Tax extenders start moving

Tax extenders start moving

June 19, 2019 | By Keith Martin in Washington, DC

Tax extenders are starting to move through Congress.

After several false starts since last fall, the House tax-writing committee was expected as the NewsWire went to press to vote out a bill in mid-June that would extend a collection of lapsed tax benefits retroactively from when they expired. Most of the benefits expired at the end of 2017. Most would be extended through the end of 2020.

The bill would give wind developers another year, through the end of 2020, to start construction of new wind farms to qualify for production tax credits or an investment tax credit at 40% of the full rate. Projects that start construction in 2019 qualify currently for tax credits at this level. The bill would convert the last step of the current phase-out schedule for wind credits into two years so that projects that start construction in 2019 or 2020 would qualify for tax credits at 40% of the full rate.

Geothermal, biomass, landfill gas, waste-to-energy, incremental hydroelectric and ocean energy projects that are put in service by the end of 2020 would qualify for production tax credits at the full rate. The current deadline is the end of 2017. This is a three-year extension for such projects. Owners of the projects would have the option to claim a 30% investment tax credit instead.

The outlook for tax extenders in the Senate is unclear.

The Senate tax-writing committee was eager earlier in the year to move its own package of tax extenders, but the topic has not made it yet on to the Senate agenda. Lobbyists are focused on several must-pass bills that are expected in the fall as possible vehicles.

The House package includes a series of other extensions.

One affects projects on Indian reservations. Super-accelerated depreciation would be allowed for any such projects that are put in service by the end of 2020. For example, wind and solar projects on reservations could be depreciated on an accelerated basis over three years rather than five years. Gas-fired power plants would be depreciated over nine or 12 years, depending on whether the project has a combined steam cycle. Projects on Indian reservations are required currently to have been in service by the end of 2016 to qualify for such rapid depreciation.

A 20% wage credit could also be claimed on the increased amount of wages and health care benefits paid to native Americans above whatever base amount the employer paid in 1993. Covered employees need to be members of tribes, live on or near the reservation and do substantially all of their work on the reservation. The credit can only be claimed on the first $20,000 in wages per employee, and there is a cap on the amount the employee can earn. The ability to claim such credits lapsed after 2017. The House bill would let such credits be claimed on compensation paid in 2018, 2019 and 2020.

The bill extends the deadline for making energy efficiency improvements to commercial buildings to qualify for an immediate deduction of the cost. The deduction is limited to $1.80 a square foot. Such improvements had to be completed by 2017 under current law to qualify for the deduction. The new deadline would be the end of 2020.