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Hearing on Certain Expiring Tax Provisions _________________________________________
HEARING BEFORE THE COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TWELFTH CONGRESS SECOND SESSION |
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COMMITTEE ON WAYS AND MEANS |
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WALLY HERGER, California |
SANDER M. LEVIN, Michigan CHARLES B. RANGEL, New York FORTNEY PETE STARK, California JIM MCDERMOTT, Washington JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts XAVIER BECERRA, California LLOYD DOGGETT, Texas MIKE THOMPSON, California JOHN B. LARSON, Connecticut EARL BLUMENAUER, Oregon RON KIND, Wisconsin BILL PASCRELL, JR., New Jersey SHELLEY BERKLEY, Nevada JOSEPH CROWLEY, New York |
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JENNIFER M. SAFAVIAN, Staff Director and General Counsel
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SUBCOMMITTEE ON SELECT REVENUE MEASURES |
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PETER J. ROSKAM, Illinois |
RICHARD E. NEAL, Massachusetts MIKE THOMPSON, California JOHN B. LARSON, Connecticut SHELLEY BERKLEY, Nevada |
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C O N T E N T S
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WITNESS LIST
Representative Charles F. Bass
Representative Brian Bilbray
Representative Diane Black
Representative Kevin Brady
Representative Bruce L. Braley
Representative John Campbell
Representative Donna M. Christensen
Representative Jim Costa
Representative Geoff Davis
Representative Theodore E. Deutch
Representative John Garamendi
Representative Michael G. Grimm
Representative Wally Herger
Representative Jaime Herrera Beutler
Representative Lynn Jenkins
Representative Steve King
Representative Tom Latham
Representative Jim McDermott
Representative James P. McGovern
Representative Pedro R. Pierluisi
Representative Mike Pompeo
Representative Tom Reed
Representative David G. Reichert
Representative Aaron Schock
Representative Peter Welch
Hearing on Certain Expiring Tax Provisions
U.S. House of Representatives,
Committee on Ways and Means,
Washington, D.C.
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The Committee met, pursuant to notice, at 10:03 a.m. in Room 1100, Longworth House Office Building, Hon. Pat Tiberi [Chairman of the Committee] presiding.
[The advisory of the hearing follows:]
*Chairman Tiberi. Good morning. Today we are going to deviate from standard practice a bit, and we are going to allow each member of the Subcommittee or those who are joining us from the Full Committee to make a five minute opening statement and submit a written statement for the record.
We obviously are here today to talk about the extenders, those tax provisions that expired in 2011 or will expire in 2012.
I welcome all of you, and I welcome members of the Subcommittee and members of the Full Committee who will be joining us.
I first want to commend our Chairman of the Full Committee, Dave Camp, for his leadership in working to overhaul the Tax Code. As he said, as some of you may remember, at the very first hearing that the Full Committee had at the beginning of this Congress, “Tax reform will be a long process.”
In the meantime, we must continue to work our way through the Tax Code, and we have had over a dozen hearings at the Full Committee and Subcommittee in trying to do that.
Unfortunately, the Tax Code is riddled with scores of provisions that have been enacted on a temporary basis over time.
I use the word “riddled” not because I believe all these provisions are bad, because they certainly are not, but because while there are rare occasions when it makes sense to enact temporary tax provisions, such as during an economic downturn, most of the temporary provisions were made temporary not for policy reasons but for arcane Budget or Senate rules.
I am reminded in the Spring when I go to my tax accountant how frustrating it is for many in the real world as to why there are so many temporary tax provisions.
Making tax policy this way obviously wreaks havoc on the ability of families and business owners to plan for future choices with any certainty.
With a few exceptions, temporary tax provisions that are worthy should be made permanent. Those that are not worthy should be terminated.
That kind of certainty might not happen until we pass comprehensive tax reform, but in the meantime, today’s hearing provides us a formal opportunity for this Subcommittee to hear from our House colleagues about the merits of extending or maybe not extending many of these tax policies.
For too long, Congress has simply rubber stamped the extenders package without any review, without any oversight that is charged by this Committee, of whether the individual provisions are effective, whether they create jobs, economic development, whether these provisions help us in any way, shape or form, and if they are upholding to the original intended purposes that were stated when they were passed.
This hearing will help us gather information that we can properly evaluate in each and every one of the provisions on its own individual merit.
Last year, Congressman Neal and I introduced H.R. 749, which would permanently extend the Subpart F exemption for active financing income.
It is among, I believe, the most important recently expired provisions in our Tax Code that must be extended. It is essential to the competitiveness of our U.S. international companies seeking to do business around the world.
I look forward to my colleagues’ testimony. I look forward to the opening statements for those of the panel who wish to give them, and I look forward to hearing more information, not only today but in the future about these tax provisions.
I now yield to our Ranking Member, Mr. Neal, for his opening statement.
*Mr. Neal. Thank you, Mr. Chairman. I am pleased you called this hearing to examine the 2011/2012 tax extenders.
However, I should note my frustration that Congress has once again allowed so many of these important tax provisions to expire.
Most are discouraged that we are now just examining the 2011 extenders even though they expired several months ago.
Important principles of tax policy is certainty and predictability. We need to remember these principles as we deal with the tax extenders.
Many of the tax provisions that expired in 2011 are priorities of mine. For example, new markets tax credits and Build America bonds are very important.
The new markets tax credit is designed to stimulate investment and economic growth in low income communities that are traditionally overlooked by conventional capital markets. We have seen the result in all of our districts.
In Western Massachusetts, the local new markets tax credit’s success include small businesses like the River Valley Market in North Hampton and the Massachusetts Green High‑Performance Computing Center in Holyoke. We need to extend new markets.
Another provision that is very important that expired last year is the 15 year depreciation schedule for leasehold improvements, restaurant improvements and new construction, as well as retail improvements.
Mama Iguanas is a restaurant that opened last year in Springfield and took advantage of this provision.
We need to extend this 15 year depreciation provision and eliminate any tax law prejudices against retail store owners.
It is also absolutely essential, as you have noted, Mr. Chairman, that active financing rules of Subpart F, which expired at the end of last year, be extended as well.
This is an issue that the two of us have worked on and a bipartisan Majority of this Committee has co‑sponsored to make the rules permanent.
The active financing rules are not a special incentive, rather they allow U.S. banks, insurance companies and finance companies to apply the regular United States tax law allowing for the deferral of U.S. taxes on active foreign business income.
Speaking of Subpart F, another important provision that we need to extend is the “look through rule.” The R&D tax credit is a huge priority for many of us in Massachusetts.
In fact, Massachusetts is ranked third in the country in terms of the number of companies in the state reporting R&D activity. The R&D credit must be extended.
Another extender that is important to Massachusetts is the 2012 AMT patch. About 975,000 families in Massachusetts, including 80,000 in my District in Springfield, will be hit with AMT if we do not enact a patch for 2012.
A few additional extenders that are extremely important and should be continued are Section 25(c), which is a tax incentive for the purchase of energy efficient improvements to homes. Section 181, which is effectively a limited form of bonus depreciation to encourage domestic film production and job creation.
The extenders related to regulated investment companies or RICs, as they are called, as well, and the enhanced charitable deduction for contributions of inventory.
In terms of the 2012 extenders, we also must extend Section 127, which allows an employee to exclude from income up to $5,250 per year for tuition assistance from their employer.
Furthermore, the production tax credit for on shore wind and the investment tax credit for offshore wind are important as well, and I hope both will be extended.
I am pleased you have called this hearing this morning and I look forward to the testimony that we are about to receive.
Chairman Tiberi. Thank you, Mr. Neal. As I sit here listening to you, I cannot help but think if you and I could just go in a library and skip the rest of the House, the Senate and the Administration, we could probably accomplish this pretty quickly.
*Mr. Neal. I suspect based on what we are about to hear in the next four hours, you may well be right.
[Laughter.]
*Chairman Tiberi. Thank you for your opening remarks. With that, I yield to Mr. Roskam for five minutes.
*Mr. Roskam. Thank you, Mr. Chairman. I think we have an incredible opportunity, Mr. Chairman. I thank you and Mr. Neal and the spirit with which you are approaching this, and Chairman Camp for his leadership in putting this together.
There is an unbelievable opportunity that we have as a Committee, the committee of jurisdiction over a Tax Code that is wildly unpopular. The opportunity is this, if you look back at the work of this Committee over the past 18 months or so, and you distill down the work, and this hearing is part of that, and you can distill it down into one single word, I think that word would be “competitiveness.”
How do you create the United States as the most competitive tax jurisdiction in the world where we build upon all of these things that we have going for us in this country, a culture of creativity, intellectual property, and the list goes on and on, but we have a Tax Code that is under performing and not serving us well.
The question as you go through the detail and as the Committee goes through the detail of all these extenders is this, at what rate is it so attractive that companies and others are willing to walk away from an extender?
That is an interesting proposition. At what rate is the rate low enough that you say you know what, I do not need that extender any more, I will take the rate.
That, I think, can be an animating theme today.
The other question is there are some of these provisions where it is not a tax policy per se but there is some other foundational question that was built into that tax policy, and we need to re‑examine that as well.
Mr. Chairman, I appreciate the spirit with which you are approaching this. I think there is an opportunity here for not only the Congress to gain confidence with the level of scrutiny that the Committee is giving these things, but ultimately, the country to gain confidence that the Committee is taking this up in a thoughtful way, and I yield back.
*Chairman Tiberi. Thank you, Mr. Roskam. Mr. Thompson is recognized for five minutes.
*Mr. Thompson of California. Thank you, Mr. Chairman. I, too, want to thank you for holding this hearing, Mr. Neal, for holding this hearing. I think it is incredibly important that we assess this issue and figure out how to bring some certainty to the Tax Code.
There is a lot of talk about the need for certainty in the business community, and I can tell you that as it pertains to the Tax Code, I think this is most illustrative as to how important this issue is.
You cannot make decisions in your personal life and your business life and your financial dealings if you have tax uncertainty. What we have right now is the ultimate in tax uncertainty.
The President of the NFIB was on Bloomberg News and was asked what is Washington not hearing. He said they are not hearing about great uncertainty that small businesses feel out here today.
I would argue that we are hearing it. We are just not doing anything about it. Again, this extender issue is most illustrative of that.
Sometimes we pass them at the very last minute. We have been known to deal with these retroactively, and there is nothing that creates more uncertainty for a small business owner than that. We need to figure that out.
I have a long list as everyone else does of ones I believe to be important. I will mention a couple of them and then I will put in my statement for the record the whole list.
The production tax credit for wind expires at the end of December. We do not have until the end of December to deal with this.
Business owners, manufacturers, energy developers, governments, community groups, they are already making decisions on this very important part of our energy future today.
We are losing jobs today because wind energy development is not something that you wake up in the morning and decide I think I will build a wind tower and site it this afternoon.
You have to figure out where the wind is, what the wind trends are. You have to work with community groups, get permitted, raise capital, go to production for these things. You cannot do it in a few hours, a few days, or sometimes even a few years. The lead time for wind projects at a minimum is a year to 18 months.
Yesterday I met with a group of combat veterans who were very, very outspoken on this issue, and for all the right reasons, including they know firsthand the cost of us being under the thumb of imported energy.
We need to deal with this one up front quickly.
R&D tax credits has already been mentioned today. I cannot tell you how often at home people ask me what is the future for the R&D tax credits. None of us can give a real answer to that. We can speculate. We cannot tell them with certainty how they should plan.
That is not right. We should be doing everything we can to make sure we do R&D and we do it right here in this country.
Another issue that is extremely important to me is the conservation easement legislation that Mr. Gerlach and I are working on.
That bill, since it has been passed in 2006, has done so much for land conservation, environmental protection, keeping people on the family farms.
It is not just a rural issue. It spills over into the community, and nowhere is that more apparent than in New York City, where that city gets its water from the surrounding watershed that is under fire for development purposes, and through conservation easements, folks have been able to protect that property and keep that watershed open and make sure city folks get their water.
It has the support of over 60 groups, everybody from Ducks Unlimited to Audubon to the Cattlemen’s Beef Association. It has 300 co‑authors on the bill that my friend, Mr. Gerlach and I have. We ought to be pushing that through quickly.
One that did not make the list that should be on the list, Mr. Chairman, is the 48(c) rule, advance manufacturing tax credit. That is so important. It provides a credit to businesses, manufacturing, clean energy technologies, right here in the United States.
Like it or not, believe it or not, we are moving toward renewable energy, and we are moving there at albeit not the pace we need to, still faster than some are willing to admit we are.
The worse thing that can possibly happen is that we get there and all the components that we used to get there were made in Germany or China or someplace else.
Those are jobs that need to be right here in this country, and that is why this provision is so important.
Again, thank you, and I look forward to hearing the rest of the testimony on this very, very important issue.
*Chairman Tiberi. I thank the gentleman from California for his testimony. It is always good to hear from the Subcommittee’s official wine connoisseur.
[Laughter.]
*Chairman Tiberi. With that, I will yield to the gentleman from up North, Mr. Paulsen.
*Mr. Paulsen. Thank you, Mr. Chairman. Let me just also thank you and Ranking Member Neal also for holding the hearing and for the leadership of Chairman Camp.
I do think it is important as we move forward with the goal of fundamental comprehensive tax reform that we are having these hearings to help look at what works and what does not work as a part of the Tax Code.
I think these tax extenders certainly serve as an example of parts of the Code that for one reason or another do not work as well as they should either because the provisions are expired and they lose their intended use or they do not allow the certainty that our companies and businesses absolutely need, or because in fact some of these extenders have outlived their usefulness.
It is my hope that as we move forward on comprehensive tax reform, we can move away from the need to have the extenders discussion every year altogether.
I would like to highlight just a few of the extenders that I do think are worthy of extension or being made permanent as a part of more comprehensive reform.
First is the R&D tax credit, which was already mentioned. That is a provision that is strictly aimed at helping companies create new products so the United States can continue to be global leaders in innovation.
Innovation is key to economic growth and in keeping our competitive edge. It is part of our DNA. It drives the entrepreneurial spirit and has made so many small and larger companies successful here in the United States, and we should work to incentivize these types of activities.
The R&D tax credit has actually been allowed to expire 14 times since it was created in 1981. This undermines the effectiveness of the credit altogether.
Some of us are co‑sponsors, Mr. Chairman, as you know, of an effort to modernize and make permanent the research and development tax credit, which would help bring stability to companies that rely on the credit when they are trying to develop new products.
I also want to note that as we look forward at the R&D credit, we need to make sure the credit is actually working as it is intended to work in the first place.
I have heard from companies in Minnesota who say the IRS makes it so difficult to comply with through time and resources that it makes it very difficult for companies to actually take advantage of the credit.
Similar uncertainty in depreciation tax provisions have also plagued the restaurant industry, which has faced inconsistency in their depreciation time line.
Historically, the Code has allowed for improvements to depreciate over 39 years, but that is nowhere near the reality that these owners face.
Congress created a provision that lowered that time line to 15 years, but that provision has not been made permanent, and just like the R&D tax credit, has on occasion been allowed to expire as well.
This uncertainty over the depreciation schedules led to 30 percent of restaurant owners putting projects on hold. Making this provision permanent or extending it for 15 years would absolutely help.
I am also a co‑sponsor of the new markets tax credit, which was mentioned earlier. This credit would provide that 39 percent seven year credit against Federal taxes for investment in economically distressed communities.
These credits go to areas that otherwise would not see investment or benefit businesses located in low income communities.
In my District alone, the credits have created about 150 jobs. The credit has been extended three times, and I believe it should be extended again.
Finally, I just want to mention legislation that I have introduced and am sponsoring. It is regarding the mutual fund flow through. This again is a provision that should be extended and made permanent.
There is no reason whatsoever that we should withhold funding from foreign persons who invest in mutual funds. We do not do it for other assets that are held directly.
Sadly, to get around this problem now we have seen foreign companies create mirror funds that mimic U.S. funds, and if we do not extend this provision, the U.S. will lose out altogether, driving investment overseas and taking the jobs with it.
Mr. Chairman, I look forward to the rest of the testimony we will hear from some of our colleagues today in taking a deeper look at some of the provisions in the Tax Code as we move towards that reform which we need.
*Chairman Tiberi. I thank the gentleman. Dr. Boustany from Louisiana is recognized.
*Mr. Boustany. Thank you, Mr. Chairman. I want to thank you and Ranking Member Neal for convening this important hearing. It is clearly overdue.
I applaud the Subcommittee’s efforts to substantively reform the extenders process. For far too long, Congress has advocated its oversight responsibilities haphazardly extending temporary law from year to year without taking time to figure out what works, what does not work, what is the economic benefit, what is the impact on employment, and so forth.
Congress must do better. A complete overhaul of our Tax Code is the real answer, and we are all working towards that goal, but until we get there, we have to make the extenders process workable to provide stability and certainty to U.S. taxpayers.
Job creators, whether it is a small business owner or CEO of a Fortune 500 multinational are paralyzed by the uncertainty coming out of Washington.
We must provide a clear path forward for taxpayers in the short term and work to extend important tax provisions which help promote economic growth and strengthen American competitiveness.
To help U.S. companies compete in the global marketplace, I have introduced legislation along with Mr. Kind to permanently extend the CFC look through provision.
Enacted in 2006, CFC look through provides flexibility to American companies to deploy active business earnings among its foreign affiliates without immediate U.S. tax burdens.
In short, it allows American firms to deploy capital where it is most needed, the same treatment enjoyed by their global competitors.
CFC look through enjoys strong bipartisan support and helps ensure that American companies remain competitive on the global stage.
Mr. Chairman, I ask unanimous consent to submit into the record a letter signed by myself, Mr. Kind, and several of our colleagues in support of this very important measure.
[The information follows: The Honorable Charles Boustany]
*Mr. Boustany. I want to thank you again for convening this critical hearing. I am eager to hear the testimony today and to work with our colleagues to implement a workable extenders process to provide certainty to taxpayers, to promote economic growth, while we continue to work on our overall goal, which is to enact fundamental tax reform creating a 21st Century Tax Code that we can be proud of, a Tax Code that promotes American competitiveness.
I yield back.
*Chairman Tiberi. I thank the gentleman from Louisiana. The gentleman from the Commonwealth of Pennsylvania, Mr. Gerlach, is recognized for five minutes.
*Mr. Gerlach. Thank you, Mr. Chairman. I would like to thank you, Chairman Camp and Ranking Member Neal for your leadership in initiating a comprehensive review of these tax extenders, and for allowing all members to offer their views.
There is no doubt about the necessity of transforming our Tax Code. We need to move from the current hodge‑podge of complex rules that burden our small business owners and hamper our country’s competitiveness, to a more streamlined, more simple to understand and more dynamic system that unleashes innovation and ingenuity and encourages investment, hiring, and growth.
While it is important to shred many provisions that snuff out opportunity and bury job creators under the ream after ream of paperwork, it is also paramount that we preserve those policies that have proven successful and allow individuals, owners of businesses and communities to thrive.
Today, I would like to highlight three extenders that the farmers, property owners, and small business owners who I am fortunate to represent, believe are worthy of extending.
