With the early December Senate passage of their version of comprehensive tax reform legislation on a 51-49 vote, Congress has moved closer towards the final passage of comprehensive tax reform legislation titled the Tax Cuts and Jobs Act. There are a number of key differences between the Senate proposal and that which the House passed in mid-November. For example, the Senate bill contains more individual brackets (seven instead of four) than the House bill. In addition, the Senate bill does not completely repeal the Estate Tax and retains the mortgage interest debt deduction. The House bill lowers the deduction from the current cap of $1 million to $500,000. While both the Senate and House bills would lower the corporate tax rate from 35 percent to 20 percent, the Senate bill would delay the reduction by one year so it would not go into effect until 2019.
Similar to the House bill, the Senate bill does not impact tax-exempt financing. However, the bill eliminates advanced refundings after this year. Advance refunding allows municipals to take advantage of low interest rate environments to save money on infrastructure financings before their bonds are callable. Advanced refunding has been a useful tool for public natural gas systems for the refinancing of utility system revenue bonds. The bill passed by the House in November also included language eliminating advanced refundings. APGA has worked with several other groups to remove the advanced refundings language, but there were a very limited number of floor amendments offered during the debate. APGA has supported an amendment by Senator Cardin (D-Md.) during the Senate Finance Committee mark-up that would have removed the language but the amendment was defeated on a party-line vote.
In addition, the legislation largely keeps intact tax credits for the energy industry, both fossil fuel as well as renewable. The legislation allows natural gas producers to take accelerated deduction of "intangible drilling costs" for expenses such as supplies and repairs but also allows the production tax credit for energy from wind and other renewables worth billions of dollars to continue as is. By contrast the House bill reduced the value of the production tax credit by more than a third and included language to make it harder for wind farms to qualify for the credit. The Senate bill retains the $7,500 tax credit for electric-vehicle purchases. The incentive, which is capped at 200,000 vehicles per manufacturer, has helped stoke early demand for electric cars from manufacturers such as Tesla Inc., General Motors Co. and, Nissan Motor Co. APGA has pushed for the inclusion of two key natural gas vehicle (NGV) tax credits, but we are hearing that those items could potentially move as part of a separate tax extenders package but the situation remains very fluid.
Upon Senate passage, the House Senate Conference Committee has moved quickly to resolve the two versions of the bill and bring a bill to the House and Senate floors for final passage. At the time this article was written, there have been reports that an agreement has been reached among the conferees however final legislative language has yet to be released. For questions on this article, please contact Dave Schryver of APGA staff by phone at 202-464-2742 or by email at
dschryver@apga.org.