October 2007

Thirty years of energy legislation

Thirty years of energy legislation

Renewable energy is a popular topic in our fast-paced, high-technology world. Solar power, biofuels and other ways to conserve energy are frequently discussed in business and political arenas. However, these topics are not new; in fact, energy-conscious legislation has been in effect for decades.

Following is a list from the Energy Information Administration of some major legislation that has affected the renewable energy marketplace during the past 30 years.

Energy Tax Act of 1978

This bill gave residential energy tax credits for buying solar and wind energy equipment; the credits were 30 percent of the first $2,000 spent on the equipment and 20 percent of the next $8,000. Business energy tax credits were offered for investments in renewable energy technologies, and income tax credits of up to 25 percent of the cost of the technology were available. In addition, for geothermal deposits, a 22 percent depletion allowance rate was established for 1978-80 and 15 percent after 1983.

Crude Oil Windfall Profits Tax Act of 1980

This increased the residential tax credits established in the 1978 legislation from 30 percent to 40 percent of the first $10,000 in expenditures and increased the business energy tax credit from 10 percent to 15 percent. In addition, the legislation expanded and liberalized the tax credit for equipment that converted biomass into a synthetic fuel, burned the synthetic fuel or used biomass as fuel. It also allowed tax-exempt interest on industrial development bonds for development of solid waste to energy-producing facilities, hydroelectric facilities and facilities that produce renewable energy.

Economic Recovery Tax Act of 1981

This legislation allowed accelerated depreciation of capital (five years for most renewable energy-related equipment), known as the Accelerated Cost Recovery System (ACRS) and offered a 25 percent tax credit against the income tax for increasing spending on research and development of renewable energy.

Tax Equity and Fiscal Responsibility Act of 1982

This bill canceled further accelerations in ACRS and provided a provision that reduced the cost basis for purposes of ACRS by the full amount of any regular tax credits, energy tax credit or rehabilitation tax credit.

Termination of Energy Tax Credits (1982-1985)

In December 1982, the energy tax credits established in 1978 were terminated for nonrenewable energy property such as synfuels equipment and recycling equipment, shale oil equipment and cogeneration equipment. The remaining tax credits, which had been extended in the Crude Oil Windfall Profits Tax Act of 1980, were terminated Dec. 31, 1985.

Tax Reform Act of 1986

Repealing the standard 10 percent investment tax credit, this legislation also eliminated the tax-free status of municipal solid waste power plants financed with industrial development bonds; reduced accelerated depreciation; eliminated the 10 percent tax credit; and allowed public utility property to become eligible for accelerated depreciation. In addition, it extended the business energy tax credits established by the Crude Oil Windfall Profits Tax Act of 1980 for solar, geothermal, ocean thermal and biomass properties but not for wind systems, which expired Dec. 31, 1985.

Energy Policy Act of 1992

This established a permanent 10 percent business energy tax for investments in solar and geothermal equipment; extended the 10 percent business energy tax credit for solar and geothermal projects; and established a 10-year, 1.5 cents-per-kilowatt-hour production tax credit for wind projects and biomass plants. In addition, it established the Renewable Energy Production Incentive, offering 1.5 cents-per-kilowatt-hour incentive for generation from biomass, geothermal, wind and solar from tax-exempt publicly owned utilities and rural cooperatives.

Tax Relief Extension Act of 1999

This legislation made available a nonrefundable tax credit of 20 percent for incremental research expenses paid or incurred in a trade or business. It extended and modified the production tax credit established by the Energy Policy Act of 1992 for electricity produced by wind and closed-loop biomass facilities and expanded the tax credit so it included poultry waste facilities that have been in service after 1999.

Economic Security and Recovery Act of 2001

Signed into law in early 2002, this legislation extended for two years the production tax credit for new wind, closed-loop biomass and poultry waste facilities. It also extended the production tax credit established in the Energy Policy Act of 1992 retroactively from the end of 2001 to Dec. 31, 2003.

Energy Policy Act of 2005 (Section 206)

This legislation established a rebate program for money spent to install renewable energy systems in connection with a dwelling unit or small business. The rebate would amount to 25 percent of the money spent for qualifying equipment by the consumer or $3,000—whichever is less.

This Web exclusive information is a supplement to Capitol Hill.