up by the
Senate.
In the Senate, legislative efforts on energy tax incentives and energy tax extenders center around
S. 3478, the $40 billion energy tax bill offered by Finance Committee Chairman Max Baucus and
ranking Republican Charles Grassley, and supported by Senate Democratic leadership. In the
Senate, controversy over tax increases on the oil and gas industry, particularly over proposed
repeal of the tax code’s §199 deduction for the major integrated oil companies, continues; it
remains unclear whether an energy tax bill with this provision will pass a cloture vote to limit
debate, and thus be taken up.
This report is a side-by-side comparison of energy tax bills H.R. 6899 and S. 3478.

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Side-by-Side Comparison of Energy Tax Provisions of H.R. 6899 and S. 3478

Contents
Energy Tax Provisions in H.R. 6899............................................................................................3
S. 3478 .......................................................................................................................................4

Tables
Table 1. Side-by-Side Comparison of S. 3478 and the Energy Tax Provisions of H.R.
6899 ........................................................................................................................................6

Contacts
Author Contact Information ...................................................................................................... 25

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Side-by-Side Comparison of Energy Tax Provisions of H.R. 6899 and S. 3478

T

he idea of using the tax code to achieve energy policy goals and other national objectives
is not new but, historically, U.S. federal energy tax policy promoted the exploration and
development—the supply of—oil and gas. The 1970s witnessed (1) a significant cutback
in the oil and gas industry’s tax preferences, (2) the imposition of new excise taxes on oil (some
of which were subsequently repealed or expired), and (3) the introduction of numerous tax
preferences for energy conservation, the development of alternative fuels, and the
commercialization of the technologies for producing these fuels (renewables such as solar, wind,
and biomass, and nonconventional fossil fuels such as shale oil and coalbed methane).
Comprehensive energy policy legislation containing numerous tax incentives, and some tax
increases on the oil industry, was signed on August 8, 2005 (P.L. 109-58). The law, the Energy
Policy Act of 2005, contained about $15 billion in energy tax incentives over 11 years, including
numerous tax incentives for the supply of conventional fuels, as well as for energy efficiency, and
for several types of alternative and renewable resources, such as solar and geothermal. The Tax
Relief and Health Care Act of 2006 (P.L. 109-432), enacted in December 2006, provided for oneyear extensions of some of these provisions. But some of these energy tax incentives expired on
January 1, 2008, while others are about to expire at the end of 2008.
In early December 2007, it appeared that congressional conferees had reached agreement on
another comprehensive energy bill, the Energy Independence and Security Act (H.R. 6), and
particularly on the controversial energy tax provisions. The Democratic leadership in the 110th
Congress proposed to eliminate or reduce tax subsidies for oil and gas and use the additional
revenues to increase funding for their energy policy priorities: energy efficiency and alternative
and renewable fuels, that is, reducing fossil fuel demand rather than increasing energy (oil and
gas) supply. In addition, congressional leaders wanted to extend many of the energy efficiency
and renewable fuels tax incentives that either had expired or were about to expire.
The compromise on the energy tax title in H.R. 6 proposed to raise taxes by about $21 billion to
fund extensions and liberalization of existing energy tax incentives. However, the Senate on
December 13, 2007, stripped the controversial tax title from its version of the comprehensive
energy bill (H.R. 6) and then passed the bill, 86-8, leading to the President’s signing of the Energy
Independence and Security Act of 2007 (P.L. 110-140), on December 19, 2007. The only taxrelated provisions that survived were (1) an extension of the Federal Unemployment Tax Act
surtax for one year, raising about $1.5 billion; (2) higher penalties for failure to file partnership
returns, increasing revenues by $655 million; and (3) an extension of the amortization period for
geological and geophysical expenditures from five to seven years, raising $103 million in
revenues. The latter provision was the only tax increase on the oil and gas industry in the final
bill. Those three provisions would offset the $2.1 billion in lost excise tax revenues going into the
federal Highway Trust Fund as a result of the implementation of the revised Corporate Average
Fuel Economy standards. The decision to strip the much larger $21 billion tax title stemmed from
a White House veto threat and the Senate’s inability to get the votes required to end debate on the
bill earlier in the day. Senate Majority Leader Harry Reid’s (D-Nev.) effort to invoke cloture fell
short by one vote, in a 59-40 tally.
Since then, the Congress has tried several times to pass energy tax legislation, and thus avoid the
impending expiration of several popular energy tax incentives, such as the “wind” energy tax
credit under Internal Revenue Code (IRC) §45, which, since its enactment in 1992, has lapsed

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Side-by-Side Comparison of Energy Tax Provisions of H.R. 6899 and S. 3478

three times only to be reinstated.1 Several energy tax bills have passed the House but not the
Senate, where on several occasions, the failure to invoke cloture failed to bring up the legislation
for consideration. Senate Republicans objected to the idea of raising taxes to offset extension of
expiring energy tax provisions, which they consider to be an extension of current tax policy rather
than new tax policy. In addition, Senate Republicans objected to raising taxes on the oil and gas
industry, such as by repealing the (IRC) §199 deduction, and by streamlining the foreign tax
credit for oil companies. 2 The Bush Administration repeatedly threatened to veto these types of
energy tax bills, in part because of their proposed increased taxes on the oil and gas industry.
Frustrated with the lack of action on energy tax legislation over the last two years, House
Democrats introduced and approved several such bills, such as H.R. 5351, which was approved
by the House on February 27, 2008. House Speaker Pelosi and other Democrats sent President
Bush a letter February 28, 2008, urging him to reconsider his opposition to the Democratic
renewable energy plan, arguing that their energy tax plan would “correct an imbalance in the tax
code.”3
At this writing, a renewed legislative effort is being made to enact energy tax legislation, although
the two chambers were moving in different directions on how to bring the legislation to the floor.
In the House, energy tax provisions are part of H.R. 6899, House Democratic leadership’s latest
draft of broad-based energy policy legislation, the Comprehensive American Energy Security and
Consumer Protection Act. Passed on September 16, 2008, the bill would expand oil and gas
drilling offshore by allowing oil and gas exploration and production in areas of the outer
continental shelf that are currently off limits, except for waters in the Gulf of Mexico off the
Florida coast. Under the bill, states could allow such drilling between 50 and 100 miles offshore,
while the federal government could permit drilling from 100 to 200 miles offshore.4 Revenue
from the new offshore leases would be used to assist the development of alternative energy, and
would not be shared by the adjacent coastal states. The bill would also repeal the current ban on
leasing federal lands for oil shale production if states enact laws providing for such leases and
1

See. U.S. Library of Congress. Congressional Research Service. Extension of Expiring Energy Tax Provisions. CRS
Report RL32265 by (name redacted).
2
Enacted in 2004 as an export tax incentive, this provision allows a deduction, as a business expense, for a specified
percentage of the qualified production activity’s income (or profit) subject to a limit of 50% of the wages paid that are
allocable to the domestic production during the taxable year. The deduction was 3% of income for 2006, is currently
6%, and is scheduled to increase to 9% when fully phased in by 2010.
3
Several times the House has approved energy tax legislation, and several times in the Senate such legislation failed a
cloture vote and thus could not be brought to the floor for debate. The latest was H.R. 6049, the House tax extenders
bill, which was approved by the House on May 21, 2008, but failed three cloture votes in the Senate. Several times
recently, the Senate has been prevented from taking action on energy tax legislation due to the failure to invoke cloture
on the motion to proceed to the House energy tax extenders bills. The first was June 10, when the motion failed by a
vote of 50-44; the second was on June 17, when the motion failed by a vote of 52-44; the third was July 29, when the
cloture motion failed by a vote of 53 to 43. In addition, on July 30 the Senate rejected by a vote of 51 to 43 a motion to
invoke cloture on a motion to proceed to debate S. 3335, Senator Baucus’ energy tax bill.
4
The House Democratic leadership’s energy proposal is centered around opening the Outer Continental Shelf to oil and
gas development. The OCS areas—the Atlantic OCS, Gulf of Mexico (GOM) OCS, Pacific OCS, and Alaska OCS—
are the offshore lands under the jurisdiction of the U.S. government. Federal law allows or confirms state boundaries
and jurisdiction over the continental shelf areas up to 3 nautical miles from the coastline, except that (in the GOM)
Texas and Florida offshore boundaries extend up to 9 nautical miles from the coastline. Exclusive federal jurisdiction
over resources of the shelf applies from state boundaries out to 200 miles from the U.S. coastline. For a more detailed
definition of the OCS and various governmental jurisdictions see U.S. Library of Congress. Congressional Research
Service. CRS Report RL33404, Offshore Oil and Gas Development: Legal Framework, by (name redacted). May 3, 2006.
For a comparison of different proposals see U. S. Library of Congress. Congressional Research Service. CRS Report
RL34667, Outer Continental Shelf Leasing: Side-by-Side Comparison of Five Legislative Proposals, by (name
redacted). September 15, 2008.

