Following the White House’s release of an updated framework for the Build Back Better plan on October 28, 2021, the House released a revised budget reconciliation bill totaling $ 1.75 trillion. The updated framework and draft law include substantial tax provisions for the energy sector.
The full text of the bill and a section-by-section summary can be found here. Negotiations on a final package remain ongoing and Senator Manchin has indicated that he is not yet ready to support this House bill. Despite the uncertainty over what will be included in a final package, a few elements of the October 28 House bill are worth noting:
- Technologically neutral compromise compared to a specific technology: The bill includes both extensions of existing tax credits for renewable energy and alternative fuels (as previously supported by the House) and technology agnostic tax credits (as previously supported by the Senate ). This appears to represent a compromise to bridge the gap between the difference in policy between the two chambers regarding technology-specific energy tax credits versus technology-neutral tax credits.
- Direct compensation: The bill includes provisions allowing for a cash payment option for a number of credits, including those for renewable energy credits (sections 45 and 48, as well as the proposed technologically neutral provisions) and capture credit, of carbon use and storage (CCUS) of article 45Q. The bill makes explicit what was implied – the fact that such a cash payment could be subject to IRS review prior to payment, which can delay the timeframe for receiving such cash and potentially increase controversy. between taxpayers and the IRS.
- Support for national content: The bill requires that certain national content requirements be met to qualify for cash payment instead of tax credits. The domestic content requirement includes an introductory period during which the amount of the cash payment is first available in full, then is reduced and ultimately eliminated if the domestic content requirements are not met. The bill includes exceptions to this requirement, although further guidance is needed to comfortably build on the exceptions. The bill further supports the domestic manufacture of renewable energy equipment through increased tax credits for certain facilities that meet national content thresholds, and new and renewed tax credits for facilities that meet national content thresholds. manufacture renewable and alternative energy equipment. In short, the bill seeks to increase domestic manufacturing of energy equipment, but the question remains whether the incentives are sufficient to stimulate large-scale manufacturing of energy equipment to enable developers to meet the targets. National Congress manufacturing.
- Salary and apprenticeship conditions in force: The bill includes a two-tier structure for certain tax credits, including renewable energy credits (sections 45 and 48, as well as the proposed technologically neutral provisions) and the CCUS section 45Q credit. The full credit amount is only available if certain salary and learning requirements are met (subject to exceptions). Notably, Congress appears to recognize the challenge of meeting these requirements without additional guidance, and this bill provides that these requirements will be considered met for any project that begins construction before or within 60 days of the IRS issuing guidance on these requirements. In addition, the bill provides for the possibility of remedying certain shortcomings in compliance with these requirements. Similar provisions are also included elsewhere in the bill.
- Continued support for CCUS: The bill extends the Section 45Q CCUS credit, significantly reduces the minimum capture thresholds required for credit, and increases certain dollar amounts of credit.
- Ongoing support for alternative fuel vehicles: The bill provides additional support for alternative fuel vehicles, including bicycles, and related infrastructure.
- Additional credits: The bill includes credits for autonomous energy storage, transmission, clean hydrogen, sustainable aviation fuels, existing nuclear production facilities and certain other technologies. The bill also authorizes a section 45 PTC for solar installations and a section 48 ITC for interconnection costs. The extension of credits for other technologies has been researched in previous invoices and seems likely to be included in a final invoice.
- Support for low-income communities: The bill includes the possibility of increasing tax credits for solar and wind power plants put into service in low-income communities and includes certain other environmental justice provisions.