The first is the conservation easement tax incentive. Before expiring at the end of 2011, modest income property owners, family farmers, and other land owners utilized this incentive to voluntarily protect more than 83,000 acres of critical farm land and open space in my District, according to the Montgomery Lands Trust.
We now know that benefits derived from conservation easements extend well beyond the property lines of those participating properties.
A study recently released in November of 2010 by Greenspace Alliance and the Delaware River Regional Planning Commission found that open space preservation in Bucks County, Chester County, Delaware County, Montgomery and Philadelphia County in southeastern Pennsylvania have added $16.3 billion to the region’s home values, support nearly 7,000 jobs annually in industries, including agriculture, tourism, hospitality, recreation, and open space management preservation, saved more than $130 million in water treatment and flood control costs, and through recreation at area parks and trails, avoids $1.3 billion in health related costs.
H.R. 1964, the proposed Conservation Easement Incentive Act, which I have sponsored along with Congressman Mike Thompson, would make permanent the conservation easement tax credit.
Earlier this year the legislation reached a significant milestone as the 300th co‑sponsor signed on to this bill here in the House.
It is my understanding that of the thousands of bills introduced this current session, fewer than ten have topped the 300 co‑sponsor mark.
We believe this legislation has generated widespread support because the conservation easement tax deduction works.
Restaurant owners and other small and mid‑sized business owners know that the same can be said for the second provision I would like to highlight, that is making permanent the 15 year depreciation schedule for leasehold improvements, restaurant improvements, and new construction and retail improvements.
The 15 year depreciation schedule more closely reflects economic realities for most US. restaurants and retailers.
H.R. 1265, which we have introduced with Congressman Neal, would make the 15 year depreciation schedule permanent and provide much needed certainty for small and mid‑sized businesses.
We know that using more reasonable depreciation schedules has spurred tremendous economic activity according to the Bureau of Economic Analysis, and for every dollar spent in the construction industry, an additional $2.39 has been generated for spending in the rest of the economy.
Moreover, for every dollar spent in the construction industry, 28 U.S. jobs have been created in the broader economy.
While unemployment is still unacceptably high, we need tax policies to encourage businesses to plan for and invest in new capital expenditures.
We also need to encourage investment in our communities, some of which are struggling even before the most recent economic downturn.
The new markets tax credit is designed to stimulate investment and economic growth in low income, under served communities, that are often overlooked by conventional capital markets.
According to the GAO, 88 percent of new market tax credit investors surveyed would not have made the investment in low income communities without the credit.
According to the Treasury Department, every one dollar of foregone tax revenues under this tax credit program leverages $12 in private investment in distressed communities on a cost basis.
I am pleased to be an original co‑sponsor along with Chairman Tiberi, Congressman Neal, and Congressman Lewis of H.R. 2655, and this bill would extend the credit through 2016 at a level of $5 billion per year in credit authority.
In closing, I would like to submit that these three provisions meet three very critical needs. All three of these proposals have received overwhelming bipartisan support.
They have the backing of individuals, businesses, and communities we represent because they benefit broad segments rather than narrow interests, and they have a proven track record of creating jobs, spurring investment and enhancing our quality of life in our communities.
I look forward to working with my colleagues on enacting these solutions and extending these three important provisions.
Thank you, Mr. Chairman.
*Chairman Tiberi. Right on time. Thank you, Mr. Gerlach. I now recognize the gentleman from Connecticut, Mr. Larson.
*Mr. Larson. I thank the Chairman. I would like to thank Chairman Tiberi and would also like to thank Mr. Neal as well for their outstanding work with all the kudos and plaudits that have been laid at their feet this morning.
I am going to focus on three primary areas, the CFC look through, new market tax credits, and Section 181 of the production credit.
I hope that our take away from this hearing is a clear understanding we must act responsibly to enact an extenders package, and I hope today’s hearing marks a very positive first step in that direction.
Our country works best when we provide entrepreneurs and innovators the opportunity to thrive and create. That is why I believe we look at these tax extenders and also consider a comprehensive tax reform, that we need to be prioritizing initiatives that will help us achieve both of those goals.
That is why I am proud to join Mr. Brady of Texas in introducing a permanent extension of the R&D tax credit, and I hope the Committee will look to that bill as a major priority as we continue forward with the extenders.
Further, I hope the Committee will consider retaining at a minimum the spirit of R&D credit in comprehensive reform.
We must ensure that America remains the center of innovation for years to come. Out innovating and out creating our competitors requires a Tax Code that provides the right incentives to companies to invest in the products and technologies that will help further our global economic leadership.
In this respect, we must act on extending and enhancing tax credits that have already led to promising developments in the energy sector.
Specifically, this means extending critical tax credits for natural gas, including the motor vehicle fuel credit, the fueling infrastructure credit in Section 30(c), and the alternative fuel vehicle credit in 30(b).
In addition, I have long supported investments in fuel cell technology. That is why I believe the Committee should consider an extension and modification of the alternative vehicle refueling property tax credit.
As an aside, Mr. Chairman, although not part of the extenders, the Natural Gas Act, where we have more than 186 signatures in the House, an important part of the discussion, both for energy independence and for providing jobs, I hope the Committee can also consider that. I realize it is not part of this issue.
Another issue we have been working on for a number of years is a volunteer responder incentive tax credit which unfortunately lapsed at the end of 2010.
This tax credit provided direct tax relief to volunteer emergency first responders, allowing communities to offer incentives to retain and recruit volunteer fire fighters without the benefit by it being diminished by Federal income tax liability.
Volunteer fire fighters are essential to our nation’s safety and security as they comprise two‑thirds of the estimated 1.2 million fire fighters in this country.
We all remember those going up the stairs to meet the firewall and those that are coming down.
I hope we can give them consideration as well as part of this extender package.
Finally, I will end on an issue that is not necessarily as well a tax extender but vitally important to virtually numerous millions of Americans.
With many companies switching from defined benefit to defined contribution plans over the past decades, more individuals are facing the prospect of having to work longer and with less retirement savings than the previous generations.
This combined with recent economic crisis presents an urgency for this Committee to ensure that we are creating the right incentives for people to save and ultimately prosper in their later years of life.
I commend my good friends, Mr. Tiberi and Mr. Neal for recognizing the urgency of working on these issues, and I applaud the rest of the Committee for its efforts.
Thank you.
*Chairman Tiberi. Thank you, Mr. Larson. I now yield to the gentleman who hails from the state with the lowest unemployment rate in our nation, Mr. Berg from North Dakota.
*Mr. Berg. Thank you, Mr. Chairman. I truly want to thank you, Mr. Chairman, and Ranking Member Neal for holding this important hearing today.
The current Federal Tax Code is unnecessarily complex and burdensome that both individuals and businesses find frustrating, time consuming, and costly.
This Committee has made a concerted effort to work towards comprehensive tax reform. Let me be clear in my belief, that the best thing we can do is simplify the Tax Code by lowering the tax rates and broadening the base.
However, while we work to achieve this goal, it is critical that we understand the wide ranging group of taxpayers’ needs and what they need to do to make decisions right now relating to the current law, which has an immediate impact on our economy.
That uncertainty is the most damaging thing that Washington can do to our families and small business.
The extenders that we are discussing today affect a broad range of taxpayers, including associations, businesses, individuals, and non‑profit and charitable organizations.
Yet their temporary nature creates substantial uncertainty. This uncertainty has a negative impact on economic growth and job creation, and places families and businesses really in limbo year after year and these short term extensions are not helping our already struggling economy.
We need a fair, predictable tax policy now. Under the current Tax Code, many of these extenders are important to U.S. jobs and the economy. It is important that we do not pick winners and losers outside the context of real comprehensive tax reform.
For individuals and families, deductions for state and local taxes, mortgage insurance premiums, teacher expenses, tuition, adoption credits, and military housing allowances, along with extending and expanding charitable IRA distributions, among others, all are important within the current Tax Code.
Businesses need certainty as well. In my senior year in college, I started a small business with a couple of friends. Over the next 30 years, we grew that business one venture at a time.
The best thing that Washington can do for small business is to provide certainty, and that means both tax and regulatory certainty. Then Washington needs to get out of the way and allow small business to do what they do best, grow and create jobs.
The tax provisions for research and development, leasehold and retail improvements, depreciation production, and charitable contributions all serve important purposes for our businesses in the current Tax Code.
In the context of tax reform, we can no longer remain the country with the highest employer tax rate along side a complex worldwide system of additional taxation.
Deferral, active financing, and CFC look through provisions are all important in the near term as we move closer to a comprehensive tax reform.
Right now, North Dakota’s economy is on the right track, and our nation could learn a lot about North Dakota. There are some that think the North Dakota story is purely about oil. It is really about instituting pro‑growth policies and unleashing the private sector.
In fact, North Dakota truly is an “all the above” energy state. We have the only commercial scale coal gasification plant in the United States that manufactures gas.
We are the leaders in carbon capture and storage. North Dakota exports over 150 million cubic feet per day of CO2 to Canada through a 205 mile pipeline.
We mine and burn lignite to create electricity. North Dakota produces over 500,000 barrels of oil a day and North Dakota has significant wind power, alternative and biofuel infrastructure, and is a leader in hydrogen research.
In addition to breaking our dependence on foreign oil, domestic fuel production and alternative energy solutions mean good American jobs.
Preserving tax provisions such as the percentage depletion for oil and gas, intangible drilling costs, among others, are important to encouraging domestic energy production.
While there may be a need to refine and update the current alternative and biofuels provisions, these provisions serve an important purpose in the current Tax Code.
I also appreciate the testimony of our committee colleague, Mr. Reichert, regarding the production tax credit, and I associate myself with his remarks.
This is not just rhetoric. In North Dakota, we have seen it work, and we have also seen what uncertainty can do to disrupt positive growth.
For example, wind accounts for 15 percent of our electricity generation in our state and provides thousands of North Dakota jobs.
There are more projects waiting to come on line, but all are stalled because of the uncertainty in the tax environment.
In 2003, when North Dakota faced a deficit, we solved it by tightening our belt and encouraging private sector economic growth.
This generated higher revenue, not higher tax rates. This reform ensured that the state would not change the rules on North Dakota families and small businesses when times got tough. North Dakotans knew that this tax stability would promote investment and innovation by our state’s businesses.
Now as was mentioned, we have the lowest unemployment rate in the nation, and our economy is booming.
Our committee will remain committed to moving forward towards comprehensive tax reform, but until we are at the point where we have truly a willing President and an engaged Senate on this important issue, I feel strongly that we should not effectively raise taxes on small businesses and families in our current economy.
Thank you, and I yield back.
*Chairman Tiberi. I thank the gentleman from North Dakota. While I ask the first panel of witnesses to make their way to the seats in front of us, I would like to make the audience aware if they are not already, that you have the ability to submit for the record any information that you would like on tax provisions that we are talking about today from the 2011 and 2012 extenders.
You have traditionally ten business days to submit it to the Committee. For those who are viewing, you may as well. Anyone may do that.
We are honored to have three members of the Full Committee with us for our first panel. Each will be recognized to give a summary of their written testimony before us, so let us begin with the gentleman from the Lone Star State, Mr. Brady.
STATEMENT OF THE HON. KEVIN BRADY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
*Mr. Brady of Texas. Mr. Chairman, Mr. Neal, thank you very much for having us here today. I hope we will not engage a grilling from this Subcommittee as we give our testimony.
Let me, one, thank you for holding this hearing for examining the extenders, the value, cost, and results of these extensions, and I do support strongly your efforts for fundamental tax reform.
In 55 seconds, let me make two points. The first is that America is the world’s largest innovator, but we are falling behind our competitors.
Our share of global R&D innovation has fallen dramatically, while China’s has increased four fold. We used to rank among the top in R&D incentives in the world. Today, we rank 24th.
Our companies are being courted very aggressively to move those R&D jobs overseas with strong incentives, and the technology innovations and high paying jobs that go with it.
I encourage this Committee to not only extend the R&D tax credit, I and others believe it should be simplified, modernized, increased and made permanent for us to again ‑‑ our goal ought to be to ensure America remains the strongest economy in the world for the next 100 years. Innovation is key to that.
Second and final point is as long as we retain the current Tax Code ‑‑ I and Jim McDermott lead a coalition of seven sales tax states that represent 62 million Americans, including in the State of Texas, as long as we provide deductions for state and local income taxes, we clearly out of fairness ought to do the same for state and local sales taxes.
In Texas, it saves our taxpayers about $1.2 billion, but here is what is interesting, the tax bracket most likely to itemize and save money are those making under $50,000 a year. This is middle class actually in a big way.
Mr. Chairman, I conclude my remarks, and while it is not extender, I will tell you I still believe the death tax is the number one reason America family owned farms, family owned businesses are not passed down to their kids. That is an issue in a larger context at the end of the year that this Committee will be looking at as well.
Thank you, Chairman.
*Chairman Tiberi. Thank you, Mr. Brady.
With that, I will yield to the only CPA, I believe, on our committee, Ms. Jenkins from Kansas.
STATEMENT OF THE HON. LYNN JENKINS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS
*Ms. Jenkins. Thank you, Chairman Tiberi, Ranking Member Neal, and members of the Committee.
I would refer to my notes but I cannot see them. I am wondering if there is a phone book or something that I can sit on. It is a very intimidating chair.
[Laughter.]
*Ms. Jenkins. You cannot even see over the rail here. Regardless, I appreciate the opportunity to speak with you today.
I would like to speak to you on behalf of Section 45(g), the short line freight railroad rehabilitation tax credit.
This credit was first enacted in 2004 and has been extended twice, most recently through the end of 2011.
America’s 550 short line railroads operate 50,000 miles of track, mostly in rural and small town America. These are small businesses run by hard working, creative entrepreneurs.
Section 45(g) allows the small businesses to keep more of what they earn and use those resources for investment in tracks and bridges to move the American economy.
These investments generate substantial benefits. Section 45(g) helps small companies grow and prosper. It allows the private sector and not a government bureaucrat to make the investment decisions necessary to serve rural businesses.
Most small railroads do not have the in‑house manpower for large capital projects, so these efforts create new jobs. Virtually all track materials are produced by American workers in American facilities.
The investments create infrastructure that will generate public benefit for 40 years or long, and they are assets that can never be moved out of the country.
The ultimate beneficiaries are the thousands of railroad customers who depend on these local railroads to move their goods to market.
An example from my own District in Kansas demonstrates a point replicated by 45(g) throughout rural America.
A major national cement company needed to invest $500 million to expand in a plant in my District. However, this expansion could only be justified if competitive and reliable rail service was available.
The South Kansas and Oklahoma Railroad was in the right location but needed a significant upgrade.
The 45(g) credit allowed SKO to make the necessary upgrades to meet that need. The cement company made that $500 million investment and today, it is producing and shipping millions of tons of cement by rail.
They are the largest employer in that community and generate millions of dollars in economic activity.
Creating jobs and generating economic growth is always a challenge, but it is especially challenging in rural America.
Short line railroads are not the largest segment of the transportation industry. Their importance is not their size but their reach.
There are short lines in 49 of the 50 states. They operate in 376 congressional districts. They serve thousands of businesses who would otherwise be cut off from the national railroad network.
As of today, H.R. 721 has attracted 225 co‑sponsors, which I believe is one of the highest of any bills currently referred to the Ways and Means Committee.
More than 50 percent of both the Republican and Democratic Committee members have signed on.
My newest Republican colleagues have been among the most vocal and insisting that we carefully scrutinize the nation’s tax policy, and as of today, 62 of the 87 freshmen Republicans have co‑sponsored this bill.
Mr. Chairman, it would be my preference to address comprehensive reform of the Tax Code, instead of taking a piecemeal approach, but obviously, we must address these expired tax provisions sooner than later.
That being said, there is much disagreement about what tax reform should look like, but there is a growing bipartisan consensus that the Tax Code should encourage capital investment and small entrepreneurial American business. That is exactly what 45(g) does.
Thank you.
*Chairman Tiberi. Before I recognize our colleague from the Commonwealth of Kentucky, I will recognize Mr. Neal.
*Mr. Neal. I appreciate Ms. Jenkins’ comments because the short line railroad credit works well, not just in rural America, it works very well in urban America as well.
It is a success story that has not been well reported.
*Ms. Jenkins. Thank you. Yes, I agree.
*Mr. Neal. If people have a chance to discover what has happened in the economic downturn that we have, they are holding their own.
*Ms. Jenkins. Certainly.
*Chairman Tiberi. I thought you were going to make some sort of joke about short line and Ms. Jenkins. No, never mind.
[Laughter.]
*Ms. Jenkins. Mr. Chairman, shame on you.
*Chairman Tiberi. Just kidding. I have told the staff to make sure we had a phone book for future hearings. Thank you so much. Great testimony, Ms. Jenkins.
The gentleman from Kentucky is recognized.
STATEMENT OF THE HON. GEOFF DAVIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KENTUCKY
*Mr. Davis of Kentucky. Thank you, Chairman Tiberi and Ranking Member Neal for the opportunity to testify about these critical provisions of our Tax Code.
While I share the goal of broad‑based tax reform, there are many preferences in our Code that are vital to America’s economic health and job creation, provisions such as Section 179, expensing, and 100 percent bonus depreciation help cash flow for vital manufacturing and small business taxpayers.
According to the National Federation of Independent Business, one in two businesses face regular cash flow problems. While not within the scope of this hearing, these provisions help manufacturers and small businesses smooth out the roller coaster of these cash flow issues.
I hope as we continue to talk about extenders and tax reform, we keep these crucial provisions in mind.
Another provision that helps manufacturers is the research and development tax credit, which is what I would like to discuss today.
The R&D tax credit has spurred private sector investment and research by companies of all sizes across key industries. It is both bolstered America’s place as the world leader in innovation, fostering development of new products and life improving technologies.
However, in recent years, many of our foreign competitors have invested more generously or in more generous R&D incentives in order to attract innovative companies and high skilled workers.
As of 2009, the U.S. had dropped to 24th in research incentives among industrialized nations. This is only compounded by the fact that as of April 1 of this year, we had the highest corporate tax rate in the world. Higher tax rates and smaller incentives hurt our position as a world leader in technological breakthroughs.
H.R. 942, the American Research and Competitiveness Act of 2011, introduced by my friend from Texas, Chairman Kevin Brady, would simplify and strengthen the U.S. credit by increasing the alternative simplified credit from 14 to 20 percent and making it permanent, while providing an one year bridge for companies that still use the traditional credit.
The certainty of a permanent R&D credit along with lower corporate rates would help to maintain America’s position as a leader in innovation. The R&D credit leads to job creation in America.
A study by the Information Technology and Innovation Foundation estimates expanding the alternative simplified credit from 14 to 20 percent would spur the creation of 162,000 jobs in the short term, with additional job creation in the long run.
The credit was first adopted by Congress in 1981 and has been extended 14 times. It is time to give business the predictability they need to invest in next generation of invention or development by making the R&D tax credit permanent.
Finally, I would like to mention a bill I introduced with Ranking Member Levin, H.R. 3729, which would expand and make permanent tax incentives for businesses to donate food inventory to charity.
Permanently extending this deduction is a necessary step in the continued right against hunger in America, and I would urge your support.
I thank the Chairman and Ranking Member for their time to testify and yield back.
*Chairman Tiberi. Thank you, Mr. Davis. I would like to thank the three of you. If you would not mind staying just a couple of extra minutes, I wanted to ask a quick question.