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Side-by-Side Comparison of Energy Tax Provisions of H.R. 6899 and S. 3478

production. H.R. 6899 also would enact a renewable portfolio standard, a requirement that power
companies generate 15% of their energy from renewable sources by 2020.

Energy Tax Provisions in H.R. 6899
The energy tax provisions in H.R. 6899 (Title XIII, the Energy Tax Incentives Act of 2008) are
largely the same as those in H.R. 5351, an approximately $18 billion energy tax package that was
approved by the House on February 27, 2008. They also include some of the measures in H.R.
6049, another energy tax bill that was also approved by the House.5 H.R. 5351 is, in turn, a
smaller version of the energy tax title that was dropped from H.R. 3221 in December 2007, but
larger than the $16 billion bill approved by the Ways and Means Committee in 2007 (H.R. 2776).
However, because H.R. 6899 incorporates some of the incentives of H.R. 6049, its total cost is
higher than the cost of H.R. 5351: about $19 billion over 10 years, instead of $18 billion.
H.R. 6899 includes several tax incentives for renewable energy that would reduce revenue by an
estimated $19 billion over 10 years.6 At a cost of $6.9 billion over 10 years, it extends a
renewable energy production tax credit, covering wind facilities for one additional year, through
2009, and certain other renewable energy production for three years, through 2011, while capping
credits for facilities that come into service after 2009. The bill extends for eight years, through
2016, a credit for investing in solar energy and fuel cells, at a cost of $1.8 billion. It also extends
the energy-efficient commercial building deduction for five years, the credit for efficiency
improvements to existing homes for one year, and a credit for energy-efficient appliances for
three years.
The measure provides for the allocation of $2.625 billion in energy conservation bonds, $1.75
billion in clean renewable energy bonds, and $1.75 billion in energy security bonds to finance the
installation of natural gas pumps at gas stations; all would be tax-credit bonds, which provide a
tax credit in lieu of interest, and projects financed through the bonds would have to comply with
Davis-Bacon requirements. It also creates a new tax credit for plug-in electric vehicles, an
accelerated recovery period for smart electric meters and grid systems, and provides $1.1 billion
in tax credits for carbon capture and sequestration projects. The tax title also includes one nonenergy tax subsidy: a $1.1 billion provision to restructure the New York Liberty Zone tax
incentives to allow for new transportation projects.
H.R. 6899 is fully offset, raising $19 billion in taxes, including many of the same energy tax
increases on oil companies also previously approved by the House. The energy tax provisions in
H.R. 6899 are entirely offset, mainly by denying the IRC §199 manufacturing deduction to
certain major integrated oil companies (including oil companies controlled by foreign
governments—including CITGO ) and freezing the deduction for all other oil and gas producers
at the current rate of 6%.7 Earlier §199 repeal proposals had been criticized for seeking to end the
5

As noted, the House has approved several energy tax bills over the last two years, only to have them stall in the
Senate. H.R. 6049, for instance, was approved by the House on May 21, 2008 only to fail several cloture votes in the
Senate (see footnote 3).
6
U.S. Congress. Joint Committee on Taxation. Estimated Revenue Effects of Title VIII of H.R. 6899, The “Energy Tax
Incentives Act of 2008,” as Passed by the House of Representatives on September 16, 2008. JCX-68-08. September 17,
2008.
7
First enacted in 2004, this provision allows a deduction, as a business expense, for a specified percentage of the
qualified production activity’s income subject to a limit of 50% of the wages paid that are allocable to the domestic
(continued...)

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Side-by-Side Comparison of Energy Tax Provisions of H.R. 6899 and S. 3478

deduction only for U.S.-based major companies, while exempting Venezuelan-controlled CITGO
because, not being a crude oil producer, it does not meet the definition of a “major integrated oil
and gas producer.” The entire provision would raise $13.9 billion over 10 years. Additional
revenue—about $4.0 billion over 10 years—would come from a provision to streamline the tax
treatment of foreign oil-related income so it is treated the same as foreign oil and gas extraction
income.
In addition to the H.R. 6899, the Republican leadership in the House has introduced its own
energy tax bill, H.R. 6566, which also extends and expands some of the energy tax incentives and
contains no tax increases (offsets). The energy tax provisions in this bill are, however, smaller and
somewhat narrower than those in H.R. 6899.

S. 3478
In the Senate, legislative efforts on energy tax incentives and energy tax extenders center around
S. 3478, the Energy Independence and Investment Act of 2008, a $40 billion energy tax bill
offered by Finance Committee Chairman Max Baucus and ranking Republican Charles Grassley.
Senate Majority Leader Harry Reid said on September 12 that S. 3478 is “must-pass” legislation.
Reid told reporters the energy tax package, which includes extensions of tax incentives for
renewable energy, should be prioritized even ahead of the broader energy policy bills being
considered, and the rest of the non-energy tax extenders package. Reid said he hopes to bring the
bill to the floor during the week of September 15, but noted that the schedule depends on whether
Senate Republicans will agree to move to the legislation.8
While most of the tax incentives in the bill are extensions of existing policy and are not
controversial, the legislation would need to be paid for through new sources of revenue. One
proposed offset—which has been previously blocked by Republicans—would repeal the IRC
§199 manufacturing deduction for the five major oil and gas producers, raising $13.9 billion over
10 years. The bill also would be paid for through a new 13% excise tax on oil and natural gas
pumped from the Outer Continental Shelf, a proposal to eliminate the distinction between foreign
oil and gas extraction income and foreign oil-related income, and an extension and increase in the
oil spill tax through the end of 2017. In total, tax increases on the oil and gas industry would
account for $31 billion of the $40 billion total cost of the legislation. The final major offset would
come from a requirement on securities brokers to report on the cost basis for transactions they
handle to the Internal Revenue Service, a provision expected to raise about $8 billion in new
revenues over 10 years.
The tax offsets, or tax increases in S. 3478 are not without controversy, however, particularly the
repeal of the IRC §199 manufacturing deduction for the five major oil and gas producers, as
(...continued)
production during the taxable year. The deduction was 3% of income for 2006, is currently 6%, and is scheduled to
increase to 9% when fully phased in by 2010. For the domestic oil and gas industry, the deduction applies to oil and gas
or any primary product thereof, provided that such product was “manufactured, produced, or extracted in whole or in
significant part in the United States.” Note that extraction is considered to be manufacturing for purposes of this
deduction, which means that domestic firms in the business of extracting oil and gas qualify for the deduction. This
deduction was enacted under the American Jobs Creation Act of 2004 (P.L. 108-357, also known as the “JOBS” bill).
8
Bureau of National Affairs. Daily Tax Report. “Reid Says ‘Must Pass’ Energy Legislation Should be Handled Before
Tax Extenders.” September 15, 2008. P. G-5.

