Key Tax Credit Amendments Proposed for Extenders Package

Published by Peter Lawrence on Thursday, April 3, 2014 - 12:00am

list of amendments to the EXPIRE Act, a tax extenders bill to be considered April 3 by the Senate Finance Committee, and a description of each amendment have been released. It is not likely that all of these filed amendments will be offered or voted upon during committee consideration. Some of them may be incorporated into a modified Chairman’s Mark of the EXPIRE Act that will be released shortly before committee consideration of the EXPIRE Act.

Here are some highlights:

Low-Income Housing Tax Credit

  • Sens. Cantwell (D-Wash.), Roberts (R-Kan.), Schumer (D-N.Y.), Brown (D-Ohio), Rockefeller (D-W.Va.), Stabenow (D-Mich.), Cardin (D-Md.) and Menendez (D-N.J.) propose establishing a minimum low-income housing tax credit rate at 4 percent for the acquisition of existing property for allocations made before January 1, 2016 to complement the extension of the 9 percent minimum rate for new construction in the Chairman’s Mark of the EXPIRE Act.
  • Sen. Nelson (D-Fl.) proposes clarifying the applicable placed-in service date for LIHTC GO Zone Difficult Development Areas (DDAs).

New Markets Tax Credit

  • Sens. Rockefeller, Cardin and Stabenow propose increasing the 2014 allocation of NMTCs to about $4.7 billion, which is equivalent to the inflation-adjusted value of $3.5 billion from 2000, and indexing the annual NMTC allocation to inflation. The Chairman’s Mark of the EXPIRE Act extends the NMTC at $3.5 billion for 2014 and 2015.
  • Sen. Nelson proposes providing bonus points in the application process for investors who commit to NMTC projects in states that have historically been underserved by the NMTC tax credit program. An underserved state would be one that has a share of the nation’s population in poverty that is greater than the state’s share of NMTC investment over the previous five years. Currently this could include the following states: Pennsylvania, Florida, Kansas, Texas, Utah, West Virginia, Wyoming, Colorado, Georgia, Idaho, North Carolina, Alabama, Arizona, Arkansas, California, Hawaii, Illinois, Indiana, Kentucky, Montana, Nebraska, Nevada, New Mexico, South Carolina and Tennessee.
  • Sen. Brown proposes clawing back unused NMTCs and using them to create a Manufacturing Communities Tax Credit. This credit would be allocated by Treasury’s CDFI Fund to Community Development Entities (CDEs) for manufacturing investments in communities that have experienced a major job loss event

Disaster Recovery

  • Sens. Menendez, Bennet, Rockefeller propose providing tax relief for individuals and businesses impacted by federally declared disasters in 2012, 2013 and 2014. The amendment would reinstate and extend several disaster-specific provisions enacted in previous years (e.g., GO Zone and Midwestern Flood Recovery Acts), including, but not limited to increased low-income housing tax credit availability, increased historic rehabilitation tax credit availability, additional New Markets Tax Credit allocation and increased disaster-specific bond authority. This amendment was originally planned to be introduced as legislation to address the disaster recovery needs as a result of Superstorm Sandy and other major federally declared disasters since 2012.

Energy Tax Credits

  • Sen. Cantwell proposes modifying the extension of the Sec. 45 production tax credit (PTC) or investment tax credit (ITC) in lieu of the production credit to be effective for solar projects that begin construction before January 1, 2016.
  • Sen. Menendez proposes extending the Section 45 PTC for certain facilities. The amendment would allow qualified open-loop biomass and waste-to-energy facilities placed in service before date of enactment to claim the Section 45 PTC for production occurring after December 31, 2013 and prior to January 1, 2016. Qualifying facilities would be prohibited from claiming an aggregate stream of credits totaling more than 10 years.
  • Sens. Grassley (R-Iowa), Cantwell, Brown, Bennet (D-Col.), Cardin, Carper, Menendez, Nelson and Stabenow propose extending the beginning-of-construction date for the PTC or ITC. The amendment would extend for two years, through December 31, 2015, the production tax credit for wind and other qualified facilities by replacing January 1, 2014, everywhere it appears in IRC Section 45 with January 1, 2016. It would also extend for two years, through December 31, 2015, the investment tax credit in lieu of the production tax credit for wind and other qualified facilities.
  • Sen. Thune (R-S.D.) proposes phasing-out the PTC for wind. The amendment would provide wind energy producers, utilities and electricity consumers greater certainty by extending the wind credit through December 31, 2018 while providing taxpayers certainty that the federal tax subsidy for electricity from wind will not be permanent. Specifically, the amendment would provide 100% of the PTC for electricity from wind in 2014, 90% of credit in year 2015, 80% of credit in year 2016, 70% of credit in year 2017, 60% of credit in year 2018 and allow the PTC to permanently expire thereafter. The proposal would also return to a “placed in service” rule and eliminate the inflation adjustment to the credit for new projects placed in service after date of enactment.
  • Sen. Toomey (R-Pa.) proposes eliminating the PTC (and the investment tax credit in lieu of the PTC), all credits for biofuel, biodiesel, and renewable diesel; credits for energy efficient appliances; credits for electric motorcycles and fuel cell vehicles; and credits for alternative fuel refueling property.
  • Sen. Toomey proposes prohibiting any company that has benefited from or chooses to benefit from the Production Tax Credit (or the investment tax credit in lieu of the PTC) from receiving a waiver from any federal law that protects the life, wellbeing or habitat of bald eagles. Any company that has already received such a waiver must either renounce the benefits of that waiver or refund any money received from the PTC (or the investment credit in lieu of the PTC) to the federal government within 12 months.
  • Sens. Carper (D-Del.), Brown, Cardin and Menendez propose creating a 30 percent investment offshore wind tax credit for the first 3,000 MW offshore wind facilities placed into service.
  • Sens. Carper and Cardin propose including waste heat to power technology as eligible technology for the investment tax credit.
  • Sens. Bennet, Brown, Menendez, Carper, Stabenow and Cardin propose allowing technologies qualifying for the ITC to claim the incentive provided they have “commenced construction” on their project before the credit’s expiration.

Tax reform

  • Sen. Thune proposed an amendment to express support for comprehensive tax reform. The amendment would express the sense of the committee that: 1). Comprehensive tax reform should commence next Congress and conclude before the current tax extenders have expired; 2). Congress should endeavor, as part of tax reform, to eliminate temporary provisions from the tax code, thus making permanent those provisions that merit such treatment and allowing others to expire; 3). A major focus of tax reform should be fostering economic growth and lowering tax rates by broadening the tax base; and 4). The chairman and ranking member of the Finance Committee should consult with the chairman and ranking member of the Budget Committee so as to ensure that an appropriate baseline is used during tax reform.