Energy Tax Incentives: A Comparison of the Senate Finance Committee Bill (S. 1149) and the House Bill (H.R. 6), 108th Congress

Publication Date: June 2003

Publisher: Library of Congress. Congressional Research Service

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The 108th Congress is considering two major bills to provide tax incentives to increase the supply of, and reduce the demand for, fossil fuels and electricity: S. 1149, the Energy Tax Incentives Act of 2003, approved by the Senate Finance Committee (SFC) on April 2, 2003 (superseding S. 597), and H.R. 6, introduced as H.R. 1531 and approved by the House on April 11, 2003, by a vote of 247-175.

Both bills would provide a ten-year tax cut of about $18-$20 billion. However, the revenue losses in S. 1149 would be partially offset through additional curbs on corporate tax shelters, an extension of Internal Revenue Service user fees, and other provisions, which would raise about $4.9 billion over 10 years, so that the net energy tax cut is about $15.3 billion. In contrast, the House bill includes less than $100 million in general tax increases, so that its net energy tax cut is about $3 billion greater than the SFC bill.

In comparison with the Senate bill, H.R. 6 confers a larger tax cut, both in absolute and relative terms, for fossil fuels production and for electricity restructuring (or the production of electricity), and a smaller tax cut for energy efficiency and renewable/alternative fuels development. More specifically, H.R. 6 provides about $13.7 billion in tax incentives for increased fossil fuels supply and electricity generation (74% of the total gross tax cut), while S. 1149 provides about $10 billion (about half of the gross tax cut) for fossil fuels and electricity generation. S. 1149 also provides more than $5 billion (about one quarter of the gross tax cut) for alternative and renewable fuels supply, as compared to $3.6 billion under H.R. 6 (20% of the tax cut). For energy efficiency, the Senate committee bill would cut taxes by about $2 billion (about 10% of the gross total), while H.R. 6 would provide $1.3 billion (7%).

Other notable differences between the two bills are: 1) the Senate bill contains tax incentives for clean coal while the House bill does not; 2) the downstream tax incentives for oil and gas refining, distribution, and transportation are relatively larger in the House bill; 3) the tax incentives for electricity restructuring ? basically incentives to increase the generation of electricity ? are significantly larger in the House bill (both in absolute dollar terms and relative to the total tax cut); and 4) the Senate bill's incentives for alternative fuel vehicles (including advanced technology vehicles) and for alternative fuels production are much greater than in the House bill.

The President's FY2004 budget, released in February 2003, proposes a limited number of energy tax incentives ? both new incentives and liberalization of existing energy tax subsidies ? which would reduce energy taxes by about $9 billion over 10 years (about half of the size of the reductions in either S. 1149 or H.R. 6).

This report will be updated as events warrant.