Industry sector: Consulting

Announcement Type: Other

WASHINGTON D.C., February 26, 2008 — With the price of oil above $100 a barrel and adding additional pressure to the U.S. economy, the U.S. House of Representatives will take up an $18 billion energy package later this week. "The Renewable Energy and Energy Conservation Tax Act of 2008" (H.R. 5351) would extend a variety of energy production and conservation incentives for multiple years — a contrast to the year-by-year extension of other expiring provisions such as the R&D tax credit.

Multi-year extension creates an environment in which investors can make decisions with certainty that needed support will continue rather than facing the continued uncertainty that typically accompanies temporary tax incentives.

The House bill also adds to the effectiveness of various energy credits by allowing them to be used against both the regular income tax and the alternative minimum tax (AMT) — for example, with the new credit of plug-in hybrid cars and the credit for solar and fuel cell property. Previously, taxpayers who relied on the promise of an energy credit could find that the credit was denied by the AMT.

Several issues threaten the bill's passage, including oil company opposition to higher taxes that will discourage investment in oil and gas production.

"This bill will not be a serious effort to enact legislation until revenue-raising provisions that adversely affect the oil and gas industry are removed," said Clint Stretch, managing principal of Tax Policy for Deloitte Tax LLP. "Until oil and gas revenue raisers are dropped, a repeat of the same political exercise as last year, where a $21 billion energy tax plan failed to get the necessary 60 votes in the Senate, is likely."

Stretch anticipates that if Congress cannot resolve how to pay for the energy tax incentives as a stand-alone package, then they may be made part of a larger package of tax extensions covering a shorter period of time as Congress leaves town in the fall.

As Congress debates the energy tax bill, Clint Stretch is available for interviews and to provide clear and common-sense analysis of this week's Congressional action.

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