Mr. Brady, you mentioned the R&D tax credit as well. You and I have talked in the past about Texas and the economy in Texas and the number of Fortune 500 companies/employers who have moved to Texas over the years, including to your metropolitan area.
I know you have talked to many of those companies. Can you talk about some of your discussions with those companies with respect to the R&D tax credit?
*Mr. Brady of Texas. Thanks, Chairman. I know it is important in Ohio, Massachusetts and Pennsylvania as well.
We have been fortunate to have a number of businesses located in Texas, but what is interesting is they tell us how aggressively they are courted around the world, whether it is energy companies that do R&D or technology companies that do the same, our medical industry as well.
These other countries know that when they bring the R&D, they bring good paying jobs and they have first claim on the patents and technology that go with them.
With the stop and start, go/stop process, one year, two years at a time, in effect, we are not getting the full bang for the buck for R&D. We are buying a car but we are only driving it one month installment at a time.
It can go farther and faster in innovation if we make it permanent and we simplify it, not looking backward to what a company has done on R&D, but looking forward and encouraging more of that.
Like you, in Ohio, these companies ‑‑ we want to keep that innovation in America. At the end of the day, that is what is going to drive our future economy.
*Chairman Tiberi. Thank you. Ms. Jenkins, obviously as a CPA, you know a little bit about the Tax Code. Mr. Roskam in his opening remarks talked about the complexity of the Tax Code.
When you talk to other CPAs, not just in Kansas but around the country, what do you hear with respect to the complexity and how that might be inefficient for Americans and American businesses?
*Ms. Jenkins. I think that is the one thing that all political parties can agree on, that the Tax Code is too complex. We spend 18 to $19 billion a year complying with the Tax Code. That ought to tell you something.
In addition to just simplifying the Code, making it less costly to comply with, I think a second priority should be to certainly give them some certainty as it relates to the Tax Code as well.
I know tax reform is on the horizon. It is not necessarily the topic of the day, but we need to work to that end, to not only give them a less complex Code to comply with but one they can do planning beyond a six to 12 month period.
*Chairman Tiberi. Thank you. Following, Mr. Davis, just to expand on the provision that you and Mr. Levin are co‑sponsoring together, from your perch as the Subcommittee Chairman here on the Ways and Means Committee, what have you seen in terms of the benefit of that extender that you have co‑sponsored?
*Mr. Davis of Kentucky. The food donation credit is a great benefit because much food waste that happens in businesses can be handed off to frankly offset what could be an additional occurrence of taxpayer expense.
There is a ready pool of willing providers both in distribution networks and also from restaurants to get that food out to homeless shelters and a number of other vendors, soup kitchens, et cetera, that can make a real difference in people’s lives, especially in that urgency transition.
*Chairman Tiberi. Food that may otherwise not be provided to shelters?
*Mr. Davis of Kentucky. That is correct. In all likelihood it would just be scraped. Often times I have been asked the question why would not the companies just take it down there anyway, but within their own operating rules, ironically, and other regulations that would impinge on that, there is a cost of transportation. There are other liabilities that are incurred.
By having the credit, it can offset not only the base material costs but also the transportation and overhead that is necessary to get it to the locations, particularly when it is in bulk.
*Chairman Tiberi. Thank you. Thanks for your point. Mr. Brady is recognized for a thought.
*Mr. Brady of Texas. Thirty seconds. To follow up on a point you have made continually about our uncompetitive Tax Code, not only do we risk the loss of R&D innovation in America, but our Tax Code, when these companies compete around the world, they are punished to bring home those profits.
Many of them are stranded overseas, so not only do our global competitors have better incentives on R&D, they have access to ready capital to make those investments over there rather than the United States.
You are pushing for a territorial system to remove those impediments, and I think this, too, will help the innovation.
*Chairman Tiberi. Great point. Thank you, Mr. Brady. Thank you, Ms. Jenkins. Thank you, Mr. Davis, for your time today.
We are going to move to our second panel. I will call up, if they are here, Mr. Welch from Vermont, Mr. Herger from California, Mr. Bilbray from California, and Mr. Schrock from Illinois.
It looks like we have two of the four here. We are not going to wait for the other two. We are just going to go ahead and begin.
With that, I will recognize the gentleman from California, Chairman of the Health Subcommittee of Ways and Means, who will be missed next year, Mr. Herger. You are recognized.
STATEMENT OF THE HON. WALLY HERGER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
*Mr. Herger. Thank you, Chairman Tiberi and Ranking Member Neal, and Committee members. Thank you for the opportunity to testify.
As our committee works to reform the Tax Code, it is important to closely examine the merits of the various tax extender provisions.
One tax extender I strongly support is the charitable IRA rollover provision first enacted in 2006. This policy allows IRA owners to make tax free charitable contributions from their savings.
Our country has a long and proud tradition of charitable giving and meeting human needs through voluntary, private generosity, rather than relying solely on the taxpayer funded programs.
The tax deduction for charitable contribution recognizes the importance of this tradition and the charitable IRA rollover extends this favorable tax treatment to retirement savings.
Maintaining incentives for charitable giving is especially important in tough economic times, and several organizations in my Northern California District have told me that this provision has been very helpful to them.
I and Mr. Blumenauer have introduced a Public Good IRA Rollover Act to permanently extend the charitable IRA rollover. Our legislation would also make some important modifications such as allowing tax free rollover’s to donor advised funds which help to keep foundations focused on local community needs.
Also, I would urge the Subcommittee to take a careful look at expiring energy tax incentives.
I strongly support increasing American energy production, but some of these incentives have outlived their usefulness. In particular, the ethanol blenders tax credit, I feel, is a wasteful subsidy that distorts the economy. It should not be extended or replaced with new tax subsidies.
To the extent that some tax incentives for renewable energy may be maintained, I believe we should aim to make them technologically neutral and avoid picking winners and losers.
Currently, wind energy receives a production tax credit that is double the level of other renewable resources, such as biomass and hydropower.
The Renewable Energy Parody Act, which I have introduced with Mr. Thompson, would equalize the PTC for all renewables, and I urge the Subcommittee to consider this reform.
Thank you, Mr. Chairman and members.
*Chairman Tiberi. Thank you, Mr. Herger. Thank you for your leadership on the Committee.
With that, I will yield to the gentleman from Vermont, our colleague, Mr. Welch. Welcome to the Ways and Means Committee.
STATEMENT OF THE HON. PETER WELCH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VERMONT
*Mr. Welch. Quite a place. Good to be here. Thank you very much.
*Chairman Tiberi. Glad to have you.
*Mr. Welch. It is good to be here. Thank you so much for having this hearing.
I wanted to talk about the production tax credit, known as the PTC. The enormous responsibility of this Committee on taxes is quite astonishing because we do more through the Tax Code than we actually do through the appropriations process. This is the place where major policy is made, something you all well know.
This will have a real implication for us in Vermont, and I think in energy policy as well.
My view on tax credits is in emerging industries where there is a decision that makes sense to try to give them a boost because it is good for the creation of jobs, the creation of industry, and strengthening in this case our local energy production, is worthwhile.
As industries get more mature and they stand on their own, hopefully we would then wean them from tax credits.
This production tax credit especially for wind is really, really essential to help this industry get on its feet and be a solid performer, and essentially give us a chance to compete against where a lot of wind technology is being exported, and that is to China.
The way to do that, have a new energy future and create jobs here, is to maintain this production tax credit.
Since 1980, that credit has helped bring down the cost of these wind generation facilities by 90 percent. The credit helps create that market that allows scale to bring down price and then create jobs right here.
Wind has provided about 35 percent of all the new electricity generated in the last five years. Across the country, the wind industry has increased domestic manufacturing and created about 75,000 jobs.
In my home State of Vermont, renewable energy companies are producing clean and renewable energy and jobs. Right now, Vermont is generating 46 megawatts of energy, enough to power 11,000 homes, over 200 megawatts of new Vermont projects are in development.
Without these PTC credits, the projects are going to stall. That is just the fact. In fact, most likely, they will fail.
We have a great company, one of them called NRG Systems in Hinesburg, provides wind developers, utilities and turbine manufacturers with the tools needed to measure wind, and because of the uncertainty about the PTC and uncertainty obviously concerns all of us, they report about a 50 percent drop in U.S. orders compared with last year.
This PTC is really the life blood of making it economical to decide to do wind production.
Every day that we allow the extension of the PTC to hang in limbo, it creates a lot of uncertainty. I think both sides recognize uncertainty is no friend of security and investment decisions.
My request is that you include the PTC tax extender in the legislation and bring this to the Floor as soon as possible.
I thank you very much for this opportunity.
*Chairman Tiberi. I thank you both. Would you mind subjecting yourselves to some questions if the panel has questions?
One that I have for both of you, if either of you would like to take a crack at it, we have a colleague testifying later today, this afternoon. He is going to testify, I believe, that we should actually eliminate all energy tax credits because he would argue ‑‑ Mr. Bilbray, if you would like to have a seat, there is a seat right next to Mr. Herger, the California line there.
He would argue that it raises the cost in the marketplace of energy altogether.
How would either of you two, if you wish, respond to that?
*Mr. Herger. I think virtually everyone agrees that we need to be moving to renewal energy as much as we can. We need to be doing all of the above.
I think it is important that as we are looking at tax reform at a time when we are spending 40 cents out of every dollar’s borrowed money, we need to be carefully analyzing everything and particularly, as I mentioned in my testimony, I think it is important that we put renewable on a level playing field. Let that renewable which is the most efficient move forward.
For example, I have a lot of bio renewable in my District that has tax incentives half the degree as say wind would have. Same way with hydro, which we have a lot of hydro in our area.
I think again this Committee and the Congress should be looking at what is the most efficient so the taxpayer gets the most for their dollar both through incentives and other ways.
That would be my request.
*Mr. Welch. That is a central question. My view on it is this, that ideally, we would have a partnership between private industry, entrepreneurs, and to some extent, the U.S. Congress with policies that facilitate the creation of jobs and encourage and facilitate the success of emerging technologies.
We are in a competitive global market. Other countries do have public policies that have a significant impact on the ability of their companies to get an industry started, get it to scale, where you can start bringing down costs and make it affordable.
My view is that Congress cannot take a pass and not actively decide and self consciously decide about where in fact we want to have a public policy that is going to help an emerging industry, because if we sit on our hands and we do not do anything, then China is going to move ahead, Brazil is going to move ahead, and we are going to find that they get the jobs and we do not.
The difficulty is that to the extent you do a tax credit that does provide a competitive opportunity or advantage for the industry that has received that, others may complain.
We have to work that out here. Doing nothing and just saying hey, it is hands off, means our competitors are going to move ahead.
I see this as an important function of this Committee. We all know what the problems can be, that some of these tax credits over live their useful life, like for instance, I agree with Mr. Herger about ethanol, but to do nothing is to allow the other side and our competitors to move ahead.
Thank you.
*Chairman Tiberi. Thank you. Mr. Neal?
*Mr. Neal. Thank you, Mr. Chairman. I think the nexus between Mr. Welch and Mr. Herger’s commentaries is very important because one of the most under reported success stories in America today is the fact that we are currently using two million barrels of oil less than we were.
*Mr. Herger. Right.
*Mr. Neal. It is wild. What is going to happen over the next few years is even more extraordinary. I think we all want to get to the same corner of the room, whether it is from this angle or that angle.
There is also an important point, I think, that has been made here, as we transition away from less dependence on fossil fuels, but getting there also means that during this transition stage, we are going to need the help of the Tax Code because it does create behaviors and outcomes that I think in this instance are very desirable.
As Mr. Welch suggested, there will come a time when they can be ended, but in the short run, in order to keep them going, we are going to need those preferences.
*Chairman Tiberi. Thank you, gentlemen. Mr. Bilbray, you are recognized.
STATEMENT OF THE HON. BRIAN BILBRAY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
*Mr. Bilbray. Thank you, Mr. Chairman, members of the Committee.
I wanted to address 1149. It is a bipartisan bill that basically says that when you have one fuel like cellulosic ethanol that gets a tax credit, and then you have another fuel that is algae based fuel, you have one fuel that has only 70 percent of the energy content of regular gasoline, the other fuel has 100 percent of the energy capacity of gasoline, you have one fuel that is not compatible with refinery and cannot be exchanged one for one in a refinery situation, you have another that is compatible.
You could have one‑half of one percent or you have 99 percent of your fuel system that could be algae produced, no difference in production.
When you have a situation where you have one fuel like ethanol, cellulosic ethanol, which has air emission problems but algae has none of those air pollution problems, why in the world would the Federal Government have a Tax Code that says that the one fuel with less performance and less environmental benefit would have the benefit, and the other fuel that does not depend on different technologies, in fact, does not even depend on the use of fresh water, can be grown in salt water, why would you not give that tax equity along with cellulosic ethanol?
This is where we are trying to get our Tax Code to reflect good science, not inappropriate politics.
All we are asking on this issue is that when you are looking at this mixture, if you want to talk about true green fuels, true fuels that can actually in the long run help to not only supplement but replace to a large degree over a long period of time, granted, the existence of fossil fuels as we know it today, then why would not our Tax Code reflect that strategy by saying that algae based fuel should get the same tax benefits as cellulosic.
I think when we get down to it, this is one place where Republicans and Democrats should agree that common sense, good science, and responsible political guidance says algae based fuels should get the same, at least the same, Mr. Chairman, seeing that it is 30 percent more energy per gallon.
Even if you give it equity, you are still short changing algae 30 percent when it comes to how much energy the consumer gets out of it.
I think that Tax Code should at least be equal, if not question the logic that maybe we ought to go to a BTU based credit somewhere in the future that reflects true energy that the consumer is receiving and the country is getting the benefit from.
I would yield back my time at this time, Mr. Chairman.
*Chairman Tiberi. Thank you, Mr. Bilbray. I will ask you the same question that I asked the other two gentlemen with respect to energy tax credits.
What is your view that some of our colleagues may have that we should eliminate all the extenders with respect to energy tax credits? What would you say to that?
*Mr. Bilbray. Well, I think that is a legitimate argument to be held at this time. I think that in all fairness, you need to choose either to be engaged in the activity, trying to give an incentive, but if you do that, the incentive should reflect reality not politics.
If we are going to retreat from having tax incentives to try to encourage this type of production, where in the United States we have companies in the United States today that are actively engaged in algae production, including many that are under contract to the Federal Government for jet fuel, something that ethanol cannot do, I think you need to choose one or the other.
If you choose to be engaged in the encouragement of the production of so‑called “green fuels/renewables,” then it should reflect the science, not the politics. This bill basically does that.
*Chairman Tiberi. Thank you. Mr. Neal?
*Mr. Neal. Mr. Bilbray, would you argue then that we should truncate these initiatives immediately right now, get away from them?
*Mr. Bilbray. I would prefer not to. I think there are some opportunities there, but I think the credibility, Mr. Neal, Congressman, of the program has been severely hampered by what basically appears to be Congress picking winners and losers based on political agenda’s or misconceptions of environmental benefits.
I was a member of the Air Resources Board for six years. I was on an Air District for ten. I think you will agree, nobody is more hard core about environmental stuff than the California Air Resources Board.
The policies and the politics in Washington did not reflect the realities that I learned in all those years, 16 years of working on environmental and clean air strategies.
I think we need to go back, if we are going to maintain this policy, it needs to be based on good science, not based on back room politics. Right now, it appears to those of us involved in the environment that it is a misconception or it was a conscious ‑‑ I think it was a misconception.
I think it was an admission through ignorance, not through intention. That is not the perception you get when you are in California.
*Mr. Neal. Let me pursue this. Are we suggesting that, for example, as President Obama says, “all of the above,” a very integrated approach to energy independence, are we suggesting that you could build a nuclear power plant without Government guarantees?
*Mr. Bilbray. First of all, let me just say quite clearly, if you had the Federal Government streamline the procedures and take a more positive attitude of going to next generation nuclear, literally be active.
In fact, Mr. Neal, I can tell you right now as a member of the Energy and Commerce Committee, you are seeing this Administration working within the United States Navy that is becoming very aggressive at doing exactly that.
We have been able to show that there are third generation nuclear that is not only safe but much more cost effective, much lower problem, you are going to see much less of those guarantees.
The barriers to nuclear power are not scientific. They are political and they are regulatory. I say that as a former regulator.
*Mr. Neal. If we are talking about the present tense, it would be hard to draw the investor class to nuclear power without some sort of Government guarantee.
*Mr. Bilbray. Because of the regulation and obstructionism, 30 years of obstruction, before you can get something on line.
That is why it is easier to build a natural gas power plant than a nuclear power plant, although over long term, even as a proponent of natural gas as I am, long term, stationary sources such as natural gas plants should be the last choice of an environmental strategy not the first choice.
*Mr. Neal. Whether one supports or opposes the use of nuclear power, and to acknowledge the apprehension that the American people feel about it at this time, would almost guarantee that you could not go forward without those Government ‑‑
*Mr. Bilbray. Because of the misconceptions and the political agenda’s that are tied to it. To say that clearly as somebody that would tell you is working on stuff like greenhouse gases, we do not embrace some of this technology as the U.N. Council on Climate Change said, who got the Nobel Peace Prize along with Vice President Gore, you have to embrace it and have a robust expansion of nuclear power if we are going to address issues such as clean air and climate change.
That is the kind of reality we run into that there is not compatible politics, but our politics should reflect the science, not the political pressure at the moment.
*Mr. Neal. There are notable uses of incentives that draw people to making investments that will not return ‑‑
*Mr. Bilbray. I wholly agree. In fact, we are actively engaged right now through the budget process of contracting with people to develop alternative energy sources and to develop safer forms and more efficient forms of nuclear power.
We are engaged in it one way or the other through the budget process, either directly through contracting or indirectly through tax incentives.
*Mr. Neal. Reducing the carbon footprints, entirely desirable. Moving away from fossils is a good idea. Certainly, I think everybody, given what has happened in Iraq and the Hormuz Straits right now, would agree that the dependence we still have on foreign oil is a direct threat to the security of many of our young men and women who serve us admirably every day.
*Mr. Bilbray. Mr. Ranking Member, let me say this quite clearly as somebody who was a regulator more than I was a congressman, how many times have you heard we need a Manhattan Project for energy independence?
Let me assure you as a regulator, the Manhattan Project would not be legal under today’s laws. You could not legally even site the base in New Mexico within the boundaries that we did in World War II.
We have to make it legal, and one of the things I would say to you as a member of the other side, Energy and Commerce, as a regulator and somebody who is very environmentally involved, I see that those of us in Energy and Commerce need to be aggressive about standing up and making sure our regulations reflect a good outcome rather than politics, but I want the Taxation Department to do the same thing.
*Mr. Neal. This is a worthwhile conversation. One of the reasons we are less dependent on foreign oil right now by almost two million barrels a day is because the Government stepped forward to create greater requirements for more energy efficiency with many of the household appliances that we use today.
Would you agree with that?
*Mr. Bilbray. Well, I agree energy efficiency across the board has been probably one of the most cost effective benefits we can do, but it has its limits, as long as you know.
It is sort of the low lying fruit when we get into it. It is always the most cost effective because it is low lying.
