SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 1670 words

COMMITTEE: HOUSE WAYS AND MEANS

HEADLINE: ENERGY AND TAX LAWS

TESTIMONY-BY: JAY INSLEE, REPRESENTATIVE

BODY:
Statement of the Hon. Jay Inslee, M.C., Washington

Testimony Before the Subcommittee on Select Revenue Measures of the House Committee on Ways and Means

Hearing on the Effect of Federal Tax Laws on the Production, Supply and Conservation of Energy

June 12, 2001

First, I would like to thank the Chair and the Committee for holding this hearing. This is a perfect moment for the Congress to focus on how tax policy can be used to advance our national energy policy for two reasons. First, our current short-term energy crisis makes it obvious that we need conservation and efficient technology and new sources of generating capacity. Secondly, and just as importantly, the challenge of global climate change drives our need for conservation and new clean generating technologies just as powerfully as our raw shortage of kilowatts. This much is certain- we must develop new industrial bases for cleaner generating systems as well as achieving new efficiencies, or we run the risk of unintended and unpredictable climate change. President Bush is in Europe today discussing climate change and prospective international tactics to address it. We need not, we should not, and we cannot wait for other nations to act. We need to act now, with an American policy of American innovation. We did not have to wait for other nations when we passed the Clean Air Act, the Clean Water Act, or National Environmental Policy Act. We should not wait now.

Fortunately, we are a nation uniquely talented when it comes to acquiring the need for new technology. It ought to be our national goal to lead the world in these new technologies, not just for environmental reasons but for economic ones as well.

To that end, I have been working with Members of both parties, and a wide gamut of people leading in these new technologies, to develop a comprehensive package of tax policies that can spur innovation in this direction. The product we have produced represents a broad-based and well-balanced package of measures to encourage the use of new technologies. Rather than focusing on one technology, our bill addresses a number of new fronts so that Congress does not put itself in the position of "picking a winner."

I can also say that this package is one with broad-based support throughout the world of new technologies. As such, it represents the culmination of a process of consensus in that community, rather than a request by just one player.

The following is a summary of this legislation:

TITLE I--RENEWABLE AND ALTERNATIVE ELECTRIC ENERGY PRODUCTION

Tax incentives for the production of electricity by the use of renewable fuel sources.

Section 101 Expansion of Renewable Resource Credit to Include Alternative

Resources

One and a half cents/kWh production tax credit for solar, open loop biomass, hydropower efficiency, incremental geothermal, and landfill gas. One cent/kWh for biomass portion of co-firing with coal. Allows credit for co-production of electricity with heat, mechanical power, or minerals.

Section 102 Additional Modifications of Renewable Resource Credit

Allows transfer or offset of credit for public utilities. Applies minimum tax provision to be reduced by the credit allowed for renewable production. Extends existing wind, closed loop biomass, and poultry litter production tax credits.

TITLE II--ALTERNATIVE FUEL VEHICLES

Tax incentives to encourage the use of motor vehicles powered by fuel cells, hybrid technologies, battery electric technology, and alternative fuels. (Sections 201-204: Hatch--S. 760 with slight changes)

Section 201 Alternative Motor Vehicle Credit and Modification of Credit for Qualified Electric Vehicles

Provides tax credits to consumers to purchase alternative fuel and advanced technology vehicles (fuel cell vehicles, hybrid vehicles, dedicated alternative fuel vehicles and battery electric vehicles). Divides the vehicle tax credit in two parts - one part to provide a base tax credit for the purchase of vehicles dedicated to the use of alternative fuel or vehicles using advanced technologies, the other part to be used as a bonus credit based on the vehicle's efficiency and reduction in emissions. Performance criteria and emission backstops have been established in order for a vehicle to receive the tax credits. There is a minimum level of tax credits for introducing the technologies into the marketplace. Performance incentives are based on fuel economy improvements over 2000 Model Year levels for "like vehicle" categories. A sliding scale ranging from 125% to 300% over current city mileage levels is included to reward fuel economy improvements proportionately. Emission backstops are included to ensure that incentives apply only to vehicles whose emissions meet or beat the average applicable standards. Incentives are provided for the full range of transportation categories including light, medium and heavy duty applications.

Section 202 Credit for Retail Sale of Retail Sale of Alternative Fuels as Motor

Vehicle Fuels

Provides a tax credit of 50 cents per gasoline-gallon equivalent for the purchase of alternative fuel at retail.

