An Efficient Package of Tax Bills

In addition to introducing The Efficient Vehicle Leadership Act of 2009 (S. 1620) yesterday (the presumptive heir to “Cash for Clunkers”), Sens. Bingaman (D-NM) and Olympia Snowe (R-ME) introduced three other bills to expand and improve energy efficiency tax incentives. The four bipartisan bills all focus on improving our nation’s energy efficiency and increasing our energy independence. Because they are all tax-related, they have been referred to the Senate Finance Committee.

Sens. Bingaman and Snowe – both senior members of the Finance Committee – will work together to see that these legislative priorities will be reflected in the energy tax package which Senate Finance expects to consider this fall. Additionally, as chairman of the energy, natural resources and infrastructure subcommittee of the Finance Committee, Bingaman will likely convene hearings to evaluate these proposals. Technical summaries of the following bills found in the attached .pdf; bill texts will be posted on the Senate Energy website next week.

The Expanding Building Efficiency Incentives Act of 2009 (S. 1637) encourages energy efficient technology and construction throughout the nation by extending tax incentives for the construction of energy efficient new homes, energy efficient manufactured homes, energy efficient commercial buildings and major incentives for the residential energy efficiency industry. The legislation also adds a higher-tier credit for homes that satisfy the Builders Challenge standard and includes new incentives for homes in high-rise buildings, a 50 percent credit bonus for units in low-income developments and incentives for home energy ratings and auditor training.

“Homes consume more than 20 percent of our nation’s energy. This legislation will facilitate energy-efficient improvements that will lower energy costs for American families as well as reduce our nation’s greenhouse gas emissions,” Bingaman said. “In addition to extending proven tax credits, I’m pleased that this bill reflects my priority of creating enhanced incentives for efficient multi-family and affordable housing. I look forward to working again with my Finance Committee colleague Senator Snowe to see this Act become law.”

“With our crippled economy, continuing energy crisis and changing climate, Americans need timely and effective solutions to set a new course for how we use and think about energy,” said Snowe, a senior member of the Senate Finance Committee, which has jurisdiction over tax policy. “Energy efficiency has emerged as one of the most effective and expeditious actions that can be taken to preserve valuable resources for producers and consumers. I am pleased to work with Senators Feinstein and Bingaman to build upon the success of past tax credits and provide critical energy efficiency tax incentives that will spark innovation in our housing and commercial building sector and pave the way for economical and environmentally-conscious living.”

The Expanding Industrial Energy Efficiency Incentives Act of 2009 (S. 1639) would create the first direct tax incentive ever for industrial energy efficiency. As such, the Act would help our industrial sector adopt advanced energy technologies and processes, enabling American industry to reduce fuel dependency, cut costs, reduce greenhouse gas emissions, add jobs and enhance global competitiveness. The Act creates incentives in the three critical areas: water reuse, advanced motors, and CFC chillers. It also enhances incentives for combined heat and power systems.

Even though the industrial sector represents 32 percent of our domestic energy consumption, there currently are no significant tax credits that directly promote industrial energy efficiency. But as a recent study by McKinsey & Company found, the industrial sector represents the largest potential for end-use energy efficiency in the U.S. and could save $47 billion per year on energy costs through efficiency improvements. The time to make this investment is now.

The Cleaner, Secure, Affordable Thermal Energy Act (S. 1643) would create significant tax incentives for consumers, businesses and tax-exempt entities that now rely on heating oil to convert to more efficient natural gas or biomass (wood pellet stoves) heating systems.

Across the country (particularly in the Northeast and Midwest), many homes and buildings still derive heat from oil-burning furnaces. According to the Energy Information Administration, in 2007, our nation consumed nearly 160 million barrels of oil for heating fuel. This use of heating oil continues despite the existence of widely available alternatives that are cleaner, more secure and more affordable. Besides that, natural gas and biomass are far more secure resources: 98 percent of domestically-consumed natural gas is produced in North America, and domestic reserves of natural gas are estimated at 100 years, based on current consumption.

Since the price of natural gas and biomass is lower and less volatile than the price of oil, conversion offers significant short- and long-term cost savings to consumers. For instance, while the average annual cost of using fuel oil for home heating averages $1,734, the average annual cost of operating a natural gas furnace is $1,004. But significant up-front costs prevent many families and businesses from converting their heating systems. The Cleaner, Secure and Affordable Thermal Energy Act will make these conversions more affordable for American families, businesses and tax-exempt entities.

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