We just went through this last winter because the tax extender deals never seem to go away, but it’s getting harder and harder to tell who is on which side. There are a number of credits in the tax code which have (thankfully) expired on schedule, but Congress is quietly working on bringing them back from the dead like zombies. A couple of them are the truly unsupportable benefits being handed out to the wind power and biofuels industries. You might be surprised to see that this is even a topic for discussion now that the GOP controls both chambers, because it’s generally the Democrats who favor this sort of largesse. But not in this case. The person going to bat for these programs during markup hearings last week was none other than Iowa Republican Senator Chuck Grassley. (From The Daily Caller)

Democrats and Republicans seem to be working together to retroactively hand out tax credits to green energy producers. Among the most contentious of the green tax subsidies is a proposal to pay companies that produce energy from wind turbines.

The so-called Wind Production Tax Credit was allowed to expire at the end of last year, but a fierce effort by wind state Republicans and Democrats who want to see the energy source once again be given taxpayer support.

While most Republicans actually oppose many of these green energy subsidies, a few have embraced them as essential to their state’s economy. In fact, it was Iowa Republican Sen. Chuck Grassley who got wind and biofuel subsidies into the pending tax package. Grassley wrote the finance committee earlier this month, urging them to include wind subsidies in the tax extenders deal.

Grassley’s green subsidies would pay wind producers 2.3 cents per kilowatt hour over ten years for all the electricity they generate or allow wind farm operators to take a 30 percent investment tax credit instead of the power payments. Grassley also pushed for a $1.01 per gallon tax credit for cellulosic biofuel producers and a $1 credit for biodiesel makers.

The plan worked and the package passed out of committee later in the week with these same poison pills buried in the details. But as was reported in Biomass Magazine (yes, there is such a thing) Grassley did try to at least slightly ameliorate the damage with an amendment which will ensure that the biofuel would only go for ethanol that was produced in the United States.

During the hearing to address the extenders package, the committee accepted an amendment offered by Sen. Chuck Grassley, R-Iowa, to change the biodiesel fuels tax credit from a mixture credit to a production credit. During the hearing, Grassley explained that the amendment would help ensure the credit benefits only domestic biodiesel production and doesn’t subsidize imported biofuels. “It’s projected that imports from Argentina, Singapore, the European Union and South Korea could exceed 1 billion gallons in the years 2016 and 2017,” Grassley said, noting the tax incentive should not apply to these imported fuels. “By restricting the credit to domestic production, we’ll save tax payers money and reduce the cost of the extension by $90 million,” he continued.

I’m not sure how much that counts as good news but I suppose it’s better than nothing. Giving away tax credits for simply “mixing” fuel using ethanol shipped in from other countries is just adding insult to injury. And knocking $90M off the final price tag for these giveaways isn’t chicken feed, but it’s also really not that much of haircut for tax code goodies which are going to cost us more than $13B in total.

The other aspect of this not covered in the Daily Caller article but picked up by Biomass is that there were more credits buried in this pile than the relatively straightforward dollar per gallon for diesel fuel created from biomass. There include:

– A two-year extension of the renewable production tax credit
– A 2.3 cent per kWh tax credit for renewable electricity
– A two-year extension on the special depreciation allowance for 2nd generation biofuel plant property
– A two-year extension on the alternative fuel mixture excise tax credit.

In fact, all of these goodies received an extended reprieve under the current deal taking them all the way through the next election. That’s awfully convenient, isn’t it? (Particularly since Grassley will be up for election again next year, assuming he decides to run for another term. That’s not a given at his age.) None of this is done until it gets a full vote in the Senate, though, and we don’t yet know when that will wind up being scheduled. I’m not even sure if it’s possible to knock some of these things back out during the amendment process at this point, but it’s certainly worth looking into.