*Mr. Neal. The point that I am raising is that there is general agreement on reducing the carbon footprint and there are a series of steps that the Government might incent to help get us there.
*Mr. Bilbray. I agree with that. Remember, too, at the same time as we talked about changing light bulbs, if we had allowed some environmental health departments to say because of mercury content, we are not going to allow those kinds of light bulbs, that whole strategy could have been blocked by Government regulation.
That is the kind of thing we see a lot of in other points. Thank God it did not happen there. It is a lot of issues.
My biggest concern is why reduce ten percent of electricity when this plant is burning coal, Mr. Ranking Member, and the fact is when we have the technology today that could totally eliminate the greenhouse gas emissions caused by our electricity here.
We have taken the easy part, but we have not taken on tough. We are still buying coal fired electricity for the Capitol of the United States, and as a Californian, you would go to prison for doing that.
*Mr. Neal. If you are in Washington State, you would agree that for the coal ash that is traveling through Seattle and through that state now, that has created its own uproar.
*Mr. Bilbray. That is a whole different issue. I do not think you want to take the heat, and we are going to address issues that when we stop coal ‑‑ let me be frank with you.
My attitude is clean coal is as logical as safe cigarettes. That is a Californian perception. You know how we feel about both of those.
The fact is, Mr. Chairman, we all love railroads. We love the efficiency of them. We love the environmental benefit of them. As soon as we stop shipping coal in railroads, there is a whole new crisis that we are going to be addressing, but that is part of being aggressive and doing the right thing.
Sometimes there are real problems unforeseen that we are going to have to address.
I appreciate the chance to be able to talk about your part of the deal, and that is make our Tax Code fair, equal, and rational, and right now, it is not.
*Chairman Tiberi. Who says taxes are not fun? This was very entertaining, Mr. Ranking Member.
I will say one point before I recognize the gentleman from Illinois. One other issue has driven down consumption, and that is the economy.
*Mr. Bilbray. Absolutely.
*Chairman Tiberi. I know a lot of folks who are not driving as much, not traveling as much because of the economy.
Thank you, Mr. Bilbray.
Mr. Schock, you are recognized.
STATEMENT OF THE HON. AARON SCHOCK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
*Mr. Schock. Thank you, Mr. Chairman, and thank you, Ranking Member Neal. It is a pleasure to be before our committee to testify.
We all know that this Committee is undertaking the necessary task of reforming our current convoluted Tax Code, and in this process, we have held over 20 hearings looking at ways to reform and make less burdensome different parts of the Code.
Turning 70,000 pages into a manageable, simplified Tax Code that is economically beneficial for both individuals and job creators, does not happen overnight.
While great strides have been made in the last 16 months, more work remains to be done.
In the meantime, as this Committee continues working towards our shared goal of lowering the rates and broadening the base, it is important that we give employers and individuals the certainty that their taxes will not increase by over $500 billion in the short term.
That is the topic which brings us here today. Many of the low tax provisions which expired last year or will at the end of this year serve a specific economic purpose and create jobs by keeping taxes low on both individuals and employers.
In reality, many of these “extenders” are patches put in place to prevent tax increases from taking effect until this Committee can finish its work on comprehensive tax reform.
Through tax reform, we hope to no longer remain the country with the highest employer tax rate in a worldwide system of additional taxation.
U.S. employers are forced to compete in a global economy, and important tax extenders which give them that temporary patch to compete, things like deferral, active financing, and CFC look through, are all slated to expire.
Extension of these provisions and others give this Committee the necessary time to rewrite the underlying rules of the game, a game quite frankly we are losing right now to our foreign competitors.
Some will say that the only economic effect of extending expiring tax provisions is a reduction in revenue to the Government. This argument sorely understates the benefit and economic growth which is derived from these low tax mechanisms.
I have taken a leadership role in the work opportunity tax credit, which provides a reduction in tax liability for private sector employers who hire employees off of public assistance.
Most recently, this Congress expanded this program to include unemployed veterans.
However, without the core work opportunity program, employers will be less willing to participate in the new veterans’ hiring credit. It is hard for employers to justify maintaining that costly infrastructure of a work opportunity program which will now be one‑tenth the size of the core work opportunity program, unless it is extended.
For an average tax credit of $1,000 through WOTC, it saves the Federal Government $5,000 in public assistance payments in just a year, nearly an equal amount in the state contributions to public assistance as well is saved.
In my home State of Illinois, which has one of the worse budget shortfalls in the country, this extension is extremely important.
Also of vital importance is the current biodiesel tax incentive, which has been on the books since 2004.
Until we can reduce the farmers’ tax burdens below the current levels, I favor extending this policy which supports 39,000 jobs and returns more than $600 million per year in tax revenue to the Federal, state and local governments.
As I have told our Chairman, I will be the first in line to help reduce the 70,000 pages of our Tax Code to a slim volume which could fit in any of our pockets.
The bulk of these pages will become unnecessary with a lower and fairer tax rate for individuals and employers, a Code that helps taxpayers keep more of their hard earned money and employers more of theirs to invest, expand, grow and hire here in the U.S.
Until we are at that point where we have truly a willing President and an engaged Senate, it is of vital importance that we prevent looming tax increases on business and individuals, and we do so now.
Our President not too long ago said and I quote “You do not raise taxes in a recession, which is why we have not and why instead we have cut taxes. You do not raise taxes in a recession.”
Well, for once, I could not agree more with our President’s sentiments. With that, I yield back.
*Chairman Tiberi. Thank you, Mr. Schock. Any comments from the Subcommittee?
[No response.]
*Chairman Tiberi. Thank you for testifying today.
*Mr. Schock. Thank you.
*Chairman Tiberi. That concludes our second panel. We will now move to our third panel of members.
Our first panelist today hails from the great State of Tennessee. Ms. Black is recognized.
STATEMENT OF THE HON. DIANE BLACK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE
*Mrs. Black. Thank you, Mr. Chairman and members. I am here today to acknowledge the merits of extending some of the tax provisions this body has addressed in the past that benefit both individuals and businesses.
Businesses of all size in Tennessee tell me how worried they are that one more tax increase or mandate from Washington might just sink them, and individuals are at risk of seeing their tax bills go up at the end of the year.
I want to address very briefly four of these extenders that are important either to my state or what I believe are important to the nation.
The first is the sales tax deduction. I agree with the Governor of my state that the state and local tax deductions are especially important for Tennesseeans as it is for six other states, including Texas, Florida, Washington, Wyoming, South Dakota and Nevada, that are without a state income tax.
That is why I am the co‑sponsor of H.R. 476 introduced by my colleague, Mr. Brady from Texas. This bill would include the extension of state and local sales tax deduction.
This really is a fairness issue. Since 2004, when the deduction was restored, we have agreed that taxpayers in sales tax states should be treated equally as those in the Tax Code of those in states that rely upon an income tax.
Sales tax adds up for families. We are trying to protect them from a significant tax increase and help them stretch their pocketbooks a little further.
Taxpayers in these seven states who itemize their deductions have come to depend upon this provision and this deduction puts extra money in the pockets of our Tennesseeans which helps families and their budgets.
The second is the charitable tax deduction. Unlike other tax incentives, the charitable tax deduction encourages behavior that enriches our communities rather than individuals because it successfully encourages taxpayers to give more.
As charities struggle to meet the increased demands for their services and raise additional funds, we need to encourage all individuals of every level regardless of income to give more to the charitable organizations.
This is behavior that we need to encourage rather than to discourage.
The nice thing is this is one of those cherished traditions that we do not see anywhere else in the world. I would think this is one that we would want to keep.
The next one is the R&D tax credit. Congress has extended the R&D tax credit 14 times since it was originally enacted in 1981, and the R&D credit has proved an important incentive to spur our private sector investments in innovative research by companies of all sizes and sectors.
That is why I am a co‑sponsor of H.R. 942, the American Research and Competitive Act of 2011 by Mr. Brady once again.
Finally, the 15 year depreciation that is a bill by Mr. Gerlach, 1265. Generally, the depreciation period, as you all know, for commercial building and improvements is 39 years.
Congress has modified that depreciation schedule for certain types of property over time, in addition to better reflecting the unique characteristics of property used in certain types of commerce.
Shortening the depreciation schedule stimulates the economy and job growth.
For this reason, I an a co‑sponsor of this bill.
I just want to close by thanking you for having this hearing so that we could individually talk about why these are so important to us either in our communities or why we think generally they are important.
Thank you very much.
*Chairman Tiberi. I thank the gentlelady from Tennessee who is a great member of the Full Committee. I thank her for being here today.
*Mrs. Black. Thank you.
*Chairman Tiberi. With that, I yield to the gentleman from Puerto Rico, Mr. Pierluisi.
STATEMENT OF THE HON. PEDRO PIERLUISI, A REPRESENTATIVE IN CONGRESS FROM THE TERRITORY OF PUERTO RICO
*Mr. Pierluisi. Thank you, Chairman Tiberi, Ranking Member Neal, and members of the Subcommittee.
I respectfully urge extension of two tax provisions that expired in 2011 and that are of great importance to Puerto Rico’s economy.
First, I have introduced H.R. 4605, which would extend for two years a deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.
In the American Jobs Creation Act of 2004, Congress enacted Section 199, domestic production activities deduction. The deduction was intended to achieve a number of policy goals including providing support for the domestic manufacturing sector, and reducing effective corporate tax rates.
Section 199 allows a company to receive a deduction equal to nine percent of the taxable income that the company derives from qualified production activities within the United States.
However, the 2004 Act did not authorize a company to receive the Section 199 deduction on the income derived from those activities in Puerto Rico, even though Puerto Rico was part of the U.S., and jobs in Puerto Rico are American jobs.
Fortunately, that exclusion was corrected back in 2006, but every year or every two years actually, we need to extend it.
I respectfully submit that there is ample justification to extend this provision for an additional period of years or better yet to make it permanent.
Mr. Chairman, I have also sponsored H.R. 4374, introduced by Congresswoman Christensen, which would extend for two years the modest increase in the limit on the cover over of excise taxes to Puerto Rico and the U.S. Virgin Islands.
The cover over program dates back to 1917 in the case of Puerto Rico, and to 1954 in the case of the U.S. Virgin Islands. The territories are treated unequally under many Federal programs, and the cover over program helps to compensate for this fact.
The purpose of the program is to provide budgetary support to the territorial governments, and historically, funding has been used primarily for economic development, health care, infrastructure, education, and conservation.
I do believe the cover over program could be refined in certain respects to ensure that it is providing the greatest possible benefit to the U.S. citizens living in the two territories, where median household income is roughly half of what it is in our poorest states.
I have introduced legislation for that purpose. Nevertheless, the importance of the cover over program for my constituents and Congresswoman Christensen’s constituents who are short changed in so many respects cannot be overstated.
Mr. Chairman, these two extenders have enjoyed bipartisan support and have had a positive impact on our national economy of which Puerto Rico and the U.S. Virgin Islands are an integral parts.
I hope the Subcommittee will take action to prevent the economic harm that would result if these two provisions are not renewed. I yield back.
*Chairman Tiberi. Thank you for your testimony.
With that, I yield to the gentleman from New Hampshire.
Mr. Bass is recognized.
STATEMENT OF THE HON. CHARLES BASS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW HAMPSHIRE
*Mr. Bass of New Hampshire. I thank distinguished Chairman Tiberi and Ranking Member Neal for your time and your attention. I think this is a great series of hearings that you are having today.
I want to preface by saying that I applaud this Committee’s work in trying to come up with a comprehensive plan for tax reform and simplification for this country.
On top of that, we all know the fiscal cliff that we are facing at the end of the year and the impact that may have on the country’s economy.
I know there are a lot of very significant priorities the Committee needs to address, the most important of which, I believe, is comprehensive tax reform and avoiding what we face at the end of the year.
To that end, I was one of four Republican co‑sponsors along with four Democrats of, I think, the first bipartisan budget bill that has been before this Congress in my political career, and perhaps since the Budget Empowerment and Control Act was passed in 1974, so‑called implementation of the Simpson‑Bowles bipartisan tax reform ‑‑ budget, rather.
I hope that this Committee along with the Appropriations Committee and the other committees whose jurisdictions will attend to this priority ‑‑ that we need to work together to resolve the big issues that face this country over the next year.
However, within that context, I think it is important to consider that in lieu of comprehensive tax reform, the importance of maintaining the production tax credit for renewable energy, which has been around now since 1992.
It lapsed, as was mentioned by a previous member testifying, seven times. The last time it lapsed, which was in 2002‑2004, renewable energy, most notably wind production installations, fell by 72 percent very quickly. This was devastating to the industry.
My home State of New Hampshire has a renewable portfolio standard of 25 percent by the year 2025, and part of that involves the installation of some pretty significant wind capacity in the state, most notably one project which is under construction right now in Groton, New Hampshire.
It will produce over $81 million in new economy to the state. It helps us reach that goal of 25 percent renewable by the year 2025. It is important not only for New Hampshire’s economy and for our own legislative or policy objectives, but it is also important for this country to continue to balance the need to develop traditional energy resources with alternative energy resources.
As a member of the Energy and Commerce Committee, I will be working to that end on the policy side. I hope this Committee will continue to support renewal of the renewable energy production tax credit because I really believe that is important for our nation’s energy future.
I thank the Chairman for his time. I hope you will consider this priority.
*Chairman Tiberi. I thank the gentleman for his leadership on the issue. The gentleman from California, Mr. Campbell, is recognized.
STATEMENT OF THE HON. JOHN CAMPBELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
*Mr. Campbell. Thank you, Mr. Chairman, Ranking Member Neal, and members of the Committee.
I think I am the only Member of Congress who actually has an advanced college degree in taxation. I could comment on a bazillion things that are before this Committee, but I am going to limit myself to just one minor provision today, which is the mutual fund flow through exemption provision, something Mr. Neal may have a specific interest in as well.
Prior to 2004, we had a 30 percent withholding provision when foreign investors invest in mutual funds. As a result, foreign investors did not invest in mutual funds, because 30 percent, particularly if you do not make much money on the thing, you may wind up with less money after withholding than you actually made.
What they did is they set up what they called “mirror funds” in foreign countries that would try to mimic the investment decisions of U.S. mutual funds so that foreigners could sort of participate in the decisions of U.S. mutual funds.
In 2004, we eliminated that withholding provision and foreign money flowed back into the U.S. and the U.S. mutual funds again.
That provision expired at the end of 2011. The foreign money is running back offshore again into other places.
What is interesting and unfair about this withholding provision is that under current law, because that is what it is now, if you invest ‑‑ if a foreign investor invests in something directly, like let’s say an interest rate swap or something, they do not have to have withholding, even though it is an U.S. interest rate swap made by the same company that offers the mutual fund.
If they invest in a mutual fund, which has that swap as a part of it, then they have the withholding.
It totally discriminates and does not allow foreign investors to invest in U.S. mutual funds.
Let me point out, if we extend this exemption and make it permanent, which Congressman Paulsen has H.R. 4623 to do, and I am a co‑sponsor of that, and that is what I would recommend, that we just eliminate this 30 percent withholding, but realize this does not change that foreign investor’s tax liability to the U.S. at all.
This does not change the tax due based on the income they derive. This is only about withholding. All it is is changing the time at which that tax is paid, but not the total amount of the tax which is paid, because it is just a withholding thing.
I respectfully request that the Committee consider making this exemption, if you will, or eliminating this withholding provision on mutual funds, because what it is going to do is bring a lot more money into U.S. mutual funds which creates U.S. jobs both in the mutual fund industry and in the industries in which those funds are investing.
I thank the gentleman very much for his time and yield back.
*Chairman Tiberi. Thank you for your testimony.
With that, the gentleman from Iowa is recognized, Mr. Braley.
STATEMENT OF THE HON. BRUCE BRALEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA
*Mr. Braley. Thank you, Mr. Chairman, Ranking Member Neal, and members of the Committee.
My job here today is to make you all feel good about what you do on this Committee, and that is why I want to talk about making adoption of the Affordable Tax Credit bill.
We have had a great adoption tax credit provision on the books, but a portion of it expired at the end of last year, having dramatic impact on couples considering adoption, and the entire tax credit will expire at the end of this year and revert to a much more draconian adoption tax credit that will provide disincentives for couples to adopt.
I want to tell you why this is such an incredible return on investment to American taxpayers.
First of all, you get families like the Craigs, Kalin and Johnny Craig, who adopted a beautiful child from Africa, Joseph, and brought him back to give him a loving, caring home.
They were able to take advantage before the end of the year of this $13,000 fully refundable tax credit.
This was a bipartisan effort that came about under both President Bush and President Obama. We have seen the number of adoptions nearly double in this country since that tax credit was strengthened.
If we do not act, it will revert to a $6,000 level. It will only apply to special needs adoptions, and the eligibility criteria income‑wise will dramatically reduce even further those who are eligible for the credit.
Why does this make sense for taxpayers? We currently spend about $47,000 a year in state and Federal benefits to keep kids in foster care; $47,000.
This one time $13,500 credit is an enormous return on investment, puts those kids into loving, caring homes, takes away the need to continue to provide state and Federal support for them, and is a win‑win situation, and that is why it is so essential that we act together on an issue that should bring Democrats and Republicans together to feel good about our tax policy.
That is why I am asking you to move forward and make that permanent and provide that benefit to young children who are looking for a loving home.
I also want to echo the comments of my colleague from New Hampshire about the production tax credit. My state ranks number two in wind energy production. We lead the country along with Texas and Illinois in the number of jobs created by that industry.
We are currently providing power to one‑third of our state with wind energy. We need to continue to provide certainty and predictability to people willing to invest and reducing our dependence on foreign oil.
I thank you for your time.
*Chairman Tiberi. Thank you, Mr. Braley. Thank you for bringing up the adoption tax credit. I hail from a District that has the Dave Thomas Foundation on Adoption, the late Dave Thomas, who was a leader in establishing it, founder of Wendy’s. I know if he were here, he would be cheering you on. Thank you for being here.
Mr. Marchant is recognized.
*Mr. Marchant. Congressman Campbell, could you just explain to me, is the 30 percent withholding for distributions and dividends, so that even if a capital distribution is made, it is automatically 30 percent withheld?
*Mr. Campbell. Yes, that is my understanding of the law. Therefore, people can actually wind up having to have their entire amount of income withheld if they had any and perhaps even if they did not have any income.
*Mr. Marchant. They file their tax return?
*Mr. Campbell. Then they get the money back later when they file their tax return. That is right.
*Mr. Marchant. Thank you.
*Mr. Campbell. Thanks.
*Chairman Tiberi. With that, I would like to thank you five for taking time out of your busy schedules to testify today.
Our third panel is concluded. We will move to our fourth panel. We did have a cancellation on the fourth panel. There are just two in our next panel. Mr. McGovern and Mr. Grimm, you can take a seat.
I am going to make an executive decision since we only have two on this panel. You guys have more time than just three minutes if you would like.
The gentleman from Massachusetts is recognized, Mr. McGovern.
STATEMENT OF THE HON. JAMES MCGOVERN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS
*Mr. McGovern. Thank you, and even though you are generous in offering to give us more time than three minutes, I am going to try to stick to three minutes.