Section 203 Extension of Deduction of Certain Refueling Property

Extends the existing deduction for the capital costs of installing alternative fueling stations.

Section 204 Credit for Installation of Alternative Fueling Stations

Provides a 50 percent credit for the installation costs of retail and residential refueling stations.

Section 205 Credit for Investment in Property to Convert Waste to Fuel

Fifteen percent investment tax credit for equipment used to convert plastic waste and biomass into a usable fuel source. $10,000 limitation.

TITLE III--ENERGY EFFICIENCY AND CONSERVATION

Tax incentives to promote energy efficient and conservation technologies for certain commercial and industrial property, new homes, existing homes, and appliances.

Section 301 Energy Efficient Commercial Building Property Deduction

Investment tax credit of 20% for purchases of electric heat pumps, hot water heaters, and natural gas heat pumps. (Section 102 of Bingaman--S. 596)

Section 302 Credit for Construction of New Energy-Efficient Homes

(Cunningham/Markey--H.R. 778 with increased credit amount, the credit going to the builder instead of the purchaser, and the Photovoltaic provision removed)

Tax credit up to $1,500 for homes with annual heating and cooling energy consumption 30% less than the national model standard in accordance with the International Energy Conservation Code of annual heating and cooling energy. Tax credit up to $2,500 for homes with annual heating and cooling energy consumption 50% less than the standard reference model. In general, credits equal the aggregate adjusted bases of all energy-efficient property installed in a qualified new energy-efficient home during construction.

Section 303 Credit for Energy Efficiency Improvements to Existing Homes

Up to 20% tax credit for qualified energy efficiency improvements to an existing home. In order to qualify, property must meet or exceed standards set by the 2000 International Energy Conservation Code or achieve at least a 30% reduction in heating and cooling energy usage. $2000 limitation.

Section 304 Credit for Energy Efficient Appliances

(Rep. Nussle--H.R. 1316)

Production tax credit of $50 for clothes washers manufactured with a 1.26 Modified Energy Factor (MEF) and refrigerators that consume 10% less kWh per year than the energy conservation standards promulgated by the DOE for 2001 Production tax credit of $100 for clothes washers manufactured with a 1.42 MEF and refrigerators that consume 15% less kWh per year than such energy conservation standards.

Section 305 Credit for Adjustable Speed Drives

10% investment tax credit for adjustable speed drives of fifty horsepower or more that achieves at least 20% energy savings. $10,000 limitation.

TITLE IV--DEMAND MANAGEMENT AND DISTRIBUTIVE ENERGY GENERATION

Tax incentives for utilities to purchase demand management technologies, and tax incentives to encourage investment in distributive energy generation powered by renewable fuels and fuel cells.

Section 401 Credit for Distributive Energy Generation and Demand Management

Property Used in Business

(Section 101 of Bingaman--S. 596 with changes)

This section provides a tax credit to the purchaser of business property including certain solar, geothermal, energy efficiency building equipment, combined heat and power systems, anaerobic digester and low core distribution transformer property. The credit amount varies.

Section 402 Credit for Residential Solar and Fuel Cell Energy Property

(Includes Johnson--H.R. 1275 and Hayworth--H.R. 2076)

Tax credit of 15% investment tax credits for solar thermal & solar electric systems. Tax Credit of $1000 per kilowatt for purchasers of all types and sizes of permanently installed stationary fuel cell systems. The credit does not specify input fuels, applications or system sizes so a diverse group of customers can take short-term advantage of the credit to deploy a wide range of fuel cell equipment.

Section 403 Credit for Qualified Energy Demand Management Devices

Tax credit of 20% for utilities to purchase equipment allow which will allow consumers to monitor their energy usage on a real-time basis, and to adjust their consumption to respond to price and usage signals, thereby enabling individuals and small businesses to adjust their energy consumption to reduce their electricity bills while helping to "flatten" the energy demand curve.

Section 405 Incentive of Distributive Wind Generation

Thirty percent tax credit for consumers purchasing wind energy generation units of 75 kilowatts or less. $5,000 limitation.

Section 406 Credit for the Purchase of Flywheel Energy Storage Devices

Ten percent consumer tax credit for the purchase of flywheel energy storage device. $2,000 limitation.



LOAD-DATE: June 19, 2001