Section 29 tax credits extended through 2012 under bills introduced in October | Norton Rose Fulbright
The two Senators pushing the bill in the Senate – Frank Murkowski (R.-Alaska) and John Breaux (D.-La.) – are both on the Senate tax-writing committee and, therefore, they are in a position to move the bill next year if they are serious about it. Dennis Moore (D.-Kansas), a congressman who is not on the tax-writing committee, introduced a companion bill in the House.
The US government offers a tax credit of $1.035 an mmBtu for producing gas from coal seams or biomass, or synthetic fuels from coal, or $0.536 an mmBtu for producing tight sands gas. This was supposed to act as an inducement to Americans to look in unusual places for fuel. The idea was to reduce the need to import as much oil from the Middle East.
The deadline for placing projects in service to qualify for credits has already passed. The deadline for coal seam and tight sands gas projects was 1992. It was June 1998 for other projects.
Frank Murkowski – who, in addition to serving on the tax-writing committee, chairs the Senate Energy Committee – said he was introducing the bill because “we are 56 percent dependent on foreign sources of oil.” The bill would push back the deadline for completing all projects – for example, landfill gas, synthetic fuels from coal, coal seam gas, tight sands gas – to 2010. Any such project put into service after the bill is enacted and before the new deadline of 2010 would qualify for tax credits through 2012. However, the amount of the credit would phase out starting in 2009. For example, credits in 2009 would be only $0.897 an mmBtu (before inflation adjustments) compared to $1.035 an mmBtu today. Credits in 2012 would be only $0.276.
There would be no extension of tax credits for projects that are already in service when the bill is enacted.
The bill would also add heavy oil to the list of fuels that qualify for tax credits, and it would permit companies that pay taxes under the “alternative minimum tax” to use section 29 credits for the first time to offset minimum taxes.