The House Ways and Means Committee on May 14 passed the tax title to budget reconciliation legislation for Fiscal Year 2025 and beyond.
The legislation would extend expiring income tax provisions of the Tax Cuts and Jobs Act of 2017 and substantially curtail the energy tax credit provisions of the Inflation Reduction Act of 2022.
The tax title will next move to the House Budget Committee where it will be joined with other reconciliation titles drafted by other House committees.
This combined budget reconciliation bill will then be brought to the House floor for a vote.
If approved by the House, the bill will next proceed to the Senate for its consideration.
Senators have already signaled that they will take a dramatically different approach in their revisions to IRA, APPA noted.
None of the amendments proposed by Democrats were adopted during the markup and Republicans offered no amendments. As a result, the legislation continues to remain silent on the issue of tax-exempt municipal bonds and elective payment of energy tax credits.
However, the tax title could have a direct and significant effect on public power utilities because of the phaseouts of energy credits also included in the tax title.
Tax Title
While APPA staff continues to analyze the tax title, its provisions appear to result in what is effectively a near immediate repeal of most energy tax credits.
For example, the legislation accelerates the phase out of the clean electricity production tax credit (PTC) and clean electricity investment tax credit (ITC).
Under current law, these credits could begin phasing down for projects, construction of which begins after 2032, if emissions targets are met. Under the tax title approved this morning, these credits begin to phase down for projects placed in service after 2028.
However, there is no current nuclear facility under consideration today that could be placed in service before the tax title phase out is complete.
Likewise, it is true that other technologies could begin construction for several years and still be placed in service prior to the expiration of the ITC and PTC under the tax title, APPA said.
However, Foreign Entity of Concern Material Assistance restrictions would apply one year after enactment and could make these credits largely unusable for technologies relying on components, subcomponents, or even minerals from certain foreign entities.
Finally, some provisions are repealed almost immediately. For example, the commercial electric vehicle tax credit is not available for vehicles placed in service after 2025 with the exception that it is available for vehicles placed into service after 2025, if they were sold under a contract signed before May 13, 2025.
However, regardless of when any contract was signed, the credit is not available for vehicles placed in service after 2032. And the alternative fueling refueling credit is made unavailable for property placed in service after 2025, APPA said.
The tax title would also repeal tax credit transferability, which is currently available for taxable entities. Generally, this appeal would take affect two years after the date of an act of the final bill.
