Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer (D-NY), along with President Biden, on July 27 announced a deal on a $740 billion reconciliation bill. The more than 700-page bill includes a broad energy tax title that will rework existing biofuel and alternative fuel incentive structures for the next several years, as well as health and tax components. The Senate intends to vote on the legislation next week, with the House likely soon thereafter.
The cleverly dubbed Inflation Reduction Act of 2022 contains many of the same concepts and structures that have been included in previous iterations of the Build Back Better bill over the last two years. NATSO is continuing to review the legislation and will provide a more fulsome analysis in the coming days. At a high level, for fuel retailers and marketers, the most notable provisions include:
An extension through 2024 of existing (and expired) technology-specific fuel tax incentives (including the biodiesel tax credit, alternative fuel tax credit for natural gas), followed by a conversion to a purportedly "tech-neutral" clean fuels production tax credit that would be in place from 2025-2027. The amount of this production tax credit will supposedly depend upon the emissions characteristics of specific gallons of fuel from specific production facilities.
The legislation includes more favorable tax incentives for sustainable aviation fuel ("SAF") than it does for renewable diesel and biodiesel. This threatens to jeopardize feedstock availability for over-the-road biofuels.
A tax credit through 2032 for installing EV charging stations (up to $100k credit per charger), provided such chargers are located in rural or low-income areas.
A $7,500 tax credit for anyone purchasing a new electric vehicle ($4,000 for a used EV), provided the person buying the car makes $75,000 or less annually. The bill would also incentivize the increased domestic production of critical minerals used in batteries for EVs.
The legislation does not include a surtax on pass-through businesses, which was in previous iterations of the legislation and would have hit family-owned businesses and S-Corps hard. Instead, the legislation includes a minimum 15 percent tax on large corporations and closes the so-called "carried interest loophole" that essentially allows income flowing to the general partner of a private investment fund to be taxed at the lower capital gains rate rather than income.
The package includes a three-year extension (through 2025) of enhanced Affordable Care Act marketplace subsidies. The enhanced credits would remove a subsidy cliff at 400 percent of the federal poverty line, while also boosting credits for lower income levels. The subsidies are set to expire at the end of the year, which could result in premium payments skyrocketing for millions of enrollees.
The legislation would represent a $369 billion investment to combat climate change, by far the largest federal investment in clean energy the U.S. has ever made. This includes $30 billion in incentives for wind and solar production. It would allow the Medicare program to negotiate prescription drug prices with pharmaceutical companies. The legislation would ostensibly raise $739 billion in new revenue and spend $433 billion (the bill promises to put the difference toward deficit reduction). The legislation does not include many Democrat priorities that were in previous iterations, such as a $300 monthly child tax credit, universal pre-k and free community college, and the nation's first paid family leave program.
NATSO will assess the legislation and provide more detailed analysis in the coming days, and will continue to aggressively advocate for the industry's priorities.
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