Emerging Markets Law

Senate Passes Tax Extenders Legislation

The Senate last week passed tax extenders legislation that includes an extension of most renewable energy tax credit programs through the end of 2014.

The Senate passed the bill, titled “Tax Increase Prevention Act of 2014,” or H.R. 5771, by a vote of 76 to 16.

The House of Representatives had previously passed bill (entitled the "Tax Increase Prevention Act of 2014," HR 5771) by a vote of 376 to 46 .  The Senate passed the bill by a vote of 76 to 16.  President Obama is expected to sign the measure into law this week.

The bill extends the second generation biofuel producer credit through Jan. 1, 2015.  Credits for biodiesel and renewable diesel are extended through Dec. 31, 2014, while the Section 45 renewable energy tax credit is  extended through Jan. 1, 2015. The bill would also extend the special allowance for second generation biofuel plant property through Jan. 1, 2015 and extend the excise tax credits relating to certain fuels through Dec. 31, 2014.

While the bill benefits taxpayers who already have qualifying projects in place, because it is being enacted at the end of the tax year (and will not guarantee any benefit to projects in 2015 and beyond) the measure does not add any certainty to the long-range viability of these projects.  Investors cannot predict whether Congress will continue to extend these measures after-the-fact in the future.

Senator Ron Wyden, D-OR., said in a statement from the Senate floor “Congress can pass this $41 billion bill, but it cannot change anything taxpayers did six, eight or 10 months ago. Those decisions have already been made, and those actions have already been taken. The only new effects of this legislation apply to the next two weeks,” he said. “That’s not nearly enough time for the important provisions in this package to catalyze growth among businesses or to support families in a meaningful way. It’s not enough time to put a dent in veterans’ unemployment, to start a clean energy project and hire new workers, or to help a student who’s on the fence about whether to enroll in college next semester.”

Most of the tax credit programs at issue had their birth in the Energy Policy Act of 2005, which was supported by President George W. Bush.  Nevertheless, since the American Recovery Act of 2009, Republicans have tended to resist extending the provisions, often holding them in abeyance until the end of the year.  We have seen year-end tax extenders bills now for at least the past three years.

The next Congress should look at ways of making these provisions longer-lasting as a way of encouraging greater certainty to entrepreneurs and investors.

Jonathan B. Wilson is a partner in the corporate law department of Taylor English Duma where he represents growing companies in finance, securities and technology matters.   He can be reached at jwilson@taylorenglish.com. 

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