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Side-by-Side Comparison of Energy Tax Provisions of H.R. 6899 and S. 3478

discussed previously. Several times the House has approved energy tax legislation, and several
times in the Senate such legislation failed a cloture vote and thus could not be brought to the floor
for debate.
As noted above, Republicans have in the past objected to the idea of raising taxes to offset
extension of expiring energy tax provisions, which they consider to be an extension of current tax
policy rather than new tax policy. In addition, some Senate Republicans have objected to raising
taxes on the oil and gas industry, particularly by repealing the IRC §199 deduction. The Bush
Administration threatened to also veto any energy tax bill that would increase taxes on the oil and
gas industry. At this writing, it appears that inclusion of the §199 deduction repeal as an offset
might preclude the energy tax bill from coming to the Senate floor—some believe that it would
fail another cloture vote—so this provision might not survive the process.9
Finally, the debate in the Senate over energy tax incentives and energy tax extenders is seen as
potentially involving three other separate proposals: (1) The Gang of 20 proposal or “New Energy
Reform Act of 2008”(this has not yet been introduced); (2) A Bingaman/Baucus bill (also not
formally introduced); and (3) the Republican “Gas Price Reduction Act” (introduced by Senator
McConnell as Senate Amendment 5108).
A side-by-side comparison of H.R. 6899 and S. 3478 is in Table 1.10 Revenue estimates were
generated by the Joint Committee on Taxation.

9

Bureau of National Affairs. Daily Tax Report. “Plan to Bring Tax Extenders to Floor Scraps Section 199 Deduction
Repeal for Oil Firms.” September 17, 2008. P. G-13.
10
A side-by-side comparison of H.R. 6049 and S. 3478 is in CRS Report RL34669, by (name redacted), September
16, 2008.

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Table 1. Side-by-Side Comparison of S. 3478 and the Energy Tax Provisions of H.R. 6899
Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

Comments

Fossil Fuels Supply
Percentage
Depletion for
Marginal Oil and
Gas Wells

Independent producers can claim a
higher depletion rate(up to 25%,
rather than the normal 15%) for up to
15 barrels per day of oil (or the
equivalent amount of gas) from
marginal wells ( “stripper” oil/gas and
heavy oil). The percentage depletion
allowance is limited to 100% of
taxable income from each property,
but this limitation is suspended
through December 31, 2007 for
marginal oil and gas. The percentage
depletion allowance is also limited to
65% of taxable income from all
properties [IRC§613A(c)(6);
[IRC§613A(c)(6)(H); [IRC§ 613A(d)].

Sec. 213. The proposal extends for
three years (through December
31, 2010) the suspension on the
taxable income limit for purposes
of depreciating a marginal oil or gas
well. The estimated cost of this
proposal is $364 million over 10
years.

No provision.

Petroleum
Refineries

Assets used in petroleum refining are
generally depreciated over 10 years.
But, a temporary provision allows the
expensing of refinery property which
either increases total capacity by 5%
or which processes nonconventional
feedstocks at a rate equal or greater
to 25% of the total throughput of the
refinery [IRC§168(e)(3)].

Sec. 212. This bill extends the
refinery expensing contract
requirement and the placed-inservice requirement for two years.
The proposal also qualifies
refineries directly processing shale
or tar sands. The estimated cost of
this proposal is $894 million over
10 years.

No provision.

This is one of the several tax
incentives for the oil industry
created by The Energy Policy Act
of 2005(EPACT05, P.L. 109-58).

Sec. 811 & 812. Similar to S. 3478,
except that the total credits are
only $1.1 billion: $950 million for
advanced coal projects, and $150
million for coal gasification
projects. This proposal is estimated
to cost $1.044 billion over 10
years.

This tax credit was also one of
the several energy tax incentives
created by EPACT05.

Carbon Mitigation and Coal
Credit for
Investment in
Clean Coal
Facilities

CRS-6

A 15% investment credit is provided
for advanced coal projects and a 20%
credit is provided for qualified coal
gasification projects, respectively. The
credit is for coal gasification projects
which must use an integrated
gasification combined cycle (IGCC)
technology. The total credits available
for qualifying advanced coal projects is

Sec. 111 & 112. The bill provides
$2.5 billion in new total tax credits
for the creation of advanced coal
electricity projects and certain coal
gasification projects that
demonstrate the greatest potential
for carbon capture and
sequestration (CCS) technology.
Of these $2.5 billion of total

Provision

Current Law

Senate Bill S. 3478

limited to $1.3 billion, with $800
million allocated to IGCC projects
and the remaining $500 million to
projects using other advanced coalbased generation technologies [IRC
§48A and IRC §48B].

incentives, $2 billion would be
earmarked for advanced coal
electricity projects and $500
million for coal gasification
projects. These tax credits will be
awarded by Treasury through an
application process, with applicants
that demonstrate the greatest
CO2 sequestration percentage
receiving the highest priority.
Projects must capture and
sequester at least 65% of the
facility’s CO2 emissions or their
coal gasification project must
capture and sequester at least 75%
of the facility’s CO2 emissions. The
estimated cost of this proposal is
$2.373 billion over 10 years.

CO2 Capture Tax
Credit

No provision.

Sec. 115. The proposal provides a
$10 credit per ton for the first 75
million metric tons of CO2
captured and transported from an
industrial source for use in
enhanced oil recovery and $20
credit per ton for CO2 captured
and transported from an industrial
source for permanent storage in a
geologic formation. Qualifying
facilities must capture at least
500,000 metric tons of CO2 per
year. The credit applies to CO2
stored or used in the United
States. The estimated cost of this
proposal is $1.119 billion over 10
years.

Carbon Audit of
Tax Code

No provision.

Sec. 116. The bill directs the
Secretary of the Treasury to
request that the National Academy
of Sciences undertake a
comprehensive review of the tax
code to identify the types of

CRS-7

House Bill H.R. 6899

No provision.

Sec. 815. Identical to S. 3478.

Comments

Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

Comments

specific tax provisions that have
the largest effects on carbon and
other greenhouse gas emissions
and to estimate the magnitude of
those effects. Authorizes $1.5
million for the study. This proposal
has no revenue effect.
Other Coal Tax Provisions
Black-Lung Excise
Tax

An excise tax is imposed on coal
mined domestically and sold by the
producer, at the rate of $1.10 per ton
for coal from underground mines and
$0.55 per ton for coal from surface
mines (the aggregate tax per ton is
capped at 4.4% of the amount sold by
the producer). Reduced tax rates
apply after the earlier of December
31, 2013 or the date on which the
Black Lung Disability Trust Fund has
repaid, with interest, all amounts
borrowed from the general fund of
the Treasury. Tax receipts are
deposited in the Black Lung Disability
Trust Fund, and used to pay
compensation, medical and survivor
benefits to eligible miners and their
survivors and to cover costs of
program administration. The Trust
Fund is permitted to borrow from the
General Fund any amounts necessary
to make authorized expenditures if
excise tax receipts do not provide
sufficient funding [IRC§4121].

Sec. 113. The bill would enact the
President’s FY2009 proposal to
bring the Black Lung Disability
Trust Fund out of debt. The
President’s Budget proposes that
the current excise tax rate should
continue to apply beyond 2013
until all amounts borrowed from
the general fund of the Treasury
have been repaid with interest.
After repayment, the reduced
excise tax rates of $0.50 per ton
for coal from underground mines
and $0.25 per ton for coal from
surface mines would apply
(aggregate tax per ton capped at
2% of the amount sold by the
producer). Rates are extended
through 2018. The proposal is
estimated to raise $1.287 billion
over 10 years.

Sec. 813. The House bill in identical
to the Senate bill. The proposal is
estimated to raise $1.287 billion
over 10 years.

See CRS Report RS21935, The
Black Lung Excise Tax on Coal.

Black-Lung Excise
Tax on Exported
Coal

Since 2000 (which is when the IRS
issued Notice 2000-28), the black lung
excise tax has not been imposed on
exported coal (i.e., domestically
produced coal sold and destined for
export). The courts have determined
that the Export Clause of the U.S.

