U.S Senate Finance Committee releases report on Energy Tax Incentive options
The U.S Senate Finance Committee recently released a report which detailed options for reform to the federal tax incentives regarding energy. The report “Infrastructure, Energy and Natural Resource: Senate Finance Committee Staff Tax Reform Options for Discussion” identifies a series of reform principles within the energy sector. Within the Energy and Natural Resources section, the principles include:
To the extent the tax code includes tax expenditures for energy and conservation, the tax code should:
- Provide greater certainty for businesses
- Consolidate and simplify tax expenditures
- Tweak the tax expenditures to be fairer and more efficient
- Encourage energy independence through a comprehensive approach
- Carefully consider whether and how to address any positive or negative externalities
The committee's report also addressed the concern amongst some individuals about the temporary nature of tax expenditures with a deadline date since it creates uncertainty for U.S taxpayers. Such uncertainty makes it harder for business owners to plan, and may diminish the effectiveness.
According to RESNET, one of the options considered in the report was to replace existing energy tax expenditures with technology neutral tax expenditures. The report recommended to “Establish a new, performance-based tax credit for residential energy efficient retrofits of, for example, $2,000 if the retrofit makes the home 20% more efficient, regardless of what technology is used (Cut Energy Bills at Home Act, sponsored by Sens. Bingaman, Snowe and Feinstein)”.
Also, the committee's report presented the option to make the individual tax credit for energy efficient home retrofits (Home Energy Savings Act of 2012) permanent. It also recommended exteding the tax credit to commercial buildings. A product like Icynene spray foam insulation falls into the current tax credit offered by the federal government.