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Senate Budget Bill Would Increase Energy Credits and Reduce Tax Hikes | Nation

WASHINGTON – The Senate Finance Committee’s tax package would generate about $ 60 billion in less revenue to pay the rest of the social safety net and Democrats’ multibillion-dollar climate bill, according to a preliminary estimate by the joint commission on taxation.

Among the changes added by Senate Democrats were exemptions for employer and nonprofit pension plans from a new minimum tax aimed at larger businesses, and the extension of clean energy credits to profit. hydroelectric projects, hydrogen fuel production, energy efficient home electrical upgrades and more.

The panel left out, for now, the House’s changes to state and local tax deductions that would generate nearly $ 15 billion over a decade. Combined, the changes left tax cuts and bill increases totaling $ 886 billion in net income to offset other expenses, below the House version’s $ 946 billion.

With Senator Joe Manchin III pushing spending below the $ 2.2 trillion figure passed by the House, that’s probably still more than enough to foot the bill and even cut compensation even further – if Democrats can come to an agreement. on a version the West Virginia centrist will support.

Pensions, non-profit benefits

The bill’s largest new corporate tax, which would create a minimum 15% corporate levy based on reported financial statement income, would generate $ 297.5 billion over a decade in the Senate version , found the JCT.

This is $ 21.3 billion less than the version of the tax passed by the House thanks to the exemption of defined benefit pension plans that business groups have lobbied for and the new text that would avoid d ” tax the income of large non-profit organizations.

The tax applies to corporations with income over $ 1 billion on average over three years, or $ 100 million for U.S. corporations with foreign parent companies. Some large nonprofits fear the tax will hit them, according to people familiar with the matter.

Some of the largest charities, healthcare systems, universities, and other nonprofits generate hundreds of millions of dollars, if not over $ 1 billion, in net income each year. The new language of Senators would only count income from a trade or business unrelated to a nonprofit’s mission to determine if they are eligible for tax and how much they could pay, preserving essentially the tax-exempt status of these organizations.

Hydrogen, hydraulic credits

Meanwhile, the Senate version would make some additions to the clean energy incentives included in the House bill, a major part of the overall package and a priority for Senate Finance Chairman Ron Wyden, who drafted a draft law on which the provisions are partly based. The cost of tax breaks has climbed from $ 13.1 billion over the House version to nearly $ 325 billion, according to the JCT.

The cost of tax credits for renewable electricity generation and investment has increased by more than $ 3 billion, in part due to the expansion of hydroelectric projects. The majority of U.S. hydropower generation comes from the states of California and the Pacific Northwest, according to the Energy Information Administration, including the home state of Wyden, Oregon, and constituents of member Maria Cantwell. of the Finance Panel in Washington State.

The Finance Committee’s version would expand production tax credits for hydroelectric power generation and add pressurized water distribution systems such as pipelines to the list of eligible energy sources. It would also make “hydroelectric environmental improvement goods” eligible for investment tax credits, including hydroelectric dams and projects to “add or improve a safe and efficient fish passage”, such as fish ladders that allow migrating fish to bypass dams and other river obstacles.

Senators also proposed a larger additional tax credit for the establishment of renewable energy facilities and equipment in communities that have lost fossil fuel-related jobs.

The bill passed by the House softened breaks for projects built in areas where coal mines or coal-fired power plants have closed. The Senate version would also offer the bonus credit for projects built in areas where at least 5% of jobs are in the oil and gas industry or on brownfield land, where hazardous substances or other pollutants could complicate construction. But that would remove the bonus if the construction is in a wooded area.

Separately, a boost of $ 3 billion went to incentives for the production of hydrogen, a clean energy source that emits only water and can be made from a variety of sources, including natural gas or coal, and Manchin counts as a key supporter. An addition in the senatorial version would allow facilities transformed into hydrogen production plants from 2022 to benefit from tax advantages for new sites.

And the price to pay for a break in making homes more energy efficient would increase by $ 4.4 billion with new wording to allow a 30% tax credit for energy efficiency residential projects to be used for the upgrade. level or purchase of distribution panels and electrical circuits that power the devices.

Such upgrades could mean a shift to smart systems designed to save energy, a growing market that includes companies like circuit breaker maker Eaton Corp., which has reported lobbied lawmakers for incentives to clean energy bill.

Eaton, based in Dublin, Ireland, “reversed” or moved its overseas headquarters from Cleveland after acquiring Cooper Industries PLC, an Irish company, in 2012. However, it still has significant domestic operations. and maintains its US headquarters in Cleveland.

Offshore wind, solar trackers

Senate Democrats would also soften a new advanced manufacturing tax credit of around $ 1 billion compared to the House version. Generally speaking, credits for companies that manufacture components related to wind or solar energy would not begin to disappear until after 2028, two years later than the Maison version.

Senators also inserted a specific 10% credit to cover costs associated with the purchase of vessels serving offshore wind facilities, which was part of separate legislation drafted by Senators from Massachusetts, New Jersey, Georgia and Maryland. They include Finance members Elizabeth Warren, D-Mass., And Bob Menendez, DN.J.

And there are credits reserved for manufacturers of solar components such as tracking systems, which point the panels towards the sun, and inverters, which convert direct electricity into energy that can be used by the electricity grid.

The main backers of the separate solar component credits include Georgia Democrats Raphael Warnock and Jon Ossoff, who each won a runoff in January. Warnock, who won a special election for a partial term, is seen as one of his party’s most vulnerable incumbents in next year’s midterms. Dalton, Georgia, is home to the largest solar power manufacturing plant in the Western Hemisphere, according to Ossoff’s office.

More changes to come

More changes are likely to emerge in negotiations over the next iteration of the broad budget bill if Democrats hope to get Manchin’s approval. For example, they may have to cut bonuses on electric vehicle credits that would benefit automakers who employ unionized workers, a boon to Detroit-based General Motors Co. but not to companies like Toyota Motor Corp. Tokyo-based who wish to expand their EV-related manufacturing into states like West Virginia.

It is still unclear what will happen with the Maison’s “SALT” cap changes, which would generate net income over 10 years but provide a great benefit to wealthier households over the next few years.

Since the current $ 10,000 cap would otherwise expire after 2025, the House’s decision to raise it to $ 80,000 and then extend that higher cap would end up fetching $ 15 billion more than the existing law. a decade. But Menendez still wrestles with Bernie Sanders, I-Vt., And other critics over the scope of any SALT break.

With the exception of the uncertain changes to the SALT cap, Senate Democrats are working with $ 32 billion less in tax increases than in the bill passed by the House, but the spending limit of 1.75 trillion Manchin dollars would mean they would still have more than enough offsets to get the bill paid in full. for.

Manchin’s critics have recently focused on the spending of the bill, although Sen. Kyrsten Sinema, D-Arizona, has already reversed several tax increases. Lawmakers could also lose around $ 100 billion if they postpone tax increases set for tax year 2022 to 2023 to avoid retroactive increases.

In addition to minimum tax exemptions for businesses, Senate changes that would result in lost revenue include measures taken by the finance panel to remove an $ 8.6 billion tax on nicotine and vaping products and a $ 55 million rule change blocking private prison companies from real estate investment trust status.

An adjustment to a provision limiting what multinational companies can deduct from interest charges would give more flexibility in how companies can calculate this limit, losing an estimated $ 4.4 billion in revenue. Partly offsetting other measures targeting multinationals, including a $ 1.8 billion tax hike aimed at making it harder for companies to do what Eaton and others have done in previous years: relocate their overseas headquarters to reduce their US tax bill.


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Mary Cashion

The author Mary Cashion