Congressional Update: Infrastructure Bill, Budget Package
Negotiations continue among Congressional Democrats over how to pass the two most significant portions of President Biden’s legislative agenda: (1) the bipartisan Senate-passed $1.2 trillion infrastructure bill, and (2) a partisan budget reconciliation package, in excess of $3.5 trillion.
Over the weekend, Democratic leaders and President Biden delayed votes on both the infrastructure and the budget bills setting a new deadline at the end of October to get both items done. [Read more here]
Last weekend, the House Budget Committee approved the Democratic-led budget reconciliation package which includes a host of significant tax increases as part of the $3 trillion+ reconciliation bill.
To accomplish the President’s clean energy and social policy goals, the bill raises revenue from a variety of sources, including by–
— Doubling the excise tax on tobacco and nicotine products; raising the top personal income tax rate to 39.6 percent from 37;
— Increasing the capital gains rate to 25 percent from 20 percent (well below President Biden’s request of a capital gains increase to 39.6 percent);
— Raising the corporate tax rate to 26.5 percent from 21 percent; and
–Reducing the threshold of eligibility for estate taxes to $12 million for married filers, down from the current $24 million; and phasing out Section 199A deductions.
The burdensome legislation takes direct aim at EMA members by doubling the excise tax on tobacco and nicotine products and expands the current subsidization of electric vehicles (EVs).
The partisan Democratic legislation would also–
— Raise the top personal income tax rate to 39.6 percent from 37 percent;
— Increase the capital gains rate to 25 percent from 20 percent (well below President Biden’s request of a capital gains increase to 39.6 percent);
— Rolls back President Trump’s corporate-tax rate – bringing the top rate to 26.5 percent from 21 percent;
— Reduces the threshold of eligibility for estate taxes to $12 million for married filers, down from the current $24 million; and
— Phases out Section 199A deduction.
The reconciliation process is far from over as it will face significant hurdles in the Senate where moderate Democrats are expected to push back on social policies and the overall price tag.
Specifically, the partisan House bill proposes $10 billion for transportation electrification which includes installing electric vehicle charging stations in residential areas; the electrification of medium and heavy-duty vehicles, electric vehicle battery recycling for these vehicles; and the creation of multiuse charging hubs for a range of electrified vehicles.
$2 billion is set aside for adding more electric vehicle charging stations to workplaces, publicly accessible areas and multiunit housing; while a further $1 billion is reserved exclusively for the same project around public housing with an outreach program about the benefits of electric vehicles attached as well.
This additional EV infrastructure funding violates President Joe Biden’s pledge not to “double dip” in programs already settled as part of the Senate’s bipartisan infrastructure bill (BIB).
On the heating fuels front, the bill provides $3.5 billion through December 31, 2031 to incentivize the purchase of electric heat pumps through federal rebates known as the “High Efficiency Electric Home Rebate Program” (HEEHRP).
It also provides additional incentives for contractors who carry about electrification conversions.
Unfortunately, the HEEHRP is limited to purchasers of new heating appliances powered by electricity while not recognizing clean renewable biodiesel used for heating which can achieve far greater reductions in greenhouse gas emissions than any alternatively powered heating appliance on the market today, including heat pumps.
The House reconciliation bill also extends the $1 per gallon biodiesel blender’s tax credit through December 31, 2031 and includes a new $1.25 credit plus one additional cent for each CO2 percentage drop for sustainable aviation fuel.
It includes $960 billion to push E10 and B20 plus blends into the motor and heating fuels market. It is double the amount lawmakers proposed earlier this year.
The program is expected to offer cost-sharing grants of up to 75 percent to marketers to upgrade existing UST system infrastructure and pumps to sell higher biofuel blends as well as to build and retrofit traditional and pipeline biodiesel terminal operations and home heating oil distribution centers.
The bill also extends (through December 31, 2031) and increases the 25C credit for energy efficiency improvements from $600 to $1,200. O
ilheat boilers and furnaces that meet or exceed the highest efficiency tier established by the Consortium for Energy Efficiency still qualify for the 25C credit.
Unfortunately, the budget reconciliation’s tax increases on businesses will impact energy marketers’ ability to expand biofuel infrastructure.
Given Senators Manchin and Sinema’s opposition to both the cost of the package and specific provisions (particularly some of the climate change provisions for Senator Manchin), Speaker of the House Nancy Pelosi (D-CA), House Democratic moderates, and House Democratic progressives spent the week negotiating with Senate Democrats and the White House.
Negotiations over the reconciliation package coincided with a promise made to House Democratic moderates by Speaker Pelosi to hold a vote on the Senate-passed bipartisan infrastructure bill this week.
House Democratic progressives promised to block an infrastructure package without an agreement with the Senate on reconciliation, leading Speaker Pelosi (as of Thursday, September 30) to delay a vote on infrastructure.
Congressional leaders are now working with the White House to finalize a framework for reconciliation that would be acceptable to Senators Manchin and Sinema as well as House progressives.
Also this week, Congress passed, and President Biden signed a Continuing Resolution (CR), which is a temporary measure to keep the government open for nine weeks after the September 30th expiration date.
Congress is still negotiating a full appropriations package that will fund the government for FY 2022.