Sec. 114. The bill creates a new
procedure under which certain
coal producers and exporters may
claim a refund of these excise taxes
that were imposed on coal
exported from the United States.
Under this procedure, coal

Sec. 814. This provision is identical
to that in the Senate bill. The
estimated cost of this proposal is
$199 million over 10 years.

See CRS Report RS22881, Coal
Excise Tax Refunds: United States v.
Clintwood Elkhorn Mining Co.

CRS-8

Provision

Current Law

Senate Bill S. 3478

Constitution prevents the imposition
of the coal excise tax on exported
coal and, therefore, any taxes
collected on such exported coal in the
past are subject to a claim for refund.
[IRC§4121.

producers or exporters that
exported coal during the period
beginning on or after October 1,
1990 and ending on or before the
date of enactment of the bill, may
obtain a refund from the Treasury
of excise taxes paid on such
exported coal and any interest
accrued from the date of
overpayment. The estimated cost
of this proposal is $199 million
over 10 years.

House Bill H.R. 6899

Comments

Electricity Restructuring Provisions
Sale or
Disposition of
Transmission
Assets

Under present tax law, the sale of
electricity transmission or distribution
facilities is generally considered to be
an involuntary conversion, and gain
from the sale or disposition of such
assets is recognized over eight years,
rather than taxed all at once in the
year of the sale [IRC §§451, 1033,
1245, 1250].

Sec. 401. The bill extends the
present-law eight-year deferral of
gain on sales of transmission
property by vertically integrated
electric utilities to FERC-approved
independent transmission
companies. The rule applies to
sales before January 1, 2010. This
proposal is revenue neutral over
10 years.

Sec. 805. Identical to the Senate
bill. This proposal is revenue
neutral over 10 years.

The eight-year recognition rule
was introduced by EPACT05.

Renewable and Alternative Fuels
Electricity from
Renewable Fuels

CRS-9

Electricity producers may claim a tax
credit of 1.5¢/kWh (in 1992 dollars;
generally 2.0¢ in current dollars) for
electricity produced from wind
energy, “closed-loop,” and open-loop
biomass, and other renewable
resources as well as for refined coal.
Placed-in-service date is December
31, 2008 [IRC§45].

Sec. 101 &102. The Senate bill
extends the placed-in-service date
by three years, through December
31, 2011. The bill expands the
types of facilities qualifying for the
credit to new biomass facilities and
those that generate electricity
from marine renewables (e.g.,
waves and tides). The bill updates
the definition of an open-loop
biomass facility, the definition of a
trash combustion facility, and the
definition of a non-hydroelectric
dam. The bill also extends the
refined coal credit, while removing

Sec. 801 &802. The House bill also
has a three-year extension of the
placed-in-service date through
December 31, 2011, but for wind,
the extension is for only one year
through 12-31-2009. It also adds
marine renewables (e.g., waves and
tides) and hydrokinetic energy as a
qualified resource. The bill would
repeal the current phase-out
mechanism, replacing it with a cap
on the present value of the credits,
which cannot exceed 35% of the
facility’s cost. The bill clarifies the
availability of the production tax

Current tax credit is generally
available for 10 years after placedin-service, but new equipment has
to be placed-in-service by 12-312008. So this tax credit would not
be available on new investments
after 12-31-2008, unless it is
extended.

Provision

Business Solar,
Geothermal,
Fuels Cells, and
Other Renewable
Technologies

Residential Solar
and Other
Renewables Used
in Residences

CRS-10

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

the market value test and
increasing coal emissions
standards. The estimated cost of
this proposal is $15.414 billion
over 10 years.

credit with respect to certain sales
of electricity to regulated public
utilities and updates the definition
of an open-loop biomass facility,
trash combustion facility, and
nonhydroelectric dam. This
proposal is estimated to cost
$6.893 billion over 10 years.

A permanent 10% tax credit is
provided for investments in solar and
geothermal equipment used to
generate electricity (including
photovoltaic systems), or solar
equipment used to heat or cool a
structure, and for process heat. The
30% credit for solar, fuel cells and the
10% credit for micro-turbines is
available through 12-31-2009.
Geothermal energy reservoirs also
qualify for a 15% percentage depletion
allowance. Depreciation recovery
period for renewable technologies is
five years. Fuel cells do not qualify for
tax subsidies [IRC§45,46,48, 613(e)].

Sec. 103 & 107. S. 3478 extends
the 30% investment tax credit for
solar energy property and qualified
fuel cell property, as well as the
10% investment tax credit for
micro turbines, for eight years
(through 12-31-2016). The bill adds
small commercial wind, geothermal
heat pumps, and combined heat
and power systems (at a 10%
credit rate) as a category of
qualified investment. The bill also
increases the $500 per half
kilowatt of capacity cap for
qualified fuel cells to $1,500 per
half kilowatt and allows these
credits to be used to offset the
alternative minimum tax (AMT).
The estimated cost of this proposal
is $1.919 billion over 10 years.

Sec.803. This provision is similar to
the Senate’s. This proposal is
estimated to cost $1.765 billion
over 10 years.

A 30% tax credit is provided for
residential applications of solar
generated electricity (photovoltaics)
as well for solar water heating. This
credit is available through 12-31-2008
(IRC§25D).

Sec. 104. The bill extends the
credit for residential solar
property for eight years (through
2016), and doubles it from $2,000
to $4,000. The bill adds residential
small wind investment, capped at
$4,000, and geothermal heat
pumps, capped at $2,000, as
qualifying property. The bill also
allows the credit to be used to
offset the AMT. The estimated
cost of this proposal is $907
million over 10 years.

Sec.804. This provision is the same
as in the Senate bill. This proposal
is estimated to cost approximately
$907 million over 10 years.

Comments

Under current law, energy-related
income tax credits, and many of
the non-energy tax credits, are
aggregated and claimed as one
general business credit, which is
also subject to several limitations,
including the alternative minimum
tax limitation.
[IRC§38]

The payment of the AMT may
substantially reduce, or even
eliminate, this (as well as other)
energy tax credits.

Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

Comments

Clean Renewable
Energy Bonds

State and local governments may issue
clean renewable energy bonds
(“CREBS”) in order to finance
renewable projects (wind, closed-loop
biomass, open-loop biomass,
geothermal, small irrigation, qualified
hydro-power, landfill gas, marine
renewable and trash combustion
facilities). Unlike other state and local
bonds, which are exempt from federal
taxation, these bonds provide a tax
credit to the holding taxpayer. Only
$1.2 billion of such bonds may be
issued nationally; $0.75 billion by
governmental bodies. CREBS must be
issued before 12-31-2008 [IRC §54].

Sec. 105. The Senate bill increases
the maximum authorized amount
of CREBS issues to $2 billion to
finance facilities that generate
electricity from renewables. This
$2 billion authorization is
subdivided into thirds: 1/3 for
qualifying projects of
state/local/tribal governments; 1/3
for qualifying projects of public
power providers; and 1/3 for
qualifying projects of electric
cooperatives. The bill also provides
an additional year for current
allocations to issue bonds. The
estimated cost of this proposal is
$551 million over 10 years.

Sec. 806. The House bill is similar
to the Senate bill, but the national
limitation is $1.75 billion instead of
$2.0 billion. This proposal is
estimated to cost $497 million
over 10 years.

Nuclear
Electricity
Production Tax
Credit

A taxpayer producing electricity at a
qualifying advanced nuclear power
facility can claim a credit equal to
1.8¢/kilowatt hour of electricity
produced for the eight-year period
starting when the facility is placed in
service. The aggregate amount of
credit that a taxpayer may claim in any
year during the eight-year period is
subject to limitation based on
allocated capacity and an annual
limitation. A qualifying advanced
nuclear facility is one that is placed in
service before January 1, 2021. The
Secretary of Treasury may allocate up
to 6,000 megawatts of capacity
[IRC§45I].

Sec. 402. This proposal increases
the maximum allocation amount to
8,000 megawatts. Public-private
partnerships will also be allowed to
utilize the credit. This proposal has
no revenue effect.

