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April 21, 2021

Senate Finance Chairman Wyden introduces energy tax bill

Senate Finance Committee Chairman Ron Wyden (D-OR) April 21 reintroduced the Clean Energy for America Act, which proposes to eliminate fossil fuel tax incentives and replace the dozens of energy tax incentives in the Code currently with a simpler set of provisions that encourage clean electricity & transportation and energy efficiency.

The bill would provide an emissions-based, technology-neutral tax credit for clean electricity production, either as a production tax credit of up to 2.5 cents per kilowatt hour or an investment tax credit of up to 30 percent, with investments in grid improvements like stand-alone energy storage and high-capacity transmission lines qualifying for the full-value investment tax credit. The storage and grid improvement credit would offer the option to opt-out of normalization for regulated utilities.

Clean fuels, i.e., if lifecycle emissions are at least 25% less than the current US average, and zero and net-negative emission fuels qualify for a credit of up to $1.00 per gallon. For EVs, the per-manufacturer 200,000 unit cap for the $7,500 tax credit would be repealed, and the credit would be made refundable. Commercial operators would have access to a non-refundable credit worth 30% of an EV purchase.

Energy efficiency provisions include:

  • a reformed incentive for energy efficient new homes of $2,500 for homes meeting Energy Star requirements, and $5,000 for homes meeting the Zero Energy Ready requirements;
  • an Energy Efficient Home Improvement credit for homeowners equal to the lesser of 30% of the cost or $500 per improvement, with an overall annual limit of $1,500;
  • an improved section 179D energy efficient commercial buildings deduction; and
  • a tax credit bond tax with option to convert to a direct payment bond for facilities producing clean electricity or clean transportation fuels.

For fossil fuels, the bill:

  • repeals incentives including expensing of intangible drilling costs, percentage depletion, deductions for tertiary injectants, and credits for enhanced oil recovery, marginal oil wells, coal gasification, and advanced coal projects;
  • reinstates the current taxation of multinational oil companies' non-extraction income and "ensures multinational oil companies are not specially exempted from the 2017 tax law's global minimum tax;" and
  • repeals the special treatment of fossil fuels under the publicly traded partnership rules.

The bill and a summary are attached below.


Contact Information
For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
   •  Any member of the group at (202) 293-7474.


Clean Energy for America Act

Clean Energy for America Act – Section by Section