Isra-Mart srl:Tax bill passes Senate hurdle with clean tech sweeteners in place

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A bipartisan tax bill containing numerous environmental measures has cleared its first vote in the Senate, despite fierce opposition to other components of the controversial bill.

The bill, unveiled by senator Harry Reid of Nevada late last week, extends tax cuts for high earners introduced in the Bush era in what President Obama has called a necesssary compromise between Democrats and Republicans.

However, while the decision to grant the newly emboldened Republicans the extension to tax cuts that they have been lobbying for at a time when the budget deficit is soaring has angered many Democrat voters the bill also contains some clear wins for the renewable energy sector.

As a sweetner to placate liberals, the Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 includes some critical energy measures, including the extension of a $1 per gallon production tax credit for biodiesel, along with an agri-biodiesel producer credit of 10c per gallon.

Similarly, an equivalent $1 per gallon production tax credit for biomass-based diesel will also be extended.

In addition, ethanol producers will enjoy an existing per-gallon tax credit from next year, along with the extension of existing tariffs on imported ethanol, and a 50c per gallon alternative fuel tax credit will stay in place next year.

The move was broadly welcomed by the biofuel industry with Renewable Fuels Association president and chief executive Bob Dinneen hailing the extensions as a "common sense" move.

Alternative fuel companies would not be the only clean tech firms to benefit from the new bill with the legislation proposing the extension of the deadline for a major cash grant program that offers funding to large-scale renewable energy projects such as wind and solar farms. The grant scheme, which was originally set up as part of the stimulus package introduced when Obama first came to power, is currently scheduled to expire at the end of the year.

Under the bill, manufacturers of energy-efficient residential homes would also benefit from a tax credit extension, and a credit for energy-efficient existing homes would be reinstated. Similarly, a tax credit for the US-based manufacture of energy-efficient appliances would also be extended.

"Extending these important tax provisions is good policy," said Ed Hubbard, legislative counsel for the Renewable Fuels Association. "It will provide the market some stability and give the industry time to properly vet and craft responsible reforms."

The legislation passed with 83 votes to 15, and will likely pass the Senate this week. It must then pass muster in the House of Representatives before landing on the president's desk.

However, the passage of the bill could still face disruption with some Democrats in the House of Representative fiercely opposed to the extension of Bush-era tax cuts and a group of senators led by senator Dianne Feinstein pushing for the inclusion of amendments that would cut the level of biofuel tax breaks.