No provision.

A qualifying advanced nuclear
facility is one for which the
taxpayer has received an
allocation of megawatt capacity
from the Secretary of the
Treasury, in consultation with the
Secretary of Energy. See CRS
Report RL33558, Nuclear Energy
Policy.

Sec. 843. Same as the Senate bill.
The estimated cost of this proposal
is $891 million over 10 years.

Qualifying property must be
installed as part of: (1) the
interior lighting system, (2) the

Energy Conservation and Energy Efficiency
Business Sector
Energy Efficiency
in Commercial
Buildings

CRS-11

The tax code provides a formulabased tax deduction, subject to a limit
equal to $1.80 per sq.ft. of the

Sec. 303. The bill extends the
energy-efficient commercial
buildings deduction for five years,

Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

building, for all or part of the cost of
energy efficient commercial building
property (i.e., certain major energysavings improvements made to
domestic commercial buildings) placed
in service after December 31, 2005
and before January 1, 2009 [IRC
§179D].

through December 31, 2013. The
estimated cost of this proposal is
$891 million over 10 years.

Bonds for Green
Buildings and
Sustainable
Design Projects

State and local governments have the
authority to issue tax-exempt bonds
for green buildings and sustainable
design projects [IRC§142].

Sec. 307. The bill extends the
authority to issue qualified green
building and sustainable design
project bonds through the end of
2012. The bill also clarifies the
application of the reserve account
rules to multiple bond issuances.
The estimated cost of this proposal
is $45 million over 10 years.

Sec. 846. Identical to the Senate
provision. The estimated cost of
this proposal is $45 million over 10
years.

Energy
Management
Devices

Current law provides no special tax
incentives for meters, thermostats,
and other energy management devices
that allow utilities or consumers to
monitor, control energy use; such
property is depreciable over 20 years
if used in a business [IRC §168].

Sec. 306. The bill provides
accelerated depreciation for smart
electric meters and smart electric
grid systems, allowing taxpayers to
recover the cost of this property
over seven years. The estimated
cost of this proposal is $1.716
billion over 10 years.

Sec. 845. Similar to the Senate bill
except that the recovery period
would 10 years instead of seven
years. The estimated cost of this
proposal is $921 million over 10
years.

There is a 10% credit, up to a $500
maximum lifetime credit,- for energy
efficiency improvements in the
building envelope of existing homes
and for the purchase of high-efficiency
heating, cooling, and water heating
equipment. Efficiency improvements
and/or equipment must be placed in
service before December 31, 2007.
Selected energy efficiency equipment
and items qualify for specific tax
credits ranging from $50-$300 [IRC

Sec. 302. The bill retroactively
extends the tax credits for energyefficient retrofits to existing homes
for 2009, 2010 and 2011, and
includes energy-efficient biomass
fuel stoves as a new class of
energy-efficient property eligible
for a consumer tax credit of $300.
The proposal also clarifies the
efficiency standard for water
heaters. The estimated cost of this
proposal is $2.509 billion over 10

Sec. 842. The bill retroactively
extends the tax credits for energyefficient existing homes for two
years (through December 31,
2009) and includes energy-efficient
biomass fuel stoves as a new class
of energy-efficient property eligible
for a consumer tax credit of $300.
This proposal is estimated to cost
$1.067 billion over 10 years.

Comments
heating, cooling, ventilation and
hot water systems, or (3) the
building envelope, and it must
reduce total annual energy and
power costs of the building by
50% or more in comparison to a
reference building that meets the
minimum requirements of building
standards by the society of
engineers.

Residential Sector
Energy-Efficiency
Retrofits to
Existing Homes

CRS-12

This credit was enacted as part of
EPACT05, but it expired at the
end of 2007.

Provision

Senate Bill S. 3478

House Bill H.R. 6899

§25C].

years.

Construction of
Energy-Efficient
New Homes

A tax credit as high as $2,000 is
available to eligible contractors for the
construction of qualified new energyefficient homes if the homes achieve
an energy savings of 50% over the
2003 International Energy
Conservation Code (IECC). The
amount of the new energy-efficient
home credit depends on the energy
savings achieved by the home relative
to that of a 2003 IECC compliant
comparable dwelling unit. The credit
expires at the end of 2008. [IRC §45L]

Sec. 304. The bill extends the new
energy efficient home tax credit for
three years, through December 31,
2011. The estimated cost of the
proposal is $143 million over 10
years.

No provision.

Manufacture of
Energy-Efficient
Home Appliances

A credit is available for the eligible
production (manufacture) of certain
energy-efficient dishwashers, clothes
washers, and refrigerators. The total
credit amount is equal to the sum of
the credit amount separately
calculated for each of the three types
of qualified energy-efficient appliance.
The credit for dishwasher is $3
multiplied by the percentage by which
the efficiency of the 2007 standards
(not yet known) exceeds that of the
2005 standards (the credit may not
exceed $100 per dishwasher). The
credit for clothes washers is $100 for
clothes washers that meet the
requirements of the Energy Star
program in effect for clothes washers
in 2007. The credit for refrigerators
ranges from $75-$175 each [IRC
§45M].

Sec. 305. The bill modifies the
existing energy-efficient appliance
credit and extend this credit for
three years, through the end of
2010. The estimated cost of this
proposal is $322 million over 10
years.

Sec. 844. This provision is identical
to that in S. 3478. The estimated
cost of this proposal is $322
million over 10 years.

CRS-13

Current Law

Comments

The maximum amount of the new
credit allowable to a taxpayer is
capped at $75 million per tax year
for all qualifying appliances
manufactured during that year. In
each subsequent year the cap is
reduced by the amount (if any) of
the credit used in any prior tax
year. Of that $75 million (or
reduced) cap, no more than $20
million of credit amount in a
single tax year may result from
the manufacture of refrigerators
to which the $75 applicable
amount applies (i.e., refrigerators
which are at least 15 percent but
no more than 20 percent below
2001 energy conservation
standards). In addition to the $75
million cap on the credit allowed,
the overall credit amount claimed
for a particular tax year may not
exceed 2% of the taxpayer’s
average annual gross receipts for
the preceding three tax years.

Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

Qualified Energy
Conservation
Bonds

No provision.

Sec. 301. The bill creates a new
category of tax credit bonds to
finance state and local government
initiatives designed to reduce
greenhouse emissions. There is a
national limitation of $3 billion,
allocated to states, municipalities
and tribal governments. The
estimated cost of this proposal is
$1.025 billion over 10 years.

Sec. 841. The provision is similar to
that in S. 3478, except that the
national limitation is $2.625 billion.
This proposal is estimated to cost
$895 billion over 10 years.

Comments

Transportation Sector
Advanced Technology Vehicles
New Plug-In
Hybrid Vehicles

The Energy Policy Act of 2005 (P.L.
109-58) created a new system of tax
credits for four types of advancedtechnology vehicles (ATVs): hybrid
vehicles, fuel cell vehicles, advanced
lean-burn vehicles, and other
alternative fuel vehicles. The credit for
hybrids range from $250 to $3,400
per vehicle and are available through
December 31, 2009, but each
manufacturer has a 60,000 lifetime
vehicle limit. [IRC §30B].

Sec. 204 & 205. The Senate bill
establishes a new credit for
qualified plug-in electric drive
vehicles. The base amount of the
credit is $2,500. If the qualified
vehicle draws propulsion from a
battery with at least 6 kW hours of
capacity, the credit amount is
increased by $400, plus another
$400 for each kW hour of battery
capacity in excess of 6 kWhours.
Taxpayers may claim the full
amount of the allowable credit up
to the end of the first calendar
quarter after the quarter in which
the total number of qualified plugin electric drive vehicles sold in the
U.S. is at least 250,000. The credit
is available against the alternative
minimum tax (AMT). The
estimated cost of this proposal is
$755 million over 10 years.