I am happy to be here. Chairman Tiberi, Ranking Member Neal, members of the Subcommittee, thank you for the opportunity to testify today in support of extending parity for the transit benefit.
As you know, parity expired at the end of the 2011 calendar year. Currently, commuters who drive to work and park are eligible for up to $240 in pre‑tax benefits per month from their employer while commuters who take mass transit, such as commuter rails, subways, buses, or van pools, are only eligible for up to $125 a month.
Commuters who drive and park were actually eligible for an increase in their monthly parking benefit at the start of 2012 because of an automatic cost of living adjustment.
At a time of high gas prices and when many families are still struggling financially from the recession, it makes no sense to penalize commuters who utilize mass transit.
I reintroduced H.R. 2412, the Commuter Benefits Equity Act, to make permanent transit benefit parity. This bill has 74 bipartisan co‑sponsors.
I want to recognize my colleague, Congressman Grimm and Congressman Blumenauer for their efforts to extend the transit benefit.
In December of 2011, we organized a bipartisan letter to House leaders to extend the transit benefit in the payroll tax cut package. It was signed by 50 members.
Then again in February, we organized another bipartisan letter, this time it was signed by 72 members, urging that the transit benefit be extended in the continuing payroll discussions.
In recognition of the extremely difficult fiscal times in which we find ourselves, our letter proposes establishing parity at the revenue neutral maximum level of $200 per month for parking and transit benefits.
The Federal transit benefit is a perfect example of how targeted and effective Federal policy can benefit both employees, as a way to save money on their commute, and employers, as an attractive fringe benefit to offer their workers.
Employees and employers receive a pre‑tax benefit resulting in sound fiscal savings for both.
It simply makes sense to reestablish parity between parking and mass transit benefits. It is good for employers, good for employees, good for the environment, helps take cars off our congested roads, and I am hopeful you will restore parity in the tax extenders package.
I appreciate the time you have given me here.
*Chairman Tiberi. Thank you, Mr. McGovern.
The gentleman from New York is recognized, Mr. Grimm.
STATEMENT OF THE HON. MICHAEL GRIMM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK
*Mr. Grimm. Thank you, Chairman Tiberi and Ranking Member Neal. I do appreciate the opportunity to testify today in support of extending the expiring commuter transit benefit.
I would also like to thank my colleague, Mr. McGovern, for his leadership on this extremely important issue.
As a Member of Congress representing the citizens of Staten Island and Brooklyn, who have and face every day the longest commute times in the entire nation, seeing this vital program extended is of the utmost importance to me and all of my constituents.
The transit benefit is a highly effective tool used by an estimated 2.7 million Americans, and that is to help reduce the cost of commuting.
Transit Center, a New York City non‑profit, found that when transit benefits are introduced to the workforce, 20 percent of employees alter their commuting patterns. They use public transit or van pools.
When considering that, a three percent reduction in single occupancy vehicles can lead to a 25 percent reduction in congestion. It is clear that the transit benefit is an effective means of reducing traffic.
While there are additional energy and environmental benefits that can be drawn from this, I want to take this time to also recognize the role transit benefits have on employers.
Simply put, the transit benefit makes sense for businesses of all shapes and sizes. The provision is a pre‑tax benefit not only for employees but also for the employers who offer it providing fiscal savings by reducing their payroll tax burden.
According to corporate service provider Edenred, last year, employers who offered the transit benefit saved an estimated $311 million in taxes. When we look at this in context, these savings could be used to hire 6,200 new workers. Providing many employers with the additional resources that they need to expand their business and do exactly what the Congress wants, create new jobs.
The transit benefit also provides small businesses and job creators with a financial incentive to help their employees increase their disposable incomes. This is a perfect example of how targeted and effective Federal policy can provide employers with an opportunity to help their employees save money, obviously on their commute, while saving employers money that can be reinvested into their own businesses, again, to create new jobs.
Congress should not continue to promote a tax policy that is favoring drivers over commuters and that penalizes businesses that are doing the right thing by offering their employees incentives to utilize a variety of transportation options.
If we do not act quickly, millions of transit and van pool riders will continue to be taxed more than their fellow commuters who drive to work.
This inequity will force many commuters out of trains, buses, and van pools and back into their cars, which will lead to an increasing congestion, fuel consumption, lost productivity, and wasted time that could be spent either at productive work or home with their families.
The effort to extend this important benefit has received overwhelming bipartisan support here in the House, as evidenced by the 107 signatures garnered by the two letters that my colleague just mentioned.
I encourage the Committee to extend parity between the transit and parking benefits at a monthly level, providing relief from the high cost of commuting to American workers who choose public transportation and van pools.
Again, I thank you for your time. I yield back.
*Chairman Tiberi. Thank you, Mr. Grimm. Thank you, Mr. McGovern. You both represent areas of our country where quite a bit of mass transit occurs.
Some of our colleagues are in states where very little mass transit occurs.
If you had to summarize to a colleague on the Committee who has very little mass transit the impact of the Congress not extending this provision, what would you say?
First, Mr. McGovern. What would you say would happen in Massachusetts to both transit riders and employers?
*Mr. McGovern. They have already seen a reduction in their benefit. They have to decide whether it is more economical for them to drive to work or take mass transit. If they make the decision to drive to work and there are more commuters on our highways, our roads need more repair, the cost to the state and the Federal Government increases.
I would argue there is an environmental impact of increased congestion on our roads.
I think the nation as a whole benefits from this. Again, I do not see why we should provide more incentives for a person who drives their car alone to work versus a person who gets on a train or bus and goes to work that way, which is better for the entire community.
*Chairman Tiberi. What would that incentive be for someone who does not have mass transit?
*Mr. McGovern. Right now, people that drive to work and park are eligible for up for a $240 pre‑tax benefit per month.
We had tried to create parity in the stimulus bill, and then when that ran out, we saw those who actually took mass transit to work go from $240 down to $125 in terms of their benefit. That is a significant drop.
Again, it is enough of a drop to make somebody wonder whether it is more economic to drive to work than take mass transit.
Again, the more cars on the road, the more wear and tear, the more cost of maintaining our highways. Again, at a time when we are trying to encourage more people to utilize mass transit, letting this benefit expire does not make any sense to me.
*Chairman Tiberi. Mr. Grimm, can you give a New York City perspective?
*Mr. Grimm. I certainly can. I think people that are not as familiar with my specific District within New York City would think I would side with those that have massive mass transit.
Staten Island, which is more than 70 percent of my District, is known for not having mass transit. It is one of the biggest problems we have, congestion and traffic because of the lack of mass transit.
However, even in areas, rural areas that do not have mass transit, we want to encourage people to van pool and car pool. That is what this extension would do. It makes people be more efficient so that neighbors can get together, colleagues that work in the same general area can come to their own agreements to share a car or van pool.
I think it is very bad precedent for the Congress as a whole to pick winners and losers. The country is different. There are going to be areas like the heart of New York City, Manhattan and Brooklyn, that have a tremendous amount of rail and access to transportation, and parts of the city like Staten Island that does not.
I think they should all be at parity and all should be equal, but when you look at it, I think the incentives to put people in car pools and to be creative, even when there is not mass transit, is obvious, and for that reason, I would strongly urge parity.
*Chairman Tiberi. Thank you. Mr. Neal?
*Mr. Neal. Thank you, Mr. Chairman.
Mr. Grimm, following that logic that you have laid out here, you agree it is okay to incent certain behaviors to encourage people to commute rather than have just one person in terms of occupancy in a car using more fuel and standing in line for a longer period of time?
*Mr. Grimm. Yes.
*Mr. Neal. You agree with that. If that is the case, we are having the conversation that it is generally a good idea to have less reliance upon fossil fuel. Is that an agreement?
*Mr. Grimm. In general, yes.
*Mr. Neal. In general. Does the Government not have some compelling interest in encouraging use of renewable energies?
*Mr. Grimm. As long as it is sustainable and practical.
*Mr. Neal. Would you grant that solar and wind are worthwhile given Staten Island’s geography?
*Mr. Grimm. If you are discussing possibly wind turbines as opposed to wind mills, then I would say yes. As the studies and the science gets better, I think those are going to be options for the future.
If you are asking me based on what it is right now, wind mills, I would say probably not. I think it would cost more money than what we have now.
For it to be a real alternative, in my humble opinion, an alternative means that it can provide the same service at an equal or less cost. If it is more and needs massive Government subsidies like say, for example, biofuels, where we have to subsidize it at $1 per gallon, that is not a real alternative. That is not an alternative. That is the Government just paying for something because we do not have the alternative yet.
Science has to catch up with it, but I think an “all of the above” approach is what we should be doing as well as R&D.
*Mr. Neal. If science catches up with it, would you agree that before science catches up with it, we might need to build a bridge through the Tax Code to encourage science catching up with it, as you have described it?
*Mr. Grimm. To some extent, yes, but again, it has to be practical, reasonable and sustainable, and within our means.
*Mr. Neal. If you want major companies to embrace renewable energy, does there not have to be in this transitioning period some sort of incentive that is built into the Code to encourage that sort of behavior?
*Mr. Grimm. Well, I think this is a perfect example of an incentive. This is a perfect example. Right now, the way it is, we are giving an incentive for people to get in their cars, single occupancy in cars, as opposed to using public transportation. That seems backwards to me.
*Mr. Neal. The incentive here is clearly as you argue it, to encourage the Tax Code to incent that behavior.
*Mr. Grimm. Yes, or at least to make it equal at a minimum. We are asking for parity, not to pick winners and losers. I am asking for parity.
*Mr. Neal. How do you pick winners and losers when it comes to wind and sun? Is it not desirable to relieve pressure from imported oil?
*Mr. Grimm. Again, I think that it is based on simply the economics and where the science is. If it is not efficient and the cost is not sustainable, then I do not consider that an alternative.
*Mr. Neal. If the President says “all of the above,” are you suggesting that you could build a nuclear power facility today without Government guarantees?
*Mr. Grimm. When you say “without Government guarantees,” first let me say I do believe nuclear is one of the answers to our energy needs.
*Mr. Neal. Could it be constructed today without Government guarantees? Could a plant be constructed?
*Mr. Grimm. I do not know enough about the subject to be completely honest with you to say what that would entail. I would say this, that I think nuclear now, for example, in my great state and the great City of New York, we have about 25 percent, do not quote me on the exact number, of our energy coming from Indian Point, which has been providing clean, good, fairly cost effective energy for New York City for a long time, and I am a full supporter of that.
*Mr. Neal. The short answer here, Mr. Grimm, all I am suggesting to you is I am in agreement with you on the commuter tax.
*Mr. Grimm. Great.
*Mr. Neal. Having said that, my point is when you continue it to its manifestation, the issue of what the Government nurtures, I think we do not get to renewables without this bridge for a short period of time to encourage these alternative sources of energy.
*Chairman Tiberi. I thank the two panelists, and just add my two cents, Mr. Neal. I would argue that while the President talks a good game about “all of the above,” his Administration, coming from a state that has a lot of natural gas, oil, coal, that many small entrepreneurs would argue that the Administration has been anything but “all of the above.”
We can have that debate another time. I know you have mentioned it a couple of times with respect to the President, an issue sensitive to me. I would argue we can reduce imported oil, imported fossil fuels, by more domestic opportunities in the fossil fuels.
*Mr. Neal. This is a fair discussion. Domestic capacity is up by 20 percent. Next year, North Dakota is going to produce more oil in Prudhoe Bay.
*Chairman Tiberi. No thanks to the Federal Government.
*Mr. Neal. My point is many of these incentives one might argue have been also brought about because of the Code. We did a pretty good energy bill here a few years ago.
*Mr. Grimm. Ranking Member, if I may, keeping in mind, regulations do play a major role in this. When you look at the amount of coal plants that are closing, refineries that are closing, the fact that our pipelines are antiquated and desperately need to be upgraded, and there is a tremendous push back through the regulators on those things, it does not seem to really be that the Administration wants an “all of the above” approach.
Those are just the facts as I have been reading them. Again, I am not an expert.
*Chairman Tiberi. We do have our 12:00 panelist here. Just to kind of close this, to Mr. Grimms’ point, in my State of Ohio, a hot topic right now is the fact that ‑‑ this debate occurred during cap and trade, the public utilities are raising rates at the same time they are closing coal plants because of the Federal Government.
The alternative fuels that are taking place, and that is a policy decision, are raising the rates to homeowners as well as businesses, and that is happening right now in our state.
That is a debate that entails the discussion that you two are having.
There is a consequence to the dollars that are paid by at least my constituents in Ohio.
*Mr. Neal. At the moment though, I think it is fair to say as well that we are much less dependent on coal, and part of that reason is because many of our international competitors are more dependent on coal. It is that export market that is driving part of the decision making.
*Chairman Tiberi. In part because coal plants in my state are exporting because there is less domestic wanting because of Federal regulations.
Thank you both. We could have this discussion all day. Like I said earlier, who said the Tax Code is not fun in terms of discussion. We are having a great time today. Thank you both.
*Mr. Grimms. Thank you. Thank you, Ranking Member.
*Chairman Tiberi. I thank Mr. King and Mr. Costa for their patience. They are up next for our 12:00 panel. We have two on our 12:00 panel. Welcome to both of you.
We will begin with the gentleman from the Hawkeye State. Mr. King is recognized.
STATEMENT OF THE HON. STEVE KING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA
*Mr. King. Thank you, Mr. Chairman and members of the Subcommittee. I appreciate the privilege to testify here today.
I think I will dispense with my prepared remarks. I know you study them well, as does the staff. Bring this to a few points that I think are important to be emphasized.
I am here to testify in support of the protection of tax credit for wind generation of electricity. I would point out that Iowa has the second highest percentage of our electricity generated from wind of the states. South Dakota is ahead of us. Also, we have developed an industry there over the years.
As I was in the State Senate 15 years ago, I sat down and received a briefing on the future of the wind generation of electricity in Iowa and across the country.
That briefing identified that our costs were at 15 cents per kilowatt hour. Of course, that seemed pretty high at the time and illogical, but they said we will get these costs down to three cents. We think we can get them to three cents.
I have been watching it along the way. Those costs have ratcheted down from 15 cents down to the most reliable number I have, 5.2 cents. They have cut it more in half in the last few years, the cost of electrical generation by wind.
The central piece of the point that I would like to emphasize is that when we come up with new renewable energy or any kind of energy, you have to find a way to have market access.
I was involved in the ethanol industry early, involved in the biodiesel industry, now the wind industry.
My Congressional District produces more renewable energy than any other Congressional District out of all 435 in America, and with the new District, the new 4th District, which will be 39 counties across Northern Iowa, we will be far and away the largest renewable energy producing district in America.
I go back to some time in the 1970s when we first began with these endeavors. One of the challenges, of course, is technology.
A normal wind turbine back in those earlier years would produce about one‑sixth of the electricity that a single wind turbine does today, a typical, but it has always been the technology, the engineering, is one challenge, and the next challenge is market access.
Ethanol, for example, You could not get that in a gas station. You had to find a way to provide market access.
We have gone through this process in each of these renewable energy components and provided a way to kind of crack into the market access, if you will. Now we are on the edge of blenders pumps for ethanol, and they have come to us and said we will let go of the blenders credit because we are ready to compete in the industry now, we just need a little more help with market access.
A similar thing is taking place with wind, which is why I bring up the ethanol relation to wind. We have a tremendous infrastructure that has been built. That infrastructure has to have a little pay down on the return on investment before it can sustain itself.
I watched as 100 bases were put in place before the credit was extended several years ago. It was about the fourth or fifth of December when the Ways and Means Committee moved the production tax credit for wind. From that date in December until the 31st, 100 towers were stood up, 100 turbines were put up, and they were on line.
It was the only company in the country that took advantage of the credit that year.
We need to have some support to extend this so that we can phase this support down. I would go to the industry and ask them how soon. I do not want to go on record as saying how soon.
I would very much like to see an extension here, and if that extension becomes a condition, that they come back with a proposal on how long it would take to phase that down, I think that is an appropriate and responsible thing for us to do.
I see I have run out of time, and I appreciate your attention, and I yield back.
*Chairman Tiberi. I thank the gentleman from Iowa. Mr. Neal would like to make a point.
*Mr. Neal. Thank you, Mr. King, for your testimony. That is the point I have been making all morning, that you need it until you phase it down. That is precisely the point I have been trying to make.
You made the argument that but for the production credit, those turbines would not have been up and running. Is that correct?
*Mr. King. Correct.
*Mr. Neal. You can use this Democrat’s endorsement back there, and I am sure it will be very helpful to you.
*Chairman Tiberi. Wow.
[Laughter.]
*Mr. King. We have a good bipartisan bill out before us with a lot of Democrat endorsement. I would like to see some more Republicans of that mindset.
*Chairman Tiberi. Let the record show Congressman Steve King and Congressman Richard Neal agree.
[Laughter.]
*Chairman Tiberi. With that, we will turn to the gentleman from California, Mr. Costa.
You are recognized.
STATEMENT OF THE HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
*Mr. Costa. Thank you very much, Chairman Tiberi and Ranking Member Neal, for hosting this Subcommittee effort. You have a difficult task today.
We have a number of expiring tax measures before the House, the Ways and Means Committee as well as the Congress.
They all have varying degrees of merit, and obviously as we look at comprehensive tax reform, which I suspect we will not to until next year is my view, all of these interim tax measures obviously have to be addressed in some fashion.
I would like to talk about a few of them in my testimony this morning or this afternoon I should say.
Obviously, there are a number of benefits to companies and small businesses around the country. In my District, a number of these tax measures provide incentives for biodiesel and renewable diesel. Some of the renewable portfolio that my colleague was just speaking of.
Empowerment tax incentives, extensions of renewable electricity and production, percentage for the depletion for oil and gas, marginal wells. In Kern County, we have a lot of oil production, and others.
I would like to focus today on one tax extension, which has been helpful to our constituents in the San Joaquin Valley, and that is the new market tax credits.
I am pleased to join with over 60 of my colleagues on a bipartisan basis to co‑sponsor H.R. 2655, the New Market Tax Credit Act of 2011.
H.R. 2655 extends those credits for five years. I would urge the Committee to consider this measure and adopt it as part of whatever overall package you produce.
At the national level, between the start of the program in 2003, going back to the Bush administration, the new market tax credits investments totaled $20.9 billion.
The costs for the financed projects during that time, it was $45 billion around the country. I think that is a pretty good leverage in terms of investments that were made of significant capital from other sources.
This financing was mostly located in high distressed communities throughout the country, around 60 percent were located in communities where the unemployment rates were at least 1.5 times the national average.
In my Congressional District, the new market tax credit investments totaled $60 million, and total project costs came to a value of over $114 million, over almost a two to one ratio.
This is significant investments in areas where capital investment is badly needed.
The leverage, I think, across the country and including my District is good.
Recognizing the value of these new market tax credits in San Joaquin Valley that I represent, I introduced H.R. 2740 last year, a bill that would help spur economic development in low income communities.
I am aware of two situations that I want to bring to the attention of the Subcommittee, and I will close, that are adjacent to universities, both at Fresno State and the University of California in Merced, where no one has lived in certain Census tracts at the time of the last Census.
Now, with the new Census that is taking place, people live adjacent to these universities. There was no information on income available from the last Census that was taken in 2001. Now, there is.
