Energy Tax Incentives in H.R. 6: The Conference Agreement as Compared with the House Bill and Senate Amendment

Publication Date: August 2003

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Energy

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Abstract:

The 108th Congress is considering three bills to provide tax incentives to increase the supply of, and reduce the demand for, fossil fuels and electricity: the House version of H.R. 6, introduced as H.R. 1531 and approved by the House by a vote of 247-175 on April 11, 2003; the Senate version of H.R. 6, passed by the Senate on July 31, which is the same as the energy bill H.R. 4 approved by the Senate in 2002; and S.Amdt. 1424, a Senate Finance Committee (SFC) amendment to H.R. 6 that is a slightly modified version of S. 1149, the Energy Tax Incentives Act of 2003 approved by the SFC on May 23, 2003.

Each of the three bills provides a ten-year tax cut of about $18 billion, although the mix of energy tax incentives differs. H.R. 6 as passed by the House provides about $18.2 billion of energy tax incentives and includes just under $0.1 billion ($100 million) of non-energy tax increases, or offsets. The apportionment of tax savings in the House-passed H.R. 6 among the three categories -- fossil fuels, energy efficiency, and alternative/renewable fuels -- is the same as the House bill in the last Congress (H.R. 4), but the absolute amounts of dollar cuts are much smaller. The Senate version of H.R. 6 is the same as the Senate version of H.R. 4, the omnibus energy measure approved by the Senate in 2002, but on which no conference agreement was reached. This version of H.R. 6 included about $13.2 billion in energy tax incentives over ten years, plus an additional $5.1 billion in energy tax cuts (or revenue losses) due to mandates that would have further reduced energy tax receipts: the renewable portfolio standard and the renewable fuels standard. S. 1149, which was approved by the Senate Finance Committee on April 2, 2003, but not included in the Senate version of H.R. 6, would provide about $19.5 billion in energy tax cuts, offset by about $5 billion of non-energy tax increases -- additional curbs on corporate tax shelters, limits on corporate and individual expatriates, and an extension of Internal Revenue Service user fees. Thus the net, ten-year tax cut under S. 1149 would be just over $14.6 billion.

In general, the House version of H.R. 6 confers a larger tax cut, in both absolute and relative terms, for fossil fuels production -- particularly the oil and gas industry -- and for electricity restructuring (or the production of electricity), and a smaller tax cut for energy efficiency and renewable/alternative fuels development than the other two bills. Also, the downstream tax incentives for oil and gas refining, distribution, and transportation are both absolutely and relatively larger in the House bill than in either of the other two bills. In contrast, the Senate bills are absolutely and relatively more generous to renewable and alternative fuels. The Senate bills also include substantial new tax breaks for investment in clean-coal technologies and for the generation of electricity from these technologies; the House version of H.R. 6 includes no incentives for clean coal technologies -- these were dropped from the 2002 bill. Finally, with regard to ethanol fuel, the House version of H.R. 6 has no additional incentives for that renewable transportation fuel, while the other two bills would expand existing tax incentives.