Baucus’ exit sends extenders debate into overdrive

Source: Nick Juliano and Elana Schor, E&E reporter • Posted: Friday, December 20, 2013

Even before news broke that Sen. Max Baucus would soon be heading to China, Democrats on Capitol Hill were starting to get antsy over the fate of dozens of expiring tax credits that had been placed on the back burner while Baucus tried to craft a complete overhaul of the tax code

Now that the Montana Democrat is all but officially headed for the exits, momentum behind extending the temporary incentives like the production tax credit, home efficiency rebates and alternative fuels tax breaks has shifted into high gear in the Senate.

“I think people are thinking about that now that this transition is happening. … People are thinking about getting that done sooner rather than later,” Sen. Maria Cantwell (D-Wash.), a member of the Finance and Energy committees, said of the coming push for tax extenders.

Cantwell was one of several Democrats who delivered a series of floor speeches yesterday in support of extending various expiring provisions.

The temporary credits will expire at the end of this month, and clean energy proponents say they should be extended retroactively as soon as possible next year. A modification enacted in January has provided some breathing room for wind developers, which benefit more than any other industry affected by the expiring energy-related provisions (Greenwire, Dec. 19).

Despite a looming expiration that everyone has known about all year, there has been relatively little public pressure to extend those credits. Baucus made it clear early on that comprehensive tax reform was his top priority, so that’s where lobbyists put their focus.

Hours before news of his departure emerged yesterday, Baucus dropped his widely anticipated draft bill that would completely overhaul portions of the tax code affecting energy, a radical proposal to replace nearly everything with three credits to promote low-carbon electricity and transportation fuels as well as carbon capture and sequestration (Greenwire, Dec. 18).

It was always widely expected that tax reform would not make it across the finish line before the end of next year — necessitating an extenders package for the industries that rely on them. (In addition to the energy provisions, such a package typically includes an extension of the broadly popular research-and-development tax credit as well as the ability for individuals to deduct state and local taxes from their federal obligations.)

“I think you’re going to see a much more aggressive approach beginning next year,” one renewable industry lobbyist said, on condition of anonymity. “The business community has been waiting out tax reform because that’s what they were told to do — even though a lot of people didn’t think it was going to happen.”

Baucus’ exit is likely to result in Sen. Ron Wyden’s (D-Ore.) taking over as Finance Chairman, leaving Sen. Mary Landrieu (D-La.) to claim the Energy and Natural Resources gavel that Wyden would give up (see related story).

A top question in the minds of many is how this affects the plans of House Ways and Means Chairman Dave Camp (R-Mich.), who has worked closely with Baucus on comprehensive tax reform throughout the year.

“One of the problems is that Senator Baucus has been the one doing most of the negotiating with Congressman Camp, so it’s going to take a while for Senator Wyden to get up to speed on some of these issues,” said Jim Manley, a former Reid aide and now a senior director at Quinn Gillespie & Associates. “That’s not an insurmountable issue. I’m not so sure there’s terribly much of a difference [between Baucus and Wyden on energy taxes]. Certainly they both are supporters of alternative energy, as far as I know.”

A House committee aide said Camp will remain focused on tax reform and looks forward to working with Wyden on the effort.

However, Baucus has not officially announced his plans, leaving questions as to how soon the shift would happen and what he might be able to accomplish before he leaves. Sen. Orrin Hatch (R-Utah), the ranking member on Finance, said the committee will take up an extenders package, although the timing of such is unclear.

“If Max is still chairman, we might be able to get that done before he leaves,” Hatch told reporters yesterday in response to a question on extenders. “We’ll get it done.”

Even as he steadfastly declined to weigh in on the fate of his chairmanship, Wyden reminded reporters yesterday that he has promoted sweeping tax reform since 2005.

The dense tax “code is a dysfunctional mess,” he said. The Oregonian also offered praise for the energy-specific discussion draft Baucus rolled out Wednesday that replaces a panoply of tax breaks with broad incentives to promote cleaner transportation fuels and electricity as well as carbon capture and sequestration.

Though he has not finished “the appropriate deep dive on Chairman Baucus’ proposal,” Wyden said, “I believe it’s a promising approach” that aims “to move toward a more level playing field among various energy sources.”

The more urgent task for renewable energy lobbyists, however, is keeping the PTC alive in a “tax extenders” bill that many hope to see taken up as soon as lawmakers return next month. Wyden said that while his “first preference would be to have energy addressed as part of comprehensive tax reform,” the House’s move “to pull back” on that effort requires supporters of cleaner power generation to stop incentives “from being sacrificed on the altar of inaction.”

In earlier remarks praising the Baucus draft bill, Wyden did single out areas like energy efficiency as potentially in need of some additional support via tax incentives.

“From our perspective, that will be good for us,” said Steven Nadel, executive director of the American Council for an Energy-Efficient Economy.

Nadel said the shift accelerates planning for an extenders push that already was expected. ACEEE, he said, will push for an extension to credits to promote energy-efficient new homes and commercial buildings, but the group is not asking for renewal of a credit for efficient appliances or the so-called 25C credit that homeowners could receive for purchases of more efficient windows, water heaters or other products.

Wyden has a long history on Finance and has made tax reform one of his top issues for years, increasing confidence that he would be able to successfully build on the foundation Baucus has established.

“It’s not like Ron Wyden isn’t a Finance guy,” said Michael Brower, president of the American Council on Renewable Energy. “And he’s chomping at the bit to do this.”