There is an important student population that has taken residence adjacent to the universities. They are posed to continue development in that area to provide services to these students and to the university community.
H.R. 2740 allows the new market tax credits to apply to where Census tract information is not available or where a tract adjacent to two or more low income communities did not exist.
I would urge the consideration of this measure as a part of the larger effort that the Subcommittee will undertake. It would benefit in this case these two university communities that are important to the education of our future, both at UC Merced as well as Fresno State.
I would be prepared to answer any questions the Subcommittee might have at this time.
*Chairman Tiberi. Thank you, Mr. Costa, and thank you for your information on the new markets tax credit, which has been pretty impactful in my District as well, and Mr. Neal has been a leader in the Congress on that issue.
Do we have any comments for our panelist?
[No response.]
*Chairman Tiberi. All right. You guys did well. Thank you both so much. Appreciate it.
*Mr. Costa. Iowa and California.
*Chairman Tiberi. There you go. King and Costa. Sounds like a ticket.
*Mr. Costa. Thank you very much.
*Chairman Tiberi. Unfortunately, we have had a couple of cancellations. We have a little bit of time here. I am going to just recess. We will reconvene at the call of the Chair for our next panel.
Everyone can grab a cup of coffee or some lunch if they like, and we will just recess for a little bit.
[Recess.]
*Chairman Tiberi. Since we have most of the 12:40 panel here and one crasher, maybe two crashers, we are going to go ahead and get started.
Starting on my far left, no pun intended, Mr. McDermott.
[Laughter.]
*Mr. McDermott. When your Clerk brought me up here, I find I was being put on the left.
*Chairman Tiberi. A distinguished member of our Ways and Means Committee will go first, Mr. McDermott from the great State of Washington.
STATEMENT OF THE HON. JIM MCDERMOTT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
*Mr. McDermott. Thank you, Mr. Chairman. I want to thank the Chairman and the Ranking Member, who I am sure will be here in a moment, for holding today’s hearing.
Certainly, it is a critical component of our Tax Code, and making this hearing on expiring tax provisions is really in my view long overdue because businesses want to know what is going on, and a lot of people want to know.
I come to talk about two specific tax provisions that if not extended will significantly impact taxpayers and homeowners.
The first is the reduction for state and local sales tax. This provision brings tax equity to taxpayers living in states with no income tax. There are a number of them. My State of Washington is one of six states that do not have an income tax. This has been in and out of the law several times during my time in the Congress. It is time for it to be permanent, but here we are again.
Currently, taxpayers may deduct their state income taxes, but if you do not live in a state with any income tax, you lose a whole deduction.
Without a corresponding deduction, the taxpayers will shoulder most of the Federal tax program themselves. More than 800,000 Washingtonians alone would be subject to this unequal treatment if the deduction is not extended. That is true for Texas and a lot of other places, Florida, that do not have income taxes.
Last December, my colleague, Mr. Brady, and I, along with 68 bipartisan members of the House sent a letter to the Committee requesting an extension of this, and I request unanimous consent to enter this letter into the record.
[The information follows: The Honorable Jim McDermott]
*Mr. McDermott. The second provision is the exclusion from income for mortgage debt discharge. This provision provides critical tax relief to struggling homeowners that are lucky enough to get their lender to agree to principal reduction.
In February, 49 state AGs and five major banks recently agreed to a $26 billion settlement, a portion of which will go to reducing principal. Hundreds of thousands of homeowners will get this relief, but if this exclusion is not extended, these homeowners will be hit with a tax bill on money they never received.
I introduced the Homeowner Tax Fairness Act along with my Democratic colleagues on the Committee that not only extends the exclusion but ensures that every bit of relief for our state attorney generals that has been agreed to goes to the homeowners and the Service members that need it most.
I am looking forward to working with my colleagues on the Committee to extend these provisions and the other necessary provisions that were made outside the scope of this hearing.
I sincerely hope the Committee considers every extender but not just those that were extended in 2010. To pass effective tax law that is in the best interest of this country, we ought to go back beyond 2010.
I thank the Chairman, and I yield back my time.
*Chairman Tiberi. Thank you. I thank you for being here to testify. With that, we will go to our third Hawkeye today, from Iowa.
*Mr. Latham. I am more known as a Cyclone, actually, but from the Hawkeye State.
*Chairman Tiberi. From the Hawkeye State. Mr. Latham is recognized.
STATEMENT OF THE HON. TOM LATHAM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA
*Mr. Latham. I wish to really express my appreciation to the esteemed Chairman, Mr. Tiberi, and Mr. Neal, for holding this hearing to discuss the fate of several expiring tax provisions.
I have long been a supporter of domestic energy resources as a means to support American jobs, decrease our dependency on foreign oil, and to ensure our own energy independence.
As you review the tax extenders, I would urge you to consider extending the production tax credit for wind energy. The PTC serves as an important function to help diversify our energy resources. The tax credit, which is based solely on project performance, has been a proven benefit to consumers and the nation.
Since 2005, the PTC has been the catalyst for private investment in wind energy generating over $75 billion of private investment in U.S. wind projects over the last seven years, and $13 billion this last year alone.
An extension of the PTC will provide much needed certainty for the wind industry to continue its contribution to increasing our supply of domestic energy. In the past five years, domestic manufacturing facilities have flourished, adding nearly 500 manufacturing facilities, and providing good paying manufacturing jobs to 30,000 people.
In all, the wind energy supports 75,000 jobs, some 4,000 to 5,000 in my home State of Iowa alone.
However, I fear that if the tax credit is allowed to expire, many of these jobs will be put in jeopardy, particularly in the manufacturing sector.
Companies in my home District have already indicated they are planning employee layoff’s without an extension, and has predicted that 2,000 to 3,000 Iowa jobs are at risk of being lost immediately without the extension.
Investment and jobs aside, the PTC just makes sense to increase our domestic energy supply. Over the span of five years, wind energy has provided 35 percent of all new power generation in the United States, and is still growing.
Through incentives like the PTC, my home state has become a leader in the wind energy industry and generates 20 percent of the state’s electric needs, powering over one million homes.
Estimates indicate the U.S. as a whole is capable of growing to Iowa’s level of wind power generation by 2030, and at that level, the industry would support 500,000 jobs.
If my home state is any indication for the potential for U.S. wind energy, then I know the future for American wind energy is bright, but in order for the industry to grow to its full potential, long term certainty from Congress is necessary, and the extension of the protection tax credit will provide that certainty. It is necessary to continue that investment.
Mr. Chairman, I encourage you to consider extending the production tax credit for wind energy, and I appreciate very much the chance to testify here today.
*Chairman Tiberi. Thank you. I thank the gentleman. The gentlelady from the U.S. Virgin Islands is recognized.
*Ms. Christensen. Close.
STATEMENT OF THE HON. DONNA CHRISTENSEN, A REPRESENTATIVE IN CONGRESS FROM THE U.S. VIRGIN ISLANDS
*Ms. Christensen. Thank you, Mr. Chairman and Ranking Member Neal, for the opportunity to present testimony in support of H.R. 4374, legislation I introduced with Resident Commissioner of Puerto Rico, Pedro Pierluisi, to extend the rum tax cover over provision for the next two years.
I would like to explain what the rum tax cover over is and what it is not. It is not a tax credit nor is it a tax benefit for businesses or individuals.
The cover over does not increase taxes nor does it decrease taxes. The tax policy behind the cover over is not temporary nor is it new.
Rather, the cover over is part of the fundamental tax relationship between the United States and its territories that goes back over 100 years, before there was even an income tax.
When the United States acquired Puerto Rico and the Virgin Islands at the turn of the last Century, Congress generally exempted these new territories from the application of the U.S. Internal Revenue laws, including Federal excise taxes on manufactured goods.
To protect domestic manufacturers from untaxed territorial manufacturers, Congress from the very beginning imposed on products manufactured in Puerto Rico and the Virgin Islands a tax that is “Equal to the Internal Revenue tax imposed in the United States upon like articles of domestic manufacture.”
Thus, the tax imposed on rum manufactured in the Virgin Islands and Puerto Rico and shipped to the United States is not an ordinary excise tax. It is not intended to raise revenue for the U.S. but rather as the courts have recognized, it is an equalization tax intended to regulate commerce between the territories and the United States, and to preserve a level playing field for the mainland distillers.
Accordingly, the Act that governs the relationship between the United States, Virgin Islands and Puerto Rico provided that all of such equalization taxes be returned or covered over to the Treasuries of the respective territories.
These fundamental principles have been enforced since 1900. In 1984, Congress increased the excise tax on rum from $10.50 per proof gallon to $12.50 per proof gallon, but also provided for the first time in the history of the territorial relationship that these proceeds of the increase of the rum equalization tax would be retained by the United States.
Congress later increased the rum tax to $13.50 per proof gallon, but it was not until more than a decade later that Congress restored the cover over policy that existed for the greater part of the past Century.
In 1999, Congress increased the cap on rum tax cover back to territories of $13.25, but for budget reasons, only did it for a two year period.
The so=‑called “Rum tax extender” has been regularly and seamlessly extended ever since.
Today, the Virgin Islands Government issues bonds backed by these rum taxes to finance the construction of schools, hospitals, and other essential public works in the territory, and any funds that are not encumbered to support the general expenses of the Government and to modernize the rum industry.
In addition to maintaining the Federal territorial tax relationship, this cover over legislation is critical to the Government’s efforts to resolve our fiscal crisis.
Extension of the rum cover over rate will also help to mitigate significant revenue losses associated with the closure of HOVENSA oil refinery on St. Croix, which is the largest private sector employer in the territory and one of the largest refineries in the world.
Accordingly, I strongly urge the support of the Subcommittee for the timely extension of the rum tax cover over rate, and I thank you again for the opportunity to testify.
*Chairman Tiberi. Thank you for testifying today. Our colleague from Puerto Rico was here earlier testifying.
The gentleman from California is recognized.
STATEMENT OF THE HON. JOHN GARAMENDI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
*Mr. Garamendi. Mr. Chairman and Ranking Member Neal, I want to address three policies that would create economic opportunity in my District, in California, and across the nation.
First, the Federal renewable energy production tax credit. Second, extending the conservation easement incentives, and third, extending the 100 percent bonus depreciation for capital investments that are made in the United States.
First, let me take up the renewable energy production tax credit. Since its adoption in 1992, this financial incentive has provided stability in the energy market.
Over the past five years, the production tax credit has helped the wind energy sector grow at an average of 35 percent a year. Some 75,000 jobs are supported by this across the nation. In my own District, there are 4,000 to 5,000 jobs, both in my District and in California.
There should be added to the production tax credit, should it be extended, a “Make it in America” provision such as found in H.R. 487, which would require that our tax money be spent on American made equipment.
It seems to me that if we are going to provide a tax credit or a tax subsidy, we ought to provide that subsidy to American made equipment and American workers, not some foreign import.
Secondly, I would like to voice my full support for the Conservation Easement Incentive Act of 2011. This bill would permanently extend the deductions for land owners who dedicate their land to development protection through conservation easements.
I know that members of your committee, Mr. Gerlach and Mr. Thompson, have worked long and hard on this. They are on the right track. This supports farmers and ranchers staying in business and protecting our landscape, a very, very important provision.
Third, I want to voice my support for the 100 percent depreciation for capital investments that is found in your bill, Mr. Chairman. I applaud you for your wisdom and urge you to carry on and succeed.
This bill does create jobs in the United States. Again, I would suggest that you add to it, since we are using our tax money for this particular purpose or reducing taxes for this purpose, that you build into it a “Make it in America” provision, so that the provision applies more to those who are actually buying American made capital equipment, and in any case, only for capital improvements within the United States.
There you have it. The production tax credit, the conservation easements, and the 100 percent capital write‑off. I urge your support of all three of them. Thank you.
*Chairman Tiberi. Thank you for your testimony today. The gentlelady from Washington State.
STATEMENT OF THE HON. JAIME HERRERA BEUTLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
*Ms. Herrera Beutler. Thank you, Mr. Chairman and Ranking Member. Thank you so much for giving me the opportunity to advocate on behalf of extending the state and local sales tax deduction for the families in Southwest Washington and individuals across our state, as well as all seven states who do not have an income tax.
We all understand that folks in this economy are struggling. We often hear about fairness and about certainty for hard working taxpayers and for those job creating businesses.
I stand firmly behind both principles, which is why I have worked diligently to ensure that folks in Southwest Washington can deduct their state and local sales tax from their Federal income tax.
In fact, I am joined by colleagues on both sides of the aisle and in both bodies who believe we should permanently etch this provision into our Tax Code.
Mr. Chairman, we have the opportunity to keep millions of dollars in Washington State’s economy at a time when struggling businesses in Longview, Vancouver, in Olympia and in Chehalis need it most.
We have double digit unemployment now going on three years.
This deduction allows the average family that I serve to keep $500 a year in money that they have earned. It is their money. That is a lot of groceries and a few tanks of gas. It gives the family savings account a much needed cushion. It is small but it is needed, as folks struggle to find employment and to make their mortgage payments.
Unfortunately, the folks in Southwest Washington and in these other states have become accustomed to an 11th hour extension for this common sense deduction, and I am hopeful that we can prevent that this go around.
It should be simple. Let’s extend the state and local sales tax deduction for folks in Southwest Washington who have already dutifully paid their taxes, and let’s work to make this a permanent solution.
I will continue to be a champion for this cause until we reach that goal. Thank you both for your time.
*Chairman Tiberi. Thank you. The gentleman from Florida is recognized.
STATEMENT OF THE HON. THEODORE DEUTCH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
*Mr. Deutch. Thank you, Mr. Chairman, Mr. Ranking Member, for the opportunity to testify about the production tax credit.
You might wonder why a member from the Sunshine State cares about wind. The truth is the PTC has made it possible for wind energy to be relevant for communities all across the country, like the one I represent in South Florida.
The credit had made investments in domestic renewable energy production a cost effective venture. It should serve as a working example of how the Federal Government can be an ally to the private sector, promoting growth and creating jobs.
The $3 billion invested through the production tax credit has generated 10 to $20 billion of annual private sector investment.
With more competition, wind only gets better. Since enactment of the PTC, wind energy has become 30 percent more efficient and 30 percent cheaper.
Extending the production tax credit will continue this incredible progress and is vital to the industry’s continued success.
Even as we discuss these issues, the plans for an inland wind project in my home of Palm Beach County, Florida are moving forward. This development would have been laughable a decade ago. The technology just was not there.
Once the turbines in Palm Beach County start turning, Floridians will benefit from what the breeze brings in, affordable wind energy means lower utility bills and more money in families’ pockets.
I am also pleased to say the largest developer of wind energy in the country and the second largest in the world, NextEra, calls Florida home.
Wind supports over 2,000 Florida jobs and counting. It is even propelling our manufacturing sector forward with 15 Florida companies building component parts for wind.
Through the PTC, the Federal Government transformed wind energy from a green dream to a competitive reality. If we were foolish enough to abandon this initiative, the great progress we have made towards a competitive wind market will come undone.
Creation of a completely new energy sector is not easy business. Wind production often takes a year and a half to get off the ground, finding a site, navigating regulations, securing manufacturers, and completing installation. All of this must occur before a company even qualifies for the credit.
Just the possibility of the expiration of this incentive is freezing projects and costing jobs.
NextEra has not placed a single manufacturing order for 2013 because of the pending expiration.
The suspension of growth endangers 37,000 manufacturing jobs throughout America, including North Florida, home to a major turbine manufacturer.
Wind means lower cost for consumers, new jobs in every field imaginable, enhanced national security, and a healthier environment, but for the American people to reap these benefits, energy policy must be stable and continuous.
Clean domestic energy and low rates can go hand in hand. Florida Power and Light, the utility providing electricity for most of my constituents, has one of the cleanest emissions profiles in the country with rates below the national average.
The question before this Committee is whether you are willing to make the proper investments now to reap the rewards of cleaner, cheaper American energy today and for decades to come. I respectfully urge the Committee to extend the production tax credit as soon as possible, and I yield back the balance of my time.
*Chairman Tiberi. Thank you. Thank you all for being here today to testify. The Ranking Member and I were just talking about the number of people today, not just at this hearing, three out of six, who brought up the production tax credit.
Anybody here care to answer this question, whether you testified on it or not? We have some colleagues who believe that the production tax credit picks winners and losers. Any comments?
The gentleman from California.
*Mr. Garamendi. Actually, it does not. The production tax credit does pick among in this case the wind turbine industry, no winner or loser. Anyone that is capable of putting up a turbine and producing energy, the key here is actually producing energy. It is on the production that they get the credit.
It may pick winners and losers between solar, wind, nuclear and the rest, but the “all of the above” strategy would require the production tax credit to be in place for the wind industry and hopefully a similar one for the solar industry.
*Chairman Tiberi. The gentleman from Florida.
*Mr. Deutch. I would just add it has absolutely picked winners. The winners are the American people. Tens of thousands of jobs and 10 to $20 billion of private sector investment, that is a winner for the American people.
The wind industry is not asking for the production tax credit to go on indefinitely. We are at the point where the industry has been able to move to the point where it has been successful and with the extension for a limited amount of time, they will be in a position to ensure that this kind of growth can continue for the future.
*Chairman Tiberi. Thank you. Mr. Latham?
*Mr. Latham. I would just echo what my two colleagues said. It is about production. That is what you get the credit on. It is not just the wind energy. It is also, like the gentleman from Washington here mentioned, although land owners and people who get income from this very efficient today source of energy, clean, renewable, and it is something that has to continue.
The industry is looking for certainty. If there is a phase out of the credit over time where they can plan, then in fact it will work.
Right now, this cutoff is just devastating to the industry. Like I mentioned, it is going to cost ‑‑ in Iowa already jobs are being terminated because of no purchase orders for next year, for the next calendar year.
It is absolutely critical that we extend this credit.
*Chairman Tiberi. Mr. Neal?
*Mr. Neal. That is precisely the point, Mr. Latham, we have been making today and during these hearings.
For us what is fascinating is left, right and center, members who have testified today have put ideology aside and emphasized the success that the production tax credit has had. I think that is what is notable about this hearing.
I might just ask Ms. Beutler a question. The gentlelady testified about the sales tax deduction for Southwest Washington. Might I infer your entire ‑‑
*Ms. Herrera Beutler. My entire state would benefit, as would the seven other states that do not have a Federal income tax.
*Mr. Neal. I knew that is what you meant. I just wanted to get that on the record.
*Ms. Herrera Beutler. I am really focused on the folks at home, but Mr. Chairman, Ranking Member, can I weigh in on the production tax credit?
*Chairman Tiberi. You may.
*Ms. Herrera Beutler. As someone who does not necessarily have a dog in this fight, I am “all of the above” when it comes to energy.
I would ask that this Committee consider, and it is going to be a little out of step with everyone sitting here, but in the Great Northwest, we have a tremendous opportunity with our hydro system.
It is a low cost form of energy that is incredibly efficient and carbonless. It is very renewable.
We have companies that have located in Southwest Washington from other nations, manufacturing jobs, high paying jobs, because of our access to affordable energy.