Sec. 824. The bill establishes a new
credit for each qualified plug-in
electric drive vehicle placed in
service during each taxable year by
a taxpayer. The base amount of the
credit is $3,000. If the qualified
vehicle draws propulsion from a
battery with at least 5 kilowatt
hours of capacity, the credit
amount is increased by $200, plus
another $200 for each kilowatt
hour of batter/capacity in excess of
5 kilowatt hours up to 15 kilowatt
hours. Taxpayers may claim the full
amount of the allowable credit up
to the end of the first calendar
quarter after the quarter in which
the manufacturer records 60,000
sales. The credit is reduced in
following calendar quarters. The
credit is available against the
alternative minimum tax (AMT).
This proposal is estimated to cost
$1.056 billion over 10 years.

Other Alternative
Technology
Vehicles

The tax credits for advanced leanburn vehicles is the same as for
hybrids; the credit for fuel cell
vehicles may be as high as $4,000 for

Sec. 205. The bill extends the lean
burn, heavy hybrid, and alternative
fuel vehicle tax credit through
2011,and reduces the fuel cell

No provision.

CRS-14

Toyota reached its limit in 2006;
Honda in 2007. Thus, purchasers
of hybrid vehicles from these
manufacturers no longer qualify
for the tax credits. The two bills
essentially add plug-in hybrid
vehicles as a new technology to
the existing system of tax credits,
but with their own separate tax
credit structure.

Provision

Current Law

Senate Bill S. 3478

cars, and $40,000 for heavy-duty
trucks; the credit for advanced
alternative fuel vehicles is up to 80%
of marginal costs, limited to $32,000.
[IRC §30B]

credit to $7,500 at the end of
2009. The credit is available against
the alternative minimum tax
(AMT). The estimated cost of this
proposal is $527 million over 10
years.

Alternative-Fuel
Refueling Stations

A tax credit is provided equal to 30%
of the cost of any qualified alternative
fuel vehicle refueling property
installed to be used in a trade or
business or at the taxpayer’s principal
residence. The credit would be
limited to $30,000 for retail clean-fuel
vehicle refueling property, and $1,000
for residential clean-fuel vehicle
refueling property. The property must
be placed in service before1-1-2010
(1-1-2015 for hydrogen property)
[IRC§30C.]

Energy Security
Bonds

No provision

CRS-15

House Bill H.R. 6899

Comments

Sec. 208. The bill extends the 30%
alternative refueling property
credit (capped at $30,000) for
three years, through 2012. The
provision provides a tax credit to
businesses (e.g., gas stations) that
install alternative fuel pumps, such
as fuel pumps that dispense fuels
such as E85, compressed natural
gas and hydrogen. The bill also
adds electric vehicle recharging
property to the definition of
alternative refueling property. The
estimated cost of this proposal is
$256 million over 10 years.

Sec. 828. The provision in H.R.
6899 is similar to the provision in
S. 3478. The bill increases the 30%
alternative refueling property
credit (capped at $30,000) to 50%
(capped at $50,000). The bill also
extends this credit through the end
of 2010, 2017 for certain natural
gas type fuels. The estimated cost
of this proposal is $226 million
over 10 years.

The credit provides a tax credit
to businesses (e.g., gas stations)
that install alternative fuel pumps,
such as fuel pumps that dispense
E85 fuel.

No provision.

Sec. 828. The bill creates a new
type of tax-credit bond known as
“energy security” bonds and
provides for the allocation of $1.75
billion in bonding authority. The bill
requires 100% of the available
project proceeds to be used for
“qualfied purposes,” which would
include the making of grants and
low-interest loans for natural gas
refueling properties at retail gas
stations. The bill stipulates that a
loan could be no more than
$200,000 for a property located at
any one retail gas station and
stipulates that loans could not
cover more than 50% of the cost
of the property and its installation.
Allocations would be made by the
Treasury Department among

Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899
qualified issuers, including states
and political subdivisions or
instrumentalities thereof. The bill
requires that 50% of the limitation
be allocated only for loans for
natural gas refueling property in
metropolitan statistical areas. The
measure also directs the
department to attempt to ensure
that at least 10% of the motor fuel
stations receive loans from the
proceeds of the bonds. The
measure’s provisions would apply
to bonds issued by Dec. 31, 2017.
It also coordinates the energy
security tax-credit bonds with the
refueling credit. This proposal is
estimated to cost $76 million over
ten years.

Biofuels
Cellulosic Fuel
Alcohol
Production

Alcohol fuels qualify for production
and blending tax credits (either
income or excise tax credits) and
refunds. The credit for ethanol is
$0.51per gallon. In addition, there is
an ethanol small producer credit of
$0.10 per gallon, up to 15 million
gallons annually. Facilities that
produce cellulosic ethanol are also
allowed the 50% bonus depreciation if
such facilities are placed in service
before January 1, 2013. The farm bill
(P.L. 110-246) also included a new,
temporary cellulosic bio-fuels
production tax credit for up to $1.01
per gallon, available through
December 31, 2012 [IRC §168].

Sec. 201. The bill makes this benefit
available for the production of
other cellulosic biofuels in addition
to cellulosic ethanol. This proposal
is estimated to be revenue neutral
over 10 years.

Sec. 821. The House bill provision
is identical to that in the Senate
bill.

Alternative Fuels
Excise Tax
Credits

The tax code imposes excise taxes on
motor fuels at varying rates, but also
provides tax credits (at varying
amounts) against these taxes for

Sec. 207. The bill extends the
alternative fuel excise tax credit
through December 31, 2011 for all
fuels except for hydrogen (which

No provision.

CRS-16

Comments

Provision

Volumetric
Excise Tax Credit
(VEETC) for Fuel
Ethanol

Current Law

Senate Bill S. 3478

various types of alternative fuels; it
also provides small producer tax
credits for some of the fuels such as
ethanol and bio-diesel. The credits
generally expire at the end of 2008
[IRC §6426, §6427].

maintains its current-law expiration
date of September 30, 2014). Upon
date of enactment, for liquid fuel
derived from coal through the
Fischer-Tropsch process (“coal-toliquids”), to qualify as an alterative
fuel, the fuel must be produced at
a facility that separates and
sequesters at least 50% of its CO2
emissions. The sequestration
requirement increases to 75% on
December 31, 2011. This 75%
standard may be implemented
prior to December 31, 2011,
subject to certification of feasibility.
The proposal further provides that
biomass gas versions of liquefied
petroleum gas and liquefied or
compressed natural gas, and
aviation fuels qualify for the credit.
The proposal is estimated to cost
$569 million over 10 years.

Fuel ethanol qualifies for excise tax
credits (or refunds), at the rate of
$0.51/gallon of ethanol; and a small
producer tax credit of $0.10/gallon.
The excise tax credit was established
in the American Jobs Creation Act of
2004. Per the 2008 farm bill, starting
the year after which 7.5 billion gallons
of ethanol are produced and/or
imported in the United States, the
value of the credit is reduced to
$0.45/gallon. The credit is currently
authorized through December 31,
2010

Sec. 210. This bill extends VEETC,
including the 10¢/gallon small
producer credit, through
12/31/2011. The estimated cost of
this proposal is $4.978 billion over
10 years.

[IRC§40, 6426, §6427]].

CRS-17

House Bill H.R. 6899

No provision.

Comments

Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

Small Producer
Tax Credit for
Fuel Ethanol

As noted above, in the case of
ethanol, the tax code also provides a
small producer tax credit of
$0.10/gallon, up to 15 million gallons
[IRC §40A].

Sec. 211. S. 3478 creates a new
small producer alcohol credit of 10
cents per gallon for facilities that
produce ethanol through a process
that does not use a fossil-based
resource. The credit is available
through December 31, 2011. The
estimated cost of this proposal is
$210 million over 10 years.

No provision.

