Tax Credits in the Spotlight

The legislature is considering how much money to allocate to tax credits for manufacturing and installing alternative energy equipment.One of the questions still lingering this session is what tax credits will survive in a time of extreme budget austerity.

Of the existing tax credits, about $40 million worth are set to expire in 2012. Legislators would have to renew tax credits this session if they wish to keep them available.

Ways and Means budget writers have set aside about $10 million in the budget for tax credits, and a Joint Committee on Tax Credits is charged with sifting through the tax credits up for renewal and choosing whether to keep, reduce or let them expire.

When the joint tax credits committee was announced, it sparked a philosophical debate: are tax credits part of revenue policy or spending policy? At the Capitol, that makes a difference because tax issues are considered in the Revenue Committee, and budget issues are considered in the Ways and Means Committee. By creating a new committee, legislators didn't have to answer that question, though the best answer is that tax credits are part of both, and that's what the new committee enables.

Business Energy Tax Credit

Much of the tax credit discussion has revolved around the Business Energy Tax Credit (BETC), which offers tax incentives for industries involved in alternative energy. The policy gained notoriety when, after it was expanded in 2007, its cost ballooned as the Department of Energy received a higher-than-anticipated number of applications.

In the 2007-09 biennium, BETC costs exceeded the budget by $100 million. The legislature voted to scale it back in 2009, but then-Governor Ted Kulongoski vetoed the idea, citing his desire to retain a friendly business environment for the renewable energy industry. The legislature succeeded in scaling down the BETC in 2010.

This session, Rep. Tobias Read, D-Beaverton, has led an effort to retool the BETC. He wants to split it into three tax credits relating to renewable energy generation (the Gennie), energy conservation (the Connie), and manufacturing related to conservation and renewable energy generation (the Mannie).

Other tax credits

Other tax credits under consideration this session include:

  • Film and video production;
  • Collection and production of biomass;
  • Specified research;
  • Fire insurance premiums;
  • Workers compensation premiums; and
  • Biodiesel and biofuel use in home appliance.

The Joint Tax Credit Committee is considering putting most of the approved tax credits into one omnibus bill. It also is considering measures requiring an interim committee to do a comprehensive review of Oregon's tax credit policies.

Budget writers said they are looking for up to $10 million more for tax credits, which would mean possible $20 million total. It is expected that, before session adjourns, a tax credit bill of some kind will be approved.