Unable to extend tax breaks as part of a broad energy bill two months ago, lawmakers are trying to attach some of them to an emergency economic aid package containing rebates for millions of taxpayers.
But that strategy may also falter when the Senate votes next week on the $193 billion economic stimulus bill that has been expanded over what already was approved by the House. Both President Bush and Senate GOP leaders have warned against adding to the House-passed bill.
But as it emerged this week from the Senate Finance Committee, among the items added was a string of energy tax credits aimed at helping people lower their heating and cooling costs and give a boost to wind and solar energy industries.
The efficiency measures — including tax credits for retrofitting homes with more energy efficient windows, insulation and furnaces — expired in December. The other tax breaks are set to die out at the end of this year. The economic package would extend all of the credits to the end of 2009.
Wind and solar industry lobbyists and energy efficiency advocates have pushed for the tax extensions, which have bipartisan support, but efforts to get them into the energy bill enacted just before Christmas failed because of an unrelated dispute over taxing large oil companies.
With lawmakers facing political pressure to respond to the threats of an economic recession, the stimulus package was seen as a way to prolong the energy tax breaks.
"The stimulus package should underscore the nation's commitment to energy efficiency and alternative energy," said Iowa Sen. Charles Grassley, the top Republican on the Senate Finance Committee, arguing for including the tax incentives, despite GOP leaders' opposition to adding to the $161 billion House bill.
Although the energy tax provisions would be extended only to the end of 2009, if they were to continue over 10 years the cost to the government would be $5.75 billion, according to the Finance Committee.
"Investors need certainty. They won't put their money out for a wind energy facility unless there's a reasonable expectation that tax incentives will continue into the future," said Grassley.
The bill includes incentives to spur production of wind farms, biomass energy plants and investments in solar energy plants. It also includes a tax break for making the most efficient appliances and for ultra-energy efficient residential and commercial buildings.
It also would provide tax credits up to $500 to reduce the cost of installing insulation, more efficient furnaces and windows in homes. Approved by Congress in 2005, these credits expired at the end of December just as consumers faced huge increases in fuel costs for winter heating.
The efficiency tax breaks, which would be reinstated for two years, can help to "combat spiraling home energy costs that are expected to average roughly $2,200 this year," said Kateri Callahan, president of the Alliance to Save Energy, an advocacy group.
Separate provisions aimed at manufacturers and builders would extend tax credits intended to develop the next generation of energy efficient appliances including clothes washers and refrigerators, and for constructing ultra-energy efficient commercial and residential buildings.
Renewable energy industries — wind, biomass and solar — have argued that longer term tax credits are essential to provide assurance to investors in wind turbines or biomass. The bill would extend tax credits for such electricity sources through 2009.
Wind energy grew by 45 percent last year, but continued growth has been jeopardized by the uncertainties over the production tax credit, said Greg Wetstone of the American Wind Energy Association.
"Investors are reluctant to make commitments until they know what the tax policy will be next year," said Wetstone, adding that enactment of the tax extension is "pivotal for one of the fastest growing sectors of the American economy."
The solar energy industry also has argued that certainty on tax policy is key to attracting investors.
"While the solar industry will continue to press for longer extensions (of tax breaks) for commercial and residential projects, this is a win for solar energy and for our economy," said Rhone Resch, president of the Solar Energy Industries Association.
