On Thursday, November 2, 2017, House Republicans released the legislative text of H.R. 1, the Tax Cuts and Jobs Act. The bill would make a host of significant changes to the U.S. tax code for both individuals and businesses. Provisions of particular note for renewable natural gas stakeholders:
- Reduces the corporate tax rate from 35% to 20%.
- Provides immediate expensing for capital investments and limits the deductibility of interest expenses to 30% of pre-tax earnings, with some exceptions.
- Interest on private activity bonds would be taxable starting in 2008.
- The bill is silent on the credit for alternative fuel vehicle refueling property, the second generation biofuel credit, and the alternative fuel credit that expired at the end of 2016. Thus, the provisions are assumed to remain lapsed.
- The legislation makes several changes to the Section 45 Production Tax Credit (PTC) and the Section 48 Investment Tax Credit (ITC). Specifically, H.R. 1:
- Repeals the inflation update on the PTC for tax years after November 2, 2017. Thus, the credit rate would be 1.5 cents per kilowatt-hour. H.R. 1 does not otherwise modify the phase-out for wind projects or the credit lapse for non-wind renewable technologies enacted in 2015.
- Modifies the ITC to provide micorturbines, fuel cells, combined heat and power, and small wind energy the same treatment provided to solar energy under current law (phased-down between now and 2021). The bill also repeals the permanent 10% ITC for solar and geothermal after 2027.
- For both the PTC and ITC, the legislation modifies the begin construction standard that triggers credit eligibility to require continuous construction.
The House Committee on Ways and Means is expected to begin consideration of H.R. 1 on Monday, November 6, 2017, and House Leadership has indicated a desire to consider the legislation in the full House the week of November 13, 2017. Concurrently, the Senate Finance Committee is expected to unveil its version of tax reform, which is widely anticipated to differ from the House package, the week of November 13, 2017. Senate Majority Leader Mitch McConnell has signaled his intention to consider tax reform legislation prior to Thanksgiving. That noted, the situation on timing remains fluid, and could be modified based on the feedback and concerns of elected officials.
Below are links to the summary of the House tax bill prepared by the House Ways and Means Majority staff and a link to the text of H.R. 1.