Biodiesel
Blender’s Tax
Credit and Small
Biodiesel
Producer Credit

Refundable income tax credits and
excise tax credits are available for the
blending and production of biodiesel.
The basic credit is $0.50/gallon
($1.00/gallon for virgin or “agri”
biodiesel) and is also provided on a
volumetric basis. Production of
biodiesel by a small producer qualifies
for a $0.10/gallon credit up to 15
million gallons. These credits expire at
the end of 2008 [IRC §40A, 6426, and
6427].

Sec. 202 & 203.The bill extends for
three years (through December
31, 2011) the $1.00 per gallon
production tax credits for biodiesel
and the small biodiesel producer
credit of 10¢ per gallon. The bill
extends the $1.00 tax credit for
virgin biodiesel to recycled
biodiesel. Biodiesel that is
imported and sold for export will
not be eligible for the credit
effective May 15, 2008. The
combined cost of the biodiesel
proposal and the renewable diesel
provision (please see the next
item) is $2.256 billion over 10
years.

Sec. 822 & 823. The bill extends
for one year (through December
31, 2009) the $1.00/gallon
production tax credits for biodiesel
and the small biodiesel producer
credit of 10 ¢/ gallon, but does not
eliminate the current-law disparity
in credit for biodiesel and agribiodiesel. The bill also clarifies that
certain fuel-related tax credits are
designed to provide an incentive
for U.S. production, which would
apply to claims for credit or
payment made after May 15. The
combined cost of this proposal and
the renewable diesel proposal
(discussed in the next item below)
is estimated be $401 million over
10 years.

CRS-18

Comments

Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

Comments

Renewable Diesel
Production Tax
Credit

Refundable income tax credits and
excise tax credits are available for the
blending and production of renewable
biodiesel. The basic credit is
$1.00/gallon. Renewable diesel is
diesel fuel derived from biomass using
a “thermal depolymerization
process”(TDP). TDP is a new
technology that uses heat and
pressure to change the molecular
structure of wastes, plastics, and food
wastes such as poultry carcasses and
offal, and turn it into a boiler fuel. In
order to qualify for the $1.00/gallon
tax credits, the fuel must meet EPA’s
requirements for fuels and fuels
additives under §211 of the Clean Air
Act, and the requirements of the
ASTM D975 and D396. These credits
expire at the end of 2008 [IRC §40A,
6426, and 6427].

Sec. 202. The Senate bill extends
for three years (through
December 31, 2011) the $1.00 per
gallon production tax credit for
diesel fuel created from biomass. It
eliminates the requirement that
renewable diesel fuel must be
produced using a thermal
depolymerization process. As a
result, the credit will be available
for any diesel fuel created from
biomass without regard to the
process used so long as the fuel is
usable as home heating oil, as a fuel
in vehicles, or as aviation jet fuel.
The bill caps the $1 per gallon
production credit for renewable
diesel for facilities that co-process
with petroleum to the first 60
million gallons per facility. The
estimated cost of the combined
biodiesel proposal (previous item)
and this proposal is $2.256 billion
over 10 years.

Sec. 822. The bill extends for one
year (through December 31, 2009)
the $1.00 per gallon production
tax credit for diesel fuel created
from biomass. It also eliminates the
requirement that renewable diesel
fuel must be produced using a
thermal depolymerization process.
As a result, the credit will be
available for any diesel fuel created
from biomass without regard to
the process used so long as the
fuel is usable as home heating oil,
as a fuel in vehicles, or as aviation
jet fuel. The bill also clarifies that
the $1 per gallon production credit
for renewable diesel is limited to
diesel fuel that is produced solely
from biomass. Diesel fuel that is
created by co-processing biomass
with other feedstocks (e.g.,
petroleum) will be eligible for the
50¢/gallon tax credit for alternative
fuels. This provision is estimated to
raise $77 million over 10 years.

Some oil companies are adding
animal fat or vegetable (soybean)
oil as feedstocks along with crude
oil in a conventional refinery to
produce such fuels. Unlike
biodiesel which blends the
soybean oil ester after the diesel
is made, the oil is added before as
a feedstock. The resulting “coproduced fuel” comes out of the
refinery as part of the regular
diesel fuel mix, distributed
through pipelines (unlike
biodiesel), and sold as regular
diesel fuel.

Tax Shelters for
Alternative Fuels

Under current tax law, publicly traded
partnerships are treated as
corporations for tax purposes, unless
they have passive income (dividend,
rents, etc.) and income from certain
mineral exploration and production,
timber, and other activities [IRC
§7704].

Sec. 209. The bill allows publicly
traded partnerships to treat
income derived from the
transportation and storage of
certain alternative fuels as
“qualifying income” for income
tests used to determine whether
an entity qualifies as a publicly
traded partnership. Currently, 90%
of the income of a publicly traded
partnership must be qualifying
income, or the entity is taxed as a
corporation, to which higher rates
apply. The bill covers fuels such as
alcohol fuels and mixtures,
biodiesel fuels and mixtures, and

Sec. 830. This provision appears to
be the same as the Senate bill’s
provision. The estimated cost of
this proposal is $76 million over 10
years.

The measure ensures that income
derived from those fuels would
receive treatment similar to
income from oil and gas.

CRS-19

Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

alternative fuels and mixtures. The
bill applies to taxable years that
begin after the measure is enacted.
The estimated cost of this proposal
is $78 million over 10 years.
Miscellaneous Transportation and Energy Provisions
Truck Idling Units
and Advanced
Insulation

A 12% tax is imposed on the sale
price of the first retail sale of (1) truck
bodies and chassis suitable for use
with a vehicle having a gross vehicle
weight of over 33,000 pounds, (2)
truck trailer and semitrailer bodies
and chassis suitable for use with a
vehicle having a gross vehicle weight
over 26,000 pounds, and (3) tractors
of the kind chiefly used for highway
transportation in combination with a
trailer or semitrailer. The retail tax
also generally applies to the price and
installation of parts or accessories
sold on or in connection with, or with
the sale of, a taxable vehicle [IRC
§4051].

Sec. 206. The bill provides an
exemption from the heavy vehicle
excise tax for the cost of idling
reduction units, such as auxiliary
power units (APUs), which are
designed to eliminate the need for
truck engine idling (e.g., to provide
heating, air conditioning, or
electricity) at vehicle rest stops or
other temporary parking locations.
The bill also exempts the
installation of advanced insulation,
which can reduce the need for
energy consumption by
transportation vehicles carrying
refrigerated cargo. Both of these
exemptions are intended to reduce
carbon emissions in the
transportation sector. The
estimated cost of this proposal is
$95 million over 10 years.

Sec. 825. This provision is identical
to that in S. 3478.

Transportation
Fringe Benefits

Gross income includes any income
from whatever source, including
income in kind, such as fringe benefits,
unless specifically excluded. Certain
employer-provided transportation
fringe benefits are excluded up to
certain amounts: up to $220/month
for parking and van pool benefits, and
up to $115/month of transit passes
[IRC §132].

No provision.

Sec. 827. The bill allows employers
to provide employees that
commute to work using a bicycle
limited fringe benefits to offset the
costs of such commuting (e.g.,
bicycle storage). This proposal is
estimated to cost $10 million over
10 years.

CRS-20

Comments

Provision
Recycling
Property

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

Comments

Investments in recycling property
receive no special tax incentives and
are generally treated the same as
other assets under the Modified
Accelerated Depreciation System,
which allows for shortened recovery
periods, bonus depreciation, and
expensing under certain conditions
[IRC §168, 179].

Sec. 308. S. 3478 allows recycling
property to qualify for the 50%
special depreciation allowance,
basically equivalent to expensing of
1/2 of the investment in such
property. The estimated cost of
this proposal is $162 million over
10 years.

No Provision.

Under the Crude Oil Windfall
Profits Tax of 1980 (P.L. 96-223,
recycling equipment qualified for a
10% investment tax credit, but
these generally expired at the end
of 1982.