As we are moving forward, one of the challenges that we have had, and again, I am not anti‑wind, I support wind, but because they get this credit for producing, they are forcing the issue with the Bonneville Power Administration to require that ratepayers use their energy because they only get the credit if they produce, which requires us to spill more water over dams and endanger salmon that ratepayers in our region are spending billions of dollars to protect.
I guess I say all that to say it is not a perfect system and there are unintended consequences that drive up the costs for businesses.
I mentioned the double digit unemployment, so for those seeking work in my area.
As we move forward, let’s move with caution and make sure Congress does not pick winners and losers.
*Chairman Tiberi. Thank you. You talk about fish. I think of Mr. Nunes when I think of this Committee and fish.
Thank you all for spending time with us today.
We have most of the panelists from our last but not least panel. I would ask Mr. Pompeo, Mr. Blumenauer, Mr. Reed, Mr. Boren, and Mr. Reichert to come up.
I thank the five of you for being so punctual. We are running a little bit behind. We have plenty of time since you are the last panel.
I will start to my far left, Mr. Reed, the gentleman from New York, and our distinguished member of the Committee, is recognized to testify.
STATEMENT OF THE HON. TOM REED, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK
*Mr. Reed. Thank you very much, Mr. Chairman and Ranking Member Neal. Thank you for allowing me the opportunity to testify today.
I would like to briefly discuss four provisions important to both New York’s 29th Congressional District and New York State overall.
First is H.R. 4336, a bill I introduced with several other Committee members. It is a straight one year extension of a tax relief provision which ensures that when lenders forgive a portion of a borrower’s mortgage obligation, the homeowner is not required to pay tax on the amount of the forgiven debt.
If this extension is not enacted, homeowners who are in short sales or foreclosures, and even those who are able to restructure existing loans and keep their homes, will be required to pay income tax on cash which they never actually had.
Unfortunately, the housing crisis persists. This relief, which passed initially on a vote of 386‑27, is still needed.
I would also like to speak in support of H.R. 3087, the Motor Sports Fairness and Permanency Act, which makes permanent the classification of motor sports complexes as one single asset. Motor sports tracks, small and large, have used the present system of depreciation for decades.
Congress codified the policy that made this classification clear and permanent as part of the American Jobs Creation Act of 2004.
The policy was made temporary by the House and Senate Conference Committee on that bill, but it was always intended to be permanent.
The importance of the annual NASCAR Race at Watkins Glen, New York, in my District to my constituents cannot be understated. It is the economic equivalent of the Super Bowl for us.
However, this provision has been mischaracterized as a tax break for Nascar. In fact, Nascar tracks account for only a small fraction in the motor sports tracks around the country affected by this provision.
These tracks exist in every state, in most of our Districts, and conduct motorcycle races, dirt track races, and more. They are mostly in small rural communities and support fans that support the local economy, sustain local jobs, and fill the diners and hotels throughout the area.
Uncertain tax treatment for motor sports facilities threatens jobs.
I also wish to comment on the CFC look through. I am a co‑sponsor of H.R. 2735, the bipartisan bill introduced by Mr. Boustany and Mr. Kind to make this provision permanent.
Look through merits inclusion in any extenders package. It helps our economy by leveling the playing field for U.S. companies operating abroad.
The final provision I want to speak on is the active financing exception under Subpart F or the AFE Rule. This provision simply extends to financial services companies the same deferral rule that applies to manufacturers with respect to active income earned in foreign markets.
Equal treatment for financial services income should be a normative principle we follow on a permanent basis in any tax system, whether it be worldwide or territorial.
I am proud to be a co‑sponsor of legislation introduced by Chairman Tiberi and Ranking Member Neal to make the AFE Rule permanent.
Again, Mr. Chairman, thank you for the opportunity to testify today, and I look forward to any thoughts or questions you may have.
*Chairman Tiberi. Thank you for your testimony.
The gentleman from Kansas is recognized to testify.
STATEMENT OF THE HON. MIKE POMPEO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS
*Mr. Pompeo. Thank you, Chairman Tiberi, thank you, Ranking Member Neal, for giving me this opportunity today.
You know, in preparing this testimony, I looked at the list of credits that you had and the enormous scope and span reminds us all about the importance of tax reform.
I want to applaud you all and Chairman Camp for efforts to get rid of particular tax credits and deductions and flatten our Tax Code.
I have echoed this sympathy in a piece of legislation that Chairman Camp is pursuing related to energy tax credits in particular.
I think it is consistent with a vision of a fair and simpler Tax Code that aims to stop picking winners and losers in the energy marketplace.
I would argue that one of the most if not the most egregious example of our Tax Code failures lies in these energy tax credits.
You all have a big challenge. My Energy Freedom and Prosperity Act gets rid of every energy tax credit in the entire Federal Internal Revenue Code. It is industry neutral. It impacts natural gas and oil tax credits. It impacts the entire panoply.
The savings are small, but any savings that are generated as a result of that to the Federal Treasury go to lowering tax rates, the perfect model both for good energy policy and tax reform.
I think it is common sense and it is being actively supported by small Government conservative organizations like Americans for Tax Reform, the National Taxpayers Union, Heritage Action, the Club for Growth, Freedom Actions, Americans for Prosperity, and many others.
They understand that trying to solve energy problems through our Tax Code is the wrong approach.
We saw that not in the Tax Code, but in the Committee I sit on, we saw when you try to pick a particular winner, the negative outcomes that can happen for taxpayers.
I have heard comments today on the wind production tax credit in particular. It is of great interest. I know it expires at the end of this year.
I do not predict the doom and gloom for the wind energy that these folks speak of. I actually have more faith in the wind folks. I am incredibly pro‑wind. I think it will work.
We saw what happened when the ethanol tax credit expired at the end of last year. We still have very successful ethanol projects moving forward all across the country in spite of the fact that the industry said without it, we will vanish.
I think the same good things will happen because the wind energy folks are so innovative, creative and talented.
I know it is the tradition in this Committee and the Congress to treat the Tax Code as a base of support for specific industries.
No one knows wind like someone from the Kansas 4th Congressional District. We have both the manufacturing side and the production side of the wind energy industry present in my District.
When I think about job creation, I do not think about things like temporary stimulus programs. I think they fail. I see these series of tax credits for the energy industry much as various stimulus programs are, they are temporary, they are constantly up for renewal.
Industry will tell you I just need one more year, and then one year later be back saying I need two or four or six additional years.
Eventually, these companies have to take the training wheels off. These industries have to go compete and provide affordable energy for American citizens.
I am confident they will, and if we stop trying to use our Tax Code to pick one against another, we will get a lot further down that road, and we will be much closer to solving the nation’s deficit problems that we face today.
I thank you for the time this morning.
*Chairman Tiberi. I thank the gentleman for his testimony.
The gentleman from Oregon is recognized.
STATEMENT OF THE HON. EARL BLUMENAUER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON
*Mr. Blumenauer. Thank you, Mr. Chairman, Ranking Member Neal. I appreciate this opportunity. You have been hearing from a variety of folks.
I respect my colleague from Kansas. I think there is some significant differences. Ethanol, for example, had benefitted from years and years and years of massive subsidy, which has also been lavished on other sources of energy production.
What we are talking about here with wind and other renewables is allowing them to get the same foothold.
There is a reason for the production tax credit and why it has been extended seven times since 1992. I will be submitting a letter from some of my Democratic colleagues, but I would note strong bipartisan support, and pleased to be a co‑sponsor with my friend from Seattle, Mr. Reichert.
We spend billions of dollars abroad every year to fuel our economy. That is the tip of the iceberg in terms of billions more spent protecting the oil supply militarily.
Being able to invest in the PTC is a much better investment to unlock a nearly unlimited source of domestic energy while supporting a market that is projected to grow to more than $2 trillion by 2020.
We are starting to get some market based orientation, a number of states not only have utility scale wind projects, they have utility frameworks like Kansas that require renewable energy to be purchased.
I have never heard the wind energy people say give me just one year. What they are looking for is certainty and a glide path to sustainability.
Every conversation I have had with the industry for the years I have been in Congress talks about giving them a framework, giving them a path that is sustainable over time, and not giving them this Russian Roulette.
We are already seeing contraction in the industry because of uncertainty going forward. It is absolutely essential that we give some certainty for the investment, to provide the ability to come to scale and reduce costs.
We have seen significant progress in this area, and I think with your help, a little certainty, we can do more in the future.
It levels the playing field for other sources of energy that have received far more in the past, most of which continue to get it now, even past when they need it.
It gives the private sector the confidence it needs to continue investing in renewables.
I am looking forward to working with this Subcommittee, with our committee, on the hard task of reform of the tax system. It is not going to be easy, but it is not about picking winners and losers, it is about being able to discern where it makes sense and where it does not.
The production tax credit, I think, is one area that makes sense. It will for the foreseeable future, but it does not need to be permanent and in fact, should not be, but it should not be pushed off the cliff this year.
Thank you. I appreciate the chance to testify and would welcome comments or questions later.
*Chairman Tiberi. I thank the gentleman from our committee as well who just got appointed to the Transportation Conference Committee. Congratulations.
*Mr. Blumenauer. Thank you.
*Chairman Tiberi. The gentleman from Oklahoma is recognized.
STATEMENT OF THE HON. DAN BOREN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA
*Mr. Boren. Thank you, Mr. Chairman, thank you, Ranking Member Neal, for giving me this opportunity to speak with you all about the extension of two tax measures, credits for the renewable energy production and for businesses on former Indian lands.
H.R. 1039 is a bill to permanently extend the Indian employment tax credit in the depreciation rule for property on former Indian lands.
Because of Oklahoma’s Native American heritage, two‑thirds of the state and my entire District qualifies for a tax incentive for businesses located on former Indian lands.
With Tribal unemployment rates soaring to 80 percent in some regions, this tax credit is especially important because it encourages businesses to employ Native Americans.
It also encourages businesses to increase wages, helping to fight the Native American poverty rate, which is at about 26 percent, over double that of non‑Natives.
This tax credit is absolutely vital to the continued growth and development of Tribal communities. It has the support of the entire Oklahoma Delegation, and I wholeheartedly ask for your deepest consideration of its extension.
Another very important issue at the top of America’s agenda is energy independence. As an outspoken critic of our nation’s dependence on foreign oil, I ask for an extension of the renewable energy production tax credit.
This bill has 93 bipartisan co‑sponsors ranging from Mr. Markey as the Ranking Member of the Natural Resources Committee, to a fellow oil and gas supporter, like me, Mr. Young.
In short, whether we agree on energy policy or not, this tax credit is widely accepted as a positive step toward a self sustaining energy infrastructure.
This five year extension is a proven way to keep electricity prices low, using clean domestic sources of energy.
We must extend and stabilize this tax credit to ensure continued investment and encourage further research in this important field.
Again, thank you very much for allowing me to speak today on these two credits, and I would be happy to answer any questions. Thank you.
*Chairman Tiberi. I thank the gentleman for his testimony.
Last but not least, the distinguished member of this panel, the gentleman from Washington is recognized.
STATEMENT OF THE HON. DAVID REICHERT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
*Mr. Reichert. Thank you, Chairman Tiberi and Ranking Member Neal, and Mr. Paulsen. Thank you for the opportunity to testify today.
I am proud to be a part of the ongoing effort and work that our committee, the Ways and Means Committee, is doing on comprehensive tax reform, both in the corporate world and in the individual tax reform world, so that American businesses can better compete in the global economy, and American families can keep more of their hard earned money.
Today’s review of tax extenders is critical to tax reform, as you all know, and I appreciate the chance to offer my suggestions today on how this tax extenders package might be put together and formed for our committee and the country that we serve.
As a representative from Washington State, no statement on taxes can begin without reminding you of a tax incentive that affects every single taxpayer, Mr. Neal, in the State of Washington, not just in Southwestern Washington, as you mentioned earlier.
*Mr. Neal. Would the gentleman yield? I am glad you picked up on that. I was concerned.
[Laughter.]
*Mr. Reichert. I am sure she meant the entire state also. The state sales tax deduction is so critical to that handful of states across our country that has the state sales tax versus the state income tax.
For us, it is a matter of fairness. Those states that have the income tax, of course, that law is in law. They do not have to ask for a tax extender. This is an important and critical thing for our taxpayers in Washington State to have equality and fairness really across the board and across this country.
It would really be a tremendous tax relief for our citizens. I urge your consideration.
I encourage the Committee to consider two other tax extenders, one would leverage maximum private sector capital, and the other that I would like to talk about would also create jobs and sustain American jobs.
Two tax extenders. One is the production tax credit that has been talked a lot about today. It has leveraged $15 billion in private sector capital in the wind industry alone.
It includes wind, hydro, geothermal, landfill waste, biomass, so it is not just about wind, but it has all those other components to it.
That is nearly 12 times the revenue estimated for the bill, $15 billion, 12 times the revenue estimate.
The investment supports an increasing number of manufacturing jobs, not to mention the services jobs, that design and finance these capital intensive energy projects.
It puts Americans to work, lowering energy costs for other Americans, and is worthy of an extension as has been said many times today.
I am pleased there is such strong support in Congress and in the Ways and Means Committee for extending the production tax credit. That includes a majority of the members on this Subcommittee, 14 members of the Full Committee, and 95 Members of Congress representing 32 states who have co‑sponsored the bill I introduced with Mr. Blumenauer.
An estimated 37,000 American jobs are at risk if the PTC is not extended. If Congress is truly committed to pursuing the “all of the above” energy policy and bringing needed certainty to the economy for job creators, extending the PTC can achieve both.
I am pleased to submit a letter from several House Republicans who agree.
[The information follows: The HonorableDave Reichert]
*Mr. Reichert. A second bipartisan extender I introduced with Mr. Kind from Wisconsin is the reduced holding period for built in gains. Simply put, this common sense bill enables S corporations to access their own capital sooner.
Fifty‑six percent of the private sector jobs in Washington State are in small businesses across this country. We all hear from these businesses in our districts. They are struggling to access capital.
My bill is an easy way to help them do just that.
I would also like to submit a letter from 13 organizations representing millions of small businesses across America who support this provision.
[The information follows: The HonorableDave Reichert]
*Mr. Reichert. These are the two extenders that leverage private capital to create jobs, both that face looming expirations, and both deserve the Committee’s consideration on tax extenders.
I appreciate your time. Thank you.
*Chairman Tiberi. Thank you. I thank you all for your testimony and time today. With that, I will recognize the Ranking Member, Mr. Neal.
*Mr. Neal. Thanks, Mr. Chairman. These hearings have been instructive. The panelists have really been good. It is a pretty good snapshot of why tax reform will be so difficult.
We have had Members of Congress here left, right and center, who have all argued for their favorite tax preference.
I will say, Mr. Pompeo, and this may be helpful to you in your own constituency, you are the only Member of Congress today who has made the argument for getting rid of all the production credits.
I dare say there are not many Members of Congress more conservative than Mr. King, and he made a pretty aggressive argument today.
*Chairman Tiberi. Mr. King of Iowa as opposed to Mr. King of New York.
*Mr. Neal. Right. Although I know him, and he can make some pretty good arguments.
[Laughter.]
*Mr. Neal. The point that I raise is that the discussion we have had here today really centers upon incenting people, as many of the panelists have said, not permanently but through the stage of infancy as the technology grows and improves.
We heard Mr. Latham suggest, for example, that his constituency, without that production credit, many potential investors as well as those who hire people are about to serve notices on them that they are going to be laid off.
My own experience tells me in this stage of development, we are going to continue to need some sort of support inside of the Code for that purpose.
I would use the argument as many panelists have said, “all of the above,” that is a pretty easy position to rally to, but also to acknowledge that without Government guarantees, you are not going to build any nuclear power plants.
If you embrace the position I think of “all of the above” or in your instance, “none of the above,” apparently, in terms of using the Tax Code, I am just curious as we talked about it, would you apply that to large oil companies as well?
*Mr. Pompeo. Absolutely.
*Mr. Neal. Your legislation does not.
*Mr. Pompeo. It does, indeed. It has two tax credits, the marginal oil well tax credit and the enhanced oil recovery tax credit, each of which apply to the petroleum industry, the natural gas and oil folks.
This is industry neutral. I agree with your point. We could absolutely create more wind jobs. We could make the production tax credit 90 percent. I am confident there would be more capital drawn to that. It is probably the case.
We could make it 99 percent or 150 percent and probably create additional jobs and investment. We could do that for any energy industry.
My notion is America is not at a place where we can afford to do that any more, protect the wind, it has been 20 years. That is a long time in my books.
*Mr. Neal. For the purposes of intermural discussion, why do I not let Mr. Reichert take your argument on.
[Laughter.]
*Mr. Reichert. That would be just great. Appreciate your recognizing me to comment.
I do agree with the gentleman that “all of the above” is really the answer to not only economic security but to national security.
I think the disagreement, of course, is we believe there should be incentive from the Government to help on some of these fledgling technologies.
Again, this bill that Mr. Blumenauer and I have authored together includes more than just wind.
The wind energy folks, again, I guess I would agree with the gentleman one more time, in that they are very innovative. Innovation, they are not only thinking about the technology, around the science of collecting wind energy, but they are also thinking about how they can transition themselves out of a tax extender.
This is one of the very few groups that I think you have talked about and heard from today in this Committee that have actually started the process and started to think about a phase out of the tax extender, because they have confidence enough in the equipment, material and people that work in this industry to begin to have that discussion where others have not.
*Mr. Neal. Mr. Boren, would you like to comment?
*Mr. Boren. I just want to say with Mr. Pompeo, I think he deserves a lot of credit for being at least intellectually honest.
I disagree with his position. That is why I am here promoting the production tax credit. I support a lot of those oil and gas industry tax credits that he is wanting to get rid of.
So many people come up to these committees and say well, you know, do this but do not do this. At least he is being intellectually honest and saying you know, I want to get rid of all of it. As a friend and a colleague, I think he does deserve a lot of credit for having the courage to come up here where a vast majority of the people oppose his viewpoint.
I just want to say that to a friend, and say I disagree with you, but good job for being here and being intellectually honest.
*Chairman Tiberi. Just a comment to the three of you, if any of you would like to comment on this. Mr. Pompeo has said, and he is not alone in saying this, he may have been alone in saying it today, but he is not alone in saying that if we get rid of all these tax credits on the energy side, and you alluded to it, there would still be an industry out there, pick the industry. It will still happen in the marketplace.
Why is that thought process, if you three would like to comment on that, wrong?
Mr. Blumenauer?
*Mr. Blumenauer. What is ignored is the sunk costs that we have had in these other sources. If you look at the extent to which we have subsidized the nuclear industry, I mean this is hundreds of billions of dollars.
We have subsidized the production of oil and gas for over a century. I think we have reached the point where much of this is not needed, but it was absolutely necessary when drilling techniques were very scattered, expensive, and we did not have a petroleum industry, and we were trying to build it.
In terms of, my word, the production of ethanol, we mandate that it be purchased, for Heaven’s sakes, and we massively subsidized the production of corn.
If you look at all the other investments, to help them come to scale, and then compare it to wind energy, which has been working for approximately 20 years, not uninterrupted by the way, but look at what has happened to the cost curve, we have had a very significant return on the investment.
