The energy industry was largely a big winner under each of the recently passed House and Senate tax bills and looks likely to maintain its wins in the final conference report. Many favorable tax benefits enjoyed by the oil and gas, midstream and utility sectors are preserved in both tax bills and look on track to staying in the final bill. For example, both bills preserve the deduction for intangible drilling costs and also maintain the deduction for interest expenses for utilities and gas pipelines.
However, the renewable and clean energy sectors face some significant challenges in the final bill. Some of the changes sought in the House bill that would have reduced the value of the PTC and ITC as well as restricted project eligibility have been removed from the final bill. But the applicability of the Base Erosion Anti-Abuse Tax (BEAT) provision to the sector appears to remain in the final bill. Renewable energy supporters believe this provision will undermine the tax equity markets, especially from international investors.
While some details are fluid, the list on the attached PDF table outlines some of the key energy provisions and differences between the Senate and House bills as well as some observations and forecasts for the final bill. Click here for the PDF.
It should be noted that the Senate hopes to pass a separate package of tax extenders before year-end that would fix some issues in the conference report as well as add or extend additional tax credits. These provisions may include tax credits for biodiesel, cellulosic ethanol, coal, nuclear, carbon capture, small wind, geothermal and fuel cells, among others. However, one note of caution: While the Senate is hoping to combine extenders with the main tax legislation or spending bill, the House is not committed to doing an extenders package and the window of time is closing fast.
