The House approved legislation on April 26th that if enacted would repeal or shrink several energy tax credits contained in the Inflation Reduction Act.
This bill is not expected to pass the Senate or become law.
The true impetus behind the bill’s passage is to jump start talks between Congress and the White House on the debt ceiling.
The debt ceiling is the amount of credit the federal government has to issue debt. That ceiling, or limit, is currently close to being breached. Lawmakers and the President must agree on how high to raise the ceiling before the limit is crossed. If they don’t, the federal government would essentially default on its outstanding debt.
Today's House bill addresses the debt ceiling by increasing the current $31.4 trillion debt ceiling by $1.5 trillion or suspending the ceiling until March 31, 2024. The debt limit would be adjusted upward when one of these threshold is reached first.
Tax Credits:
The House bill modifies several tax credits that became law in the Inflation Reduction Act last year.
Modifications to the green energy tax provisions is projected to "decrease outlays by $17 billion and increase revenues by $553 billion over the 2023–2033 period," according to the Congressional Budget Office, Congress’s official bookkeeper.
The over half trillion dollar increase in revenue would come from taxpayers making larger tax payments because of the shrinking or vanishing tax credits that are proposed in the House Republican bill.
Since the bill's introduction, the following changes include:
Provisions struck from the Inflation Reduction Act:
- Modification of credit for carbon oxide sequestration
- Incentives for biodiesel, renewable diesel, and alternative fuels.
- Second generation biofuel incentives
The bill also repeals or modifies several green energy tax credits included in the Inflation Reduction Act, which includes (to name a few):
- Modifications to the tax credit for electricity produced from certain renewable resources.
- Modifications to the clean vehicle tax credit.
- Modifications to the energy efficient commercial buildings deduction.
- Modifications to new energy efficient home credit.
- Repeals tax credit for previously-owned clean vehicles.
- Repeals the increase in energy credit for solar and wind facilities placed in service in connection with low-income communities.
- Repeals zero-emission nuclear power production credit.
- Repeals clean hydrogen tax credit.
- Reverts residential clean energy credit to credit for residential energy efficient property.
Direct pay would be affected by these changes.
Biden Veto:
This bill is not expected to pass the Senate, but if it does, it will not become law. President Joe Biden has announced that he would veto this bill if presented to him.
Re-Occurring Problem:
Speaker Kevin McCarthy (R-Calif.) is the lead sponsor on today’s bill, but he may not be the only lawmaker to use this legislation to offset the cost of other measures.
Tax staffers recently told Eide Bailly that this legislation could be used to offset the cost of future bills. In other words, the fight to keep IRA tax credits alive could be a re-occurring problem.
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