What Mr. Reichert mentioned is they are not asking, unlike most of the others, permanently being hooked up to the Federal Treasury, but having it come to scale and have a little bit of the investment that was given to nuclear, to hydro, to oil and gas is not, I think, unrealistic, and I think it is a good investment for these renewables, and not just wind. It is solar, geothermal.
I think there is a strong case to be made to help them get to the takeoff point.
*Chairman Tiberi. Mr. Boren, I can tell you are itching to comment.
*Mr. Boren. Let me touch on oil and gas just a little bit. We are actually in agreement on this wind or the production tax credit, not just wind, but as you mentioned, all the other, hydropower and everything else.
Going back to oil and gas, oil and gas is a very complex industry. Most people think of oil and gas as just the big five oil companies.
You will remember my former boss who was a member of this Committee, Wes Watkins, would talk about the mom and pop oil and gas producers.
Most of the oil and gas production in the United States is by independent small producers. We have not always had $100 a barrel oil or $125, whatever it is on the market today. A lot of our production is very mature, so we have what is called “stripper well production.”
You may have five to ten barrels of oil a day coming from a well, not thousands of barrels of oil.
We give incentives for those small wells so that they stay alive. If they are not alive, you have to plug them, and that means our domestic production goes down and people like the Venezuelans and Saudi Arabia and other countries have a bigger market share.
For us to be energy independent, we have to give incentives to our domestic industry, not big companies that are drilling in other parts of the world, but companies that are in the United States.
I also believe we have to have an “all of the above” approach. We have to have wind. We have to have coal. We have to have nuclear. We have to have natural gas, which is clean domestic, and we have a Nat Gas Act.
We have to do all of that. It is so complex, instead of just saying oh, big oil or big this or big that, it is much more complex.
I think Mr. Neal kind of hit this on the head. You really have to peel back the onion. You have to look at these industries, and it is not as easy as just black and white. There is a lot of gray and there is a lot of looking at the long term, these investments in wind, making sure there is a marketplace for this to survive for a long period of time.
You cannot use wind for baseload generation. You have to have it there to offset gas and coal and everything else.
Thank you.
*Chairman Tiberi. Mr. Reed, you have a comment, I can tell.
*Mr. Reed. Yes. Thank you very much, Mr. Chairman. I would like to throw into this conversation a very important point when it comes to the energy tax policy for our nation.
I think the primary motivating factor for that energy policy, tax policy, should keep in mind my priority in that arena, that it is a national security issue that we are trying to address with an “all of the above” approach, not only the environmental benefits, and we can get into that argument, but what we are talking about, and that is why oil and gas has to be part of that conversation, because there is a national security implication on this policy as a result of our dependency issues on foreign sources of energy.
I would encourage the Chairman and the Ranking Member to look at this issue, not only from an environmental point of view and an economic point of view, which are very good points and issues, but primarily from the perspective of a national security issue when it comes to energy independence. That can never be lost in this debate.
With that, I yield the balance of time.
*Chairman Tiberi. Mr. Reichert?
*Mr. Reichert. Thank you, Mr. Chairman. If I can just play off most of what was said here, and there is a lot of agreement as you have heard.
Number one, we all agree we want to be energy independent. Number two, that means getting off Mideastern oil and not being dependent upon that as our source.
Number three, if that is accomplished, it really does enhance our ability to produce jobs here in America, but as Mr. Reed said, it also enhances our ability to make our nation safe and secure.
Even before we start to talk about jobs, you have to talk about the national security. If our nation is not secure and safe, jobs become a topic of non‑discussion.
This point that Mr. Reed touched on is very critical for us to keep in mind as we move forward in this discussion of tax credits.
The other thing that we agree on, I think, is yes, the free market is the place for these things to work. I think we did get a little bit side tracked as has also been mentioned over the years.
I think initially these tax credits and incentives for certain energy producers were meant to be those sort of Government aids and assistance, and to help you get started, mature and grow into the companies, the private companies that we need you to be, strong enough to hold this country together and keep us safe and independent.
We have gotten to the point today where those have become expected subsidies and expected credits. That is why I want to point out once more that the wind energy ‑‑ the PTC, including more than wind, is a group of innovative people who have already said we are so far ahead in thinking, that we have already started to develop a plan to phase out the tax credits.
I think that a lot of these other industries that we have talked about need to be thinking into the future as well. Let the free market work. Phase out of these tax credits, but they need to be helped today. Today is the wrong time to pull that money from wind and the rest of the energies that are included in the bill.
I appreciate the time to respond and testify today, and I thank you.
*Chairman Tiberi. Any other thoughts?
*Mr. Reichert. One more thought. I am sorry. We have sort of done the same thing when it comes to the medical field.
If you look at NIH, we are funding all kinds of technologies, sciences, and cures for cancer, et cetera, by subsidizing in grants and funding to help those things that help the people in this great country.
Not permanent, moving toward the future, and encouraging these new sciences and new technologies, I think, is a benefit to everyone who lives in this great country.
*Chairman Tiberi. Thank you. Great testimony, great discussion, folks. We want to thank all our colleagues today from the very first panel to the last panel for a great discussion. Thanks for your time and your testimony.
I want to also thank the Ways and Means staff, the Subcommittee staff, for preparing for today’s hearing. They did a great job.
I want to remind anyone in the audience or our colleagues that they have until May 10, two weeks from today, to submit written statements for the official record.
With that, this hearing is adjourned.
[Whereupon, at 1:38 p.m., the Subcommittee was adjourned.]
Member Transcript Inserts
The Honorable Charles Boustany
The HonorableDave Reichert
The Honorable Jim McDermott
Member Submissions For The Record:
Rep. Aaron Schock
Rep. Bill Johnson
Rep. Bill Pascrell
Rep. Bill Shuster
Rep. Cedrick Richmond
Rep. Charles Boustany
Rep. Cory Gardner
Rep. Cynthia Lummis
Rep. Dave Loebsack
Rep. Dave Reichert
Rep. David Dreier
Rep. Devin Nunes
Rep. Diane Black
Rep. Don Young
Rep. Donna Christensen
Rep. Donna Edwards
Rep. Earl Blumenauer 1
Rep. Earl Blumenauer 2
Rep. Ed Towns
Rep. Eleanor Holmes Norton
Rep. Gwen Moore
Rep. Henry Waxman
Rep. Howard Berman
Rep. Jerry Costello
Rep. Jim McDermott
Rep. John Garamendi
Rep. John Lewis
Rep. Joseph Crowley
Rep. Kevin Brady
Rep. Michael Grimm 1
Rep. Michael Grimm 2
Rep. Michael Grimm 3
Rep. Mike Coffman
Rep. Mike Thompson
Rep. Niki Tsongas
Rep. Pedro Pierluisi
Rep. Ron Kind 1
Rep. Ron Kind 2
Rep. Sander Levin
Rep. Scott Tipton
Rep. Shelley Berkley
Rep. Steve King
Rep. Tom Latham
Rep. Vern Buchanan
Rep. Xavier Becerra
Multiple Member Letter
Public Submissions For The Record:
1603 Coalition
Glenn R. Schleede
Able Manufacturing & Assembly
Accelerated Wind Holdings
Active Financing Working Group
Aegis Wind
AG Resources LLC
Air Conditioning Contractors of America (ACCA), Heating, Air-conditioning & Refrigeration Distributors International (HARDI), and Plumbing-Heating-Cooling Contractors Association (PHCC)
Alexander Bester
Alka Kapur
Alliance to Save Energy and 39 Other Groups and Organizations
American Cleaning Institute
American Cleaning Institute Appendix A
American Cleaning Institute Appendix B
American Cleaning Institute Appendix C
American Council of Engineering Companies
American Council on Education
American Farm Bureau Federation
American Institute of Architects
American Public Transportation Association
American Wind Energy Association 1
American Wind Energy Association 2
American Wind Energy Association 3
Amy Lindner and Michael Failing
Ann Summer
Anna Derengowski
Anthony Kerrigan
Arctic Slope Regional Corporation
Arion Energy
Association Builders and Contractors, Inc.
Association of Fundraising Professionals
AWS True Power, LLC
Ayers Maritime Service, Inc.
Baird Swanson
Ben Wright
Berman Economics
Bill Hinton
Bingham Greenebaum Doll LLP
Biomass Power Association
Biotechnology Industry Organization
Biotechnology Industry Organization Appendix A
Biotechnology Industry Organization Appendix B
Biotechnology Industry Organization Appendix C
Bitsa Burger
Blattner Energy, Inc.
BlueDot Analytics
Bob Pabodie
Bond Investment Group
Boreas Renewables, LLC
BP Wind Energy North America, Inc.
Brad Patterson
Brewers Association
Brian Lang
Brad Foote Gear Works
Built In Gains Coalition
Burton Callicott
Business Roundtable
Carl Oerke Jr.
Carol Buck
Carol Frigault
Carol Keck
Center for Fiscal Equity
Chad Glinsky
Chaparral Stevedoring Co. of TX, Inc.
Charlene Jordan
Charles Newell
Chermac Energy Corporation
Chris McFarland
Chris McKee
Christian Billson
Christopher Whelpton
Cielo Wind Services, Inc.
Class 4 Winds & Renewables
Clear Planet Energy, LLC
Coalition for E85
Colata Harlan
Colleen Mertes
Columbia Gear Corporation
Community Reinvestment Fund, USA
Compass Wind, LLC
Competitive Energy Insight, Inc.
Concast, Inc.
Concerned Citizens of West Antelope Valley
Coulomb Technologies, Inc.
Council of the North America Insulation Manufactures Association
Council on Michigan Foundations on Behalf of the Council on Foundations
Creative Foam Corporation 1
Creative Foam Corporation 2
Creative Foam Corporation 3
Creative Foam Corporation 4
Creative Foam Corporation 5
Creative Foam Corporation 6
Creative Foam Corporation 7
Crow Nation
Daniel Jaynes
Danotek Motion Technologies
David Jordan
David Rivers
David Salvatore
DC Association of Realtors
DC Mayor Vincent Gray
Deborah Wagner
Denali Energy, Inc.
Denver Center for the Performing Arts
Diana Shaw
Distributed Wind Energy Association
DNV KEMA Energy and Sustainability
Donna Davidge, Peter Connely, and Candy Rupley
Dorayne Peplinski
Dorothy-Anne Johnson
Douglas Lawson
Dwayne Weismann
E.ON Climate and Renewables 1
E.ON Climate and Renewables 2
Edward Kelly
Efficiency First
Efficiency First Appendix A
eFormative Options, LLC
Electric Drive Transportation Association
Element Power US, LLC
Ellen Johnson-Fay
Emily Hill
Emmett Carson
Energetx Composities
Enterprise Community Partners, Inc.
enXco Inc.
enXco Service Corporation
Eolian Renewable Energy, LLC
Eric Silverman
Evan Osler
Ewa Gruszczynski
Feeding America
Financial Executives International
Florida Community Loan Fund, Inc.
Floydada Economic Development Corporation
Foundation Windpower
Fred Teal Jr.
Friends of Lana’i
Friends of Sand Canyon
G&W Electric Company
Gamesa Technology Corporation
Gamesa Wind
Gary Thompson
Gary Wyman
Geothermal Energy Association
Gerald K. Flakas
Geronimo Wind Energy
Gilford Wind Watch
Giovanni Milanese
Glen Bridges
Global Energy Investors, LLC
Governors’ Biofuels Coalition
Governors’ Wind Energy Coalition
Great Lakes Wind Truth
Green Energy 911, LLC
Greenline Renewables Inc.
GreenLink Employment Solutions Inc.
Growth Energy
Hailo, LLC
Harvest the Wind Network
Heather P. Johnson
Heidi Topp Brooks
HK Payroll Services, Inc.
HKF Development, LLC
Holland Contracting Corporation
Horn Wind, LLC
Hugh Jarvis
Iberdrola Renewables, LLC
Illinois Wind Watch
Information Technology Industry Counsel
International Franchise Association
IntegEner W
Interstate Informed Citizens Coalition, Inc.
Invenergy LLC 1
Invenergy LLC 2
Invenergy LLC 3
Invenergy LLC 4
Invenergy LLC 5
Invenergy LLC 6
Invenergy LLC 7
Investment Company Institute
Jacob Houser
Jacqueline Jenkins
James Beckstrom
James Nelson
Jane Offringa Rowan
Janet and Alfonso Grillo
Janet Hirschhorn
Janice Hallman
Jay Cashman, Inc.
Jeff and Debi Feuerbacher
Jeremy Barker
The Jewish Federations of North America
Jim Wiegand
Jody Purrington
John E. Bollwinkel
John Earl
John Guenst
John Irwin
John Schaumburg
John Wilson
Josh Green
Judith Brown
Judy Watson
J.W. Pavlic
Katana Summit LLC
Katheryne Gerrl Gall
Kathleen and Lucien Catania
Kathy McIntyre
Kathy Nobles
Kenneth Maurer
Kent Greentree
Kent Spriggs
Kirman Broadbent
KPG Investments, Inc.
Kristina Cliff-Evans
Land Trust Alliance
Large Public Power Council
Larry Frigault
Larry Rogero
Laura Jackson
Laura Kramer
LED Services Inc.
Lee Glover
Leeco Steel, LLC
Leppinks, Inc.
Leslie Weaver
LM Wind Power
Local Initiatives Support Coalition
Lois Grossman
LORD Corporation 1
LORD Corporation 2
LORD Corporation 3
LORD Corporation 4
LORD Corporation 5
LORD Corporation 6
LORD Corporation 7
LORD Corporation 8
LORD Corporation 9
LORD Corporation 10
LORD Corporation 11
LORD Corporation 12
LORD Corporation 13
LORD Corporation 14
LORD Corporation 15
LORD Corporation 16
LORD Corporation 17
LORD Corporation 18
LORD Corporation 19
LORD Corporation 20
LORD Corporation 21
Luisa Cox
Margaret Welke
Maria Luisa Bernaldo de Quiroz
Mark DuRussel
Mark Feigenson
Mark Weller
Marshall Hollander
Mary Burns
Mary Button
Mary Evelyn Smith
Mary Gardner
Matt and Megan Richards
Mattis Deutch
McGuire Consulting
Meghan Kosowski
Mellissa McClennen-Davis
Meridian Way Wind Farm
Mesonika Piecuch
Metal Construction Association
Michael Blum
Michael Geline
Michael Mulcahey
Michael Shaw
Midwest Minnesota Community Development Corporation
Mike Livermore
Mike Long
MJ Swierczynski
Molly Ross
Mortenson Construction
Mortgage Insurance Companies of America
Nancy Carringer
Nancy Taylor
National Association for the Self-Employed
National Association of the Remodeling Industry
National Association of Home Builders
National Association of Realtors
National Automobile Dealers Association
National Biodiesel Board
National Cattlemen’s Beef Association
National Development Council
National Education Association
National Electrical Manufacturers Association
National Employer Opportunity Network
National Farmers Union
National Federation of Independent Businesses
National Foreign Trade Council
National Grocers Association
National Hydropower Association
National Propane Gas Association
National Resources Defense Council
National Restaurant Association
National Retail Foundation
National Rural Electric Cooperative Association
National Treasury Employees Union
Neil Gibson
Neil Milani
New Markets Tax Coalition
New Progressive Alliance
NextEra Energy, Inc.
Nick Webb
Nissan North America
Nordex USA, Inc. 1
Nordex USA, Inc. 2
Nordex USA, Inc. 3
Nordex USA, Inc. 4
Nordex USA, Inc. 5
Nordex USA, Inc. 6
Nordex USA, Inc. 7
Nordex USA, Inc. 8
North Coast Energy Systems
North Laramie Range Alliance
Northstar Wind Towers, LLC 1
Northstar Wind Towers, LLC 2
Northwest Kidney Centers
Novogradac and Company LLP
Ohio Association of Nonprofit Organizations
Ohio Manufactured Homes Association
Partnership for Job Creation
Partnership for Philanthropic Planning
Patricia Christensen
Patrick Callahan
Patrick Hagan
Patriot Renewables, LLC
Pattern Energy Group
Peden Harris
Pellet Fuels Institute
Perry Black
Perry Callas
Peter Stanley Company, LLC
Plug Power, Inc.
PPG Industries
Proctor and Gamble
Qualtek Mfg. Inc.
Quida Jacobs
R&D Credit Coalition
Radian Guaranty Inc.
RailAmerica, Inc.
Raymond Randall
Rebecca Tippens
Rebuild America’s Schools
Reinhard Manfred Klaass
Reserve Energy Exploration Company
Residential Energy Efficient Tax Credit Industry Coalition
Retail Industry Leaders Association
Robert Boyce
Robert Fenstermaker
Robert Hall and Maureen McGee
Roberta Rothkin
Roger Harrison
Russell Mead
Ruth Kneile
SafeWorks, LLC
Sally Kaye
Sandra Wearne
Sangria Vannett
Save Our Scenic Hill Country Environment, Inc.
Scott Synnestvedt
Scott Teresi
Second Wind
Sharon Stevenson
Shawnee McLemore
Sheila Salvatore
Sherrin Loyd
Siemens Energy, Inc. 1
Siemens Energy, Inc. 2
Siemens Energy, Inc. 3
Siemens Energy, Inc. 4
Siemens Energy, Inc. 5
Sierra Club, Virginia Chapter
Silicon Valley Community Foundation
Silicon Valley Tax Directors Group
Skylands Renewable Energy, LLC
Smith NMTC Associates, LLC
Stahl, Bernal & Davis, LLP
Susan Steinhauser
Sustainable Energy Developments, Inc.
Sustainable Strategies
Tara Truett
Tawny Mackey
Team Schierl Companies
Teresa Cameron
The Investment Company Institute
Theresa Ruscitti
ThermoCor LLC
Thomas Grey
Thomas Wayne Jackson
Thompson Engineering
Tierra Farm & Grain Co.
Tim Kearney
Timothy Corcoran
Tlaloc Tokuda
Tom Hilgartner
TransitCenter, Inc.
Truck Renting and Leasing Association
TrueBlue, Inc.
Texas Society of Certified Public Accountants
Union County Community Development Corporation
Unity Foundation of La Porte County
Urban Green Energy Inc.
U.S. Chamber of Commerce
Utah Clean Energy
V. Brandt
Various Citizens of California
Various Citizens of Illinois
Various Citizens of Indiana
Various Citizens of Massachusetts
Various Citizens of Maine
Various Citizens of Nevada
Various Citizens of New York
Various Citizens of Ohio
Various Citizens of West Virginia, Virginia, Maryland, New Jersey, and North Carolina
Various Citizens of Wisconsin
VENTOWER Industries
Vermonters for Clean Environment
Vestas-American Wind Technology, Inc.
Viejas Band of Kumeyaay Indians
Vincent C. Grey
Warren Blesch
Wharf and Dock Builders, Pile Drivers, and Divers Local Union #454
White County Economic Development Organization
Whitley County Community Foundation
Wildlife Acoustics, Inc.
Wind Clean Corp
Wind Energy America, Inc.
Wind Partners Finance, LLC
WindGuard North America, Inc.
Window & Door Manufacturing Association
Winenergy Drive Systems Corporation 1
Winenergy Drive Systems Corporation 2
WOTC Solutions, LLC
YMCA of Greater Pittsburgh
Zachary Nickerson
ZF Wind Power LLC 1
ZF Wind Power LLC 2