Congress passed the JOBS (Jumpstart Our Business Strength) bill, an amalgam of $136 billion in corporate and some individual tax breaks officially known as HR 4520, the American Jobs Creation Act of 2004. This bill incorporates numerous amendments to the tax code, to the benefit of businesses in many sectors, including energy, transportation and tobacco. The AP provides a good background on the bill, including its history and the supposed economics of it. Among the provisions relevant (to us) are:
Eliminates the phase-out of the tax credit for electric vehicles, increases the tax credit for electric vehicles ($1,500 to $40,000 based on weight, range and carrying capacity) and expands the definition of electric vehicles eligible for the credit.
Allows tax credits for:
Fuel cell motor vehicles ($4,000 up to $40,000, based on vehicle weight, with an increase for fuel efficiency over a baseline also based on weight)
Hybrid motor vehicles ($250 to $10,000, based on percentage power contributed by the electric motor and vehicle weight, with an increase for fuel efficiency over a baseline based on weight, and a special increase for heavy-duty hybrids meeting certain emissions requirements)
Alternative fuel (CNG, LNG, LPG, H2, M85/E85 or better) motor vehicles (the incremental cost of an alternative fuel vehicle over the cost of a diesel or gasoline version, capped at a range between $5,000 and $40,000, based on vehicle weight; mixed-fuel vehicles receive a pro-rated amount based on the percentage of alternative fuel use)
Terminates the credit after 2011 for fuel cell motor vehicles and after 2006 for the other vehicles.
Modifies the small ethanol producer tax credit to allow the allocation of credit amounts to patrons of a tax-exempt cooperative organization. Changes the definition of a small ethanol producer to increase from 30 to 60 million gallons the required capacity of a producer to qualify for the credit. Allows a small ethanol producer to apply credit amounts against alternative minimum tax liability.
Volumetric Ethanol Excise Tax Credit (VEETC) Act of 2004:
Allows a producer credit against the gasoline excise tax for alcohol fuel of $0.52 per gallon until the end of this year, dropping to $0.51 in 2005. If none of the alcohol in the mix is ethanol, the credit increases to $0.60 per gallon.
A producer credit against the gasoline excise tax for biodiesel of $0.50 per gallon, or $1.00 per gallon if it is “agri-biodiesel”—biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, and mustard seeds, and from animal fats. This is the first tax credit for biodiesel. If the biodiesel is used in a mixture, this works out to $0.01 credit per percentage point biodiesel used.
Allows a tax credit for up to 50% of the cost of installing a clean-fuel vehicle refueling property, up to $30,000 for a retail property and $1,000 for a residential property. Terminates the credit for: (1) a property relating to hydrogen after 2011; and (2) any other property after 2007.
Allows a tax credit for the retail sale of alternative fuels (CNG, LNG, LPG, H2, M85/E85 or better). Terminates the credit after 2006.
Oil and Gas Producers
Allows a tax credit for producing oil and gas from marginal wells.
Allows a current year tax deduction for up to 75 percent of the capital costs incurred in complying with Environmental Protection Agency (EPA) sulfur regulations.
Allows a business tax credit for the production of low sulfur diesel fuel.
Modifies the definition of small refiners for purposes of the percentage depletion allowance to require an average daily run of less than 60,000 barrels (current law requires less than 50,000 barrels).
Extends through 2006 the suspension of the 100 percent of net income limit on percentage depletion for oil and natural gas produced from marginal properties.
Permits the amortization of delay rental payments (payments by oil and gas producers under production contracts with mineral owners when the producer delays mineral production to delay payments of royalties under the contract) over a two-year period.
Permits the amortization of geological and geophysical expenditures in connection with oil and gas exploration in the United States over a two-year period.
Revises the tax credit for producing fuel from a nonconventional source to extend placed-in-service dates for certain fuel producing facilities and to add facilities producing fuels from agricultural and animal waste, viscous oil, refined coal, and coal mine gas as fuel sources eligible for the credit. Directs the Secretary to study the effect of this tax credit on the production of coal bed methane.
Allows a 15-year recovery period for the depreciation of natural gas distribution lines.
Allows a tax credit for production of Alaska natural gas equal to $0.52 per 1 million British thermal units of Alaska natural gas, adjusted for inflation. Allows application of the credit amount against income and alternative minimum tax liabilities.
Allows a seven-year recovery period for the depreciation of any Alaska natural gas pipeline.
There is a great deal more in this bill—important support for renewables, tax breaks for co-generation and combined heating and power—as well as items that seem incomprehensible and ridiculous. This is a messy way to back into an energy policy.