Tax Increases (Offsets) and Other Provisions
Domestic
Activities
Manufacturing
Deduction under
the Corporate
Income Tax

Beginning on 1-1-2005, qualified
“manufacturing” businesses in the
United States can claim a deduction
for a certain percentage of their
taxable incomes, subject to certain
limits. The deduction was initially 3%,
is now 6%, and is scheduled to
increase to 9% in 2010. The definition
of a domestic manufacturing activity is
very broad and generally includes all
energy market activities except for
the transmission and distribution of
electricity and natural gas. In
particular, it includes oil and gas
extraction and production [IRC §199].

Sec. 501. The bill repeals the IRC
§199 manufacturing deduction for
major integrated and state-owned
oil and gas companies, beginning on
1-1-2009. It maintains the 6%
deduction rate for other oil and
gas companies. The proposal is
estimated to raise $13.904 billion
over 10 years.

Sec. 851. The provision in H.R.
5351 is identical to that in S. 3478.
The proposal is estimated to raise
$13.904 billion over 10 years.

The inclusion of state-owned
companies is intended to extend
the denial of the §199 deduction
to foreign owned oil companies
(such as CITGO, which is owned
by the government of Venezuela).
Such companies are large but are
not “integrated” oil companies—
they do not produce sufficient
amounts of crude oil—and thus
would otherwise continue to
receive the deduction.

Excise Taxes on
Oil and Natural
Gas

At the federal level there is no excise
tax on domestic (or imported) oil and
natural gas, including oil and gas
produced from the Outer Continental
Shelf. Oil and gas companies are
assessed excise taxes on oil purchased
for refining (a 5¢/barrel tax that funds
the Oil Spill Liability Trust Fund), and
motor fuels excise taxes on refined
petroleum products that fund various
transportation and environmental
trust funds. In addition, oil companies
pay severance taxes to some states
where they extract minerals, and pay
royalties (which are factor payments,

Sec. 502. The proposal establishes
a 13% excise tax on the removal
price of any taxable crude oil or
natural gas produced from federal
submerged lands on the OCS in
the Gulf of Mexico pursuant to a
federal OCS lease. The removal
price is defined as the amount for
which the barrel of taxable crude
oil or barrel-of-oil equivalent of
natural gas is sold by the taxpayer.
In the case of sales between
related parties, the removal price
is the constructive sales price of
the oil or natural gas. The proposal

No provision.

A type of windfall profit tax on
domestic crude oil production
was in effect from April 1980 to
August 1988. This tax, which was
actually an excise tax, not a
profits or income tax, was part of
a compromise between the
Carter Administration and the
Congress over the decontrol of
crude oil prices. It is discussed
and analyzed in detail in CRS
Report RL33305, The Crude Oil
Windfall Profit Tax of the 1980s:
Implications for Current Energy
Policy.

CRS-21

Provision

Foreign Tax
Credits on Oil
Companies

CRS-22

Current Law

Senate Bill S. 3478

not taxes) to landowners including the
federal government [IRC §4041,
§4081, §4611].

allows as a credit against the excise
tax an amount equal to royalties
paid under federal law with respect
to taxable crude oil or natural gas,
with the credit not to exceed the
tax paid. The excise tax would
apply to crude oil or natural gas
removed after the date of
enactment. The proposal is
estimated to raise $11.663 billion
over 10 years.

United States businesses operating
abroad generally pay taxes to foreign
governments as well as United States
taxes, which are generally assessed on
worldwide income. A tax credit is
allowed, subject to various limitations,
against U.S. taxes for the amounts of
these foreign taxes. Domestic oil
companies operating abroad are also
subject to additional limitation on
their foreign oil and gas extraction
income (“FOGEI”) and foreign oil
related income (“FORI”) [IRC §§901907].

Sec. 503. The proposal eliminates
the distinction between FOGEI and
FORI. FOGEI relates to upstream
production to the point the oil
leaves the wellhead. FORI is
defined as all downstream
processes once the oil leaves the
wellhead (i.e., transportation,
refining). Currently, FOGEI and
FORI have separate foreign tax
credit limitations. This proposal
combines FOGEI and FORI into
one foreign oil basket and applies
the existing FOGEI limitation. The
proposal is estimated to raise
$2.23 billion over 10 years.

House Bill H.R. 6899

Comments

Sec. 852. The House bill, which is
broader than the Senate bill)
makes two specific changes to the
calculation of such income. It bars
the use of two methodologies
established under a 2004 IRS field
directive for calculating FOGEI and
FORI, and would instead require
companies to use an “arm’s length”
price by using the independent
market value at the point nearest
to the well at which an
independent market exists when
calculating such income.

Multinational oil companies
currently allocate their income
between FOGEI and FORI, which
are subject to different taxation
rules.

The bill also requires companies,
when they pay foreign taxes that
are limited to oil and gas
companies, to treat the entire
amount of their taxes on oil and
gas extraction as applying to their
FOGEI, rather than dividing the
taxes between their FOGEI and
their FORI. Because this provision
would subject such income to the
FOGEI limitation for foreign-tax
credits, it would limit the credits
claimed, and thus increase the
revenue raised. This provision is
effective for tax years that begin
after the measure’s enactment

Provision

Current Law

Senate Bill S. 3478

House Bill H.R. 6899

Comments

date. These changes would raise an
estimated $3.84 billion over 10
years.
Oil Spill Liability
Trust Fund Excise
Tax

A 5¢-per-barrel excise tax is imposed
on domestic and imported crude oil
and petroleum products. The
revenues from this tax go into the Oil
Spill Liability Trust Fund and are used
to clean up offshore oil spills [IRC
§4611].

Sec. 505. The proposal extends the
oil spill tax through December 31,
2017, increases the per barrel tax
from 5 cents to 12 cents, and
repeals the requirement that the
tax be suspended when the
unobligated balance exceeds $2.7
billion. The proposal is estimated
to raise $3.4 billion over 10 years.

No provision.

Although the tax had expired at
the end of 1994, Congress
reinstated the 5¢ per barrel tax
effective on April 1, 2006
(EPACT05, P.L. 109-58). The tax
will remain in effect from this date
until the Oil Spill Liability Trust
Fund reaches an unobligated
balance of $2.7 billion. Thereafter,
the oil spill tax will be reinstated
30 days after the last day of any
calendar quarter for which the
IRS estimates that, as of the close
of that quarter, the unobligated
balance of the Oil Spill Liability
Trust Fund is less than $2 billion.
The oil spill tax will cease to apply
after December 31, 2014,
regardless of the Oil Spill Trust
Fund balance.

Estimated
Corporate Tax
Payments

Under current law, corporations with
assets of at least $1 billion are
required to adjust their quarterly
estimated corporate tax payments for
certain quarters, including for July,
August, and September of 2013, which
is the last quarter of FY2013. Affected
firms reduce their payments in the
following quarter by a corresponding
amount.

No provision.

Sec. 853. The bill further increases
the payments due in July, August,
or September 2013 by an
additional 40 percentage points,
but only for companies that had
any significant income for the
preceding taxable year from the
extraction, production, processing,
refining, transportation,
distribution, or retail sale of fuel or
electricity.

These provisions are generally
used to shift anticipated revenue
from one quarter to another in
order to make measures comply
with the pay-as-you-go budget
rule.

Sec. 403. The bill would allow
commercial fishermen and other
individuals whose livelihoods were
negatively impacted by the 1989
Exxon Valdez oil spill to average
any settlement or judgment-related
income that they receive in

No provision.

Income Received
as Damages from
the Exxon-Valdez
Litigation

CRS-23

Provision

Current Law

Senate Bill S. 3478
connection with pending litigation
in the federal courts over three
years for federal tax purposes. The
bill would also allow these
individuals to use these funds to
make contributions to retirement
accounts. The estimated cost of
this proposal is $49 million over 10
years.

CRS-24

House Bill H.R. 6899

Comments

Side-by-Side Comparison of Energy Tax Provisions of H.R. 6899 and S. 3478

Author Contact Information
(name redacted)
Specialist in Energy and Environmental Economics
/redacted/@crs.loc.gov, 7-....

Congressional Research Service

25

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3ARL34674. Public record. Not legal advice.