Why Congress’ Momentary Extension Of A Wind Tax Credit Isn’t Worth ‘A Carton Of Eggs’

CREDIT: AP Photo / Harry Hamburg, File

Senate Finance Committee Chairman Ron Wyden said the tax credit extension "doesn’t have the shelf life of a carton of eggs."

Weeks of congressional wrangling finally delivered a tax break for wind energy Tuesday night that will be useless in two weeks. Such is the state of modern American politics.

The bill in question was actually a package of over 50 various tax credits, for both individuals and businesses, that have to be cyclically renewed every few years. Among them is the production tax credit (PTC) for renewable energy projects, which has gone primarily into encouraging more wind power capacity, as every qualifying project gets a tax break. The extenders had all expired at the end of 2013, and gridlock stalled a renewal throughout all of this year until recently, when first the House and now the Senate passed the bill retroactively extending the package of tax credits through the end of 2014.

And therein lies the problem. While individuals and businesses can now claim the credit for any qualifying project they undertook in 2014, they literally only have days before the fate of the credits is once again thrown into uncertainty. In some cases, this is not such a big deal — more money in the pocket is more money in the pocket. But often credits are only useful to people if they can plan their finances or business decisions ahead of time with the credit assured, and that’s how it is for the wind industry. Thanks to planning and permitting needs, new wind energy projects can take up to two years or longer to complete. With certainty lasting only until the end of month that new projects will benefit from the credit, the extension is effectively useless as far as encouraging more wind projects in 2014 or 2015 than would’ve occurred without it.

“With this tax bill, the Congress is turning in its tax homework 11 months late,” said Sen. Ron Wyden (D-OR) the chairman of the Senate Finance Committee. “This package of tax incentives will last just two weeks before families and businesses are thrown back into the dark with respect to the taxes they owe. The legislation accomplishes nothing for 2015.”

“The Congress is about to pass a tax bill that doesn’t have the shelf life of a carton of eggs.”

This pattern has become something of a problem for the wind PTC. It was originally established in 1992, and was first bulked up and extended by 2009 stimulus bill. Then it expired again in 2012, but Congress extended it at the very last minute through the end of 2013. This will-they-or-won’t-they-extend-it dynamic has created a “boom and bust” cycle in wind capacity installations, as the industry ramps up to take advantage of the credit before an expiration, and then collapses when further extensions become politically uncertain.


CREDIT: Union of Concerned Scientists, based on data from DOE 2013 and AWEA 2014

An earlier version of the bill would’ve extended the package of tax credits through the end of 2015. But when Senate Majority Leader Harry Reid (D-NV) brokered a deal with Republicans that left the Child Tax Credit and the Earned Income Tax Credit out of the package — two policies that do an immense amount to help low-income families — many Democrats revolted and President Obama threatened a veto. The deal fell apart, and the new one-year version is all the Senate negotiations could salvage. Obama is expected to sign the legislation shortly, according to Time Magazine.

“I’d much rather have had a two-year bill so people had the certainty of planning for next year,” admitted Sen. Bill Nelson (D-FL). “But you have to take what you can get.”

The entire package is estimated to cost the American government roughly $41.6 billion in lost revenue and tax code spending over the next ten years, with the renewable energy PTC accounting for about $6.4 billion of that.

Ultimately, the bill passed the Senate by a solid vote of 76 to 16, though it’s an open question how enthusiastic those 76 “yes” votes were. Disgust with the process was bipartisan, with the 16 “no” votes split evenly between the parties. “This is ridiculous because we’re not extending it beyond the tax year and by the time we get back here, it will already be expired for a week or two,” said Sen. Rob Portman (R-OH). “It is a failure of Washington again to get its act together and do what should be done.”

As for Sen. Orrin Hatch (R-UT), who will replace Wyden as head of the Senate Finance Committee in January, he was even more blunt: “Never in the history of tax legislation have so many voted for so little and been so disappointed.”