The Alliance Applauds Extension of Tax Incentives

The old Yankees catcher Yogi Berra said it best, "It ain't over till it's over." If any week on Capitol Hill ever proved the wisdom of Yogi's observation, it had to be this week. Today the House of Representatives approved the landmark financial rescue plan, which contained the extension of renewable and energy efficiency tax incentives. This is great news for American consumers, who will now realize the economic benefits of tax provisions that will save energy costs and help to create new jobs.

But this victory came on the heels of a "Perils of Pauline" week in which the tax incentives appeared to be dead for the year. After finally achieving a bipartisan agreement last week in the Senate, and winning Senate approval of the "extenders" by a lopsided vote of 93-2, the House of Representatives rejected the Senate-passed bill because of unrelated and unpaid-for provisions in the tax bill.

At the beginning of this week, despite overwhelming bipartisan support for the tax incentives in both houses of Congress, it appeared that the disagreement over "pay fors" had sealed the fate of the incentives for the 110th Congress, meaning that in addition to the already expired incentives, the remaining provisions would expire as of December 31, 2008. A last ditch effort in the Senate on Monday to obtain unanimous consent to approve the House-passed version of the extenders failed.

Then the House of Representatives unexpectedly rejected the financial rescue plan on Monday afternoon. We remained in contact with the Senate leadership, and were delighted to hear from Senator Reid's office Tuesday evening that there was a plan to add the Senate approved version of the tax extenders bill to the Wall Street rescue plan. We commend the bipartisan Senate leadership for this bold action that brought the tax incentives, like Lazarus, back to life. The Senate approved the rescue plan Wednesday night, with the extenders attached to the bill, by an overwhelming vote of 74-25. The President announced he would sign the Senate-passed bill.

The outcome in the House remained in doubt, however, as some Members expressed concern over adding tax provisions that were not fully paid for. We contacted more than two dozen Members of the House and joined the Clean Energy coalition in an all out effort to persuade House Members who originally opposed the rescue plan to switch their vote. And today, by a narrow margin, the House has approved the Senate's version of the rescue bill containing the tax incentives.

For those of us who have spent the better part of 2008 fighting for the extension of these tax incentives, we are delighted with the last minute turnaround. The loss of the tax incentives, with their beneficial impact on Main Street America, would have been inconceivable at a time when the Congress is approving a massive rescue plan for the banking and financial services industry. We commend the bipartisan Senate leadership who forged the agreement to add the tax incentives to the final package, as well as the House leaders who accepted the provisions added by the Senate instead of dropping the "extenders" because of their differences with the Senate. We especially commend Senator Baucus and Senator Reid for their tenacity in pursuing the issue ever since the tax incentives were dropped out of the Energy Independence & Security Act of 2007 (EISA) at the last minute. We also salute our fellow members of the Clean Energy Caucus who joined with us in a nine month lobbying campaign to make sure this unfinished business from EISA was completed before the 110th Congress went home for the elections.

But the real winners are clearly the American consumers who urgently need these tax incentives. The median family income in America for a family of four in 2006 was under $50,000 a year. The Alliance estimates that the average American family will spend $6300 a year on energy costs – fully 13% of pre-tax dollars – just for fueling the home and the car. And 26 million American families (20% of the population) earn less than $20,000 annually. Spiraling energy costs are a critical problem for these Americans. As Congress approves the “bail out” of the financial industry, we must do everything possible to alleviate the effects of high energy prices on low and middle income Americans. And, as a result of today's vote in the House of Representatives, American consumers will be able to take advantage of these important energy savings provisions contained in the rescue plan that will be signed by the President:

• Extension of the credit for energy-efficient improvements to existing homes for 2009, this includes biomass fuel stoves (maximum of $300 credit), and clarifies the efficiency standard for water heaters.
• Extension of the deduction for energy-efficient improvements to commercial buildings through 2013. The amount deductible is up to $1.80 per square foot of building floor area for buildings achieving a 50% energy savings target. The energy savings must be accomplished through energy and power cost reductions for the buildings heating, cooling, ventilation, hot water, and interior lighting systems. (5 year extension);
• Extension of the manufacturer's EE appliance tax credits through 2010 for appliances that are U.S.-produced. (3 year extension);
• Extension of the credit for energy-efficient improvements in new homes through 2009 (1 year extension) that achieve a 30% or 50% reduction in heating and cooling energy consumption relative to a comparable dwelling. The credit equals $1,000 for homes meeting a 30% efficiency standard, $2,000 for homes meeting a 50% standard;
• Allows smart electric meters and smart grid systems to be recovered over 10 years (instead of 20-year recovery period applicable under MACRS), but does not apply to property that already qualifies under a shorter recovery schedule;
• New credit for qualified plug-in electric drive vehicles. The credit for passenger vehicles and light truck ranges from $2500-$7500. Taxpayers may claim the credit up to the end of the first quarter after the quarter in which the total number of qualified plug-in electric drive vehicles sold in the United States exceeds 250,000, with all manufacturers combined.

By today's action, the 110th Congress has filled the gap left by one of the most significant omissions in EISA and fulfilled its obligation to the American people to stop the erosion in our economy caused by high energy prices. As we reach the likely ending of Congress this weekend, the Alliance is pleased to be able to report this favorable outcome. Now we turn our sights to preparing for energy efficiency legislation in the new Congress that will take office in January.