Dear Federal Affairs Committee,

Below is the relevant ITC section from Rep. Camp’s tax reform proposal that went public today, as well as the actual legislative language.

Highlights of the Camp draft include:

• Reduction in the statutory corporate rate to 25%, phased in over five years with a 2% reduction each year
• 95% dividend exemption system, broad taxation of all intangible income of foreign subsidiaries when income is earned, with intangible income from serving foreign markets taxed at 15% once the proposal is fully phased in
• Repeal of the modified accelerated cost recovery system (MACRS), lengthening of depreciation lives for property placed in service after 2015
• Change in the tax treatment of carried interest
• Establishment of individual tax rates of 10% and 25%, with a 10% surtax that would apply on annual income from certain sources exceeding $400,000 for individuals/$450,000 for couples
• Repeal of the corporate and individual alternative minimum tax (AMT)
• Reduction in the principal cap associated with deductible home mortgage interest payments from $1 million to $500,000 for new mortgages

Solar Investment Tax Credits

Donna Flynn with Washington Council reads this section to mean that Camp keeps the 30% ITC up until the end of 2016 and repeals it for property placed in service after 2016. 

As for the permanent 10% ITC, according to the actual legislative language text on the ITC, it appears that the Camp proposal does completely repeal the ITC for property placed in service after end of 2016 [see legislative language below].  Even though the JTC does not score the termination of the 10% ITC as a savings, the legislative language makes it clear that the entire Section 48 does not apply to solar property placed in service after Dec 31 2016.

Full text of the legislation and section-by-section summary are here.
 

 Sec. 3224. Repeal of energy credit.

Current law: Under current law, taxpayers may claim up to a 30-percent nonrefundable, business energy credit for the cost of certain new equipment that either (1) uses solar energy to generate electricity, to heat or cool a structure, or to provide solar process heat, or (2) is used to produce, distribute, or use energy derived from a geothermal deposit (but only, in the case of electricity generated by geothermal power, up to the electric transmission stage). Property used to generate energy for the purposes of heating a swimming pool is not eligible solar energy property. The credit expires at the end of 2016.

Provision: Under the provision, the credit would be repealed. The provision is effective for property placed in service after 2016. Prepared by Ways and Means Committee Majority Tax Staff 85

 JCT estimate: According to JCT, the provision would have no revenue effect over 2014-2023.

SEC. 3224. REPEAL OF ENERGY CREDIT.

23 (a) TERMINATION.—Section 48 is amended by adding

24 at the end the following new subsection:

VerDate 0ct 09 2002 15:23 Feb 21, 2014 Jkt 000000 PO 00000 Frm 00481 Fmt 6652 Sfmt 6201 C:\DOCUME~1\HWCHRI~1\APPLIC~1\SOFTQUAD\XMETAL\5.5\GEN\C\CAMP_041.XML H

1 ‘‘(e) APPLICATION OF SECTION.—This section shall

2 not apply to any energy property placed in service after

3 December 31, 2016.’’.

4 (b) CONFORMING AMENDMENTS.—

5 (1) Paragraph (2)(A)(i)(II), and clauses (ii)

6 and (vii) of paragraph (3)(A), of section 48(a) are

7 each amended by striking ‘‘but only with respect to

8 periods ending before January 1, 2017’’.

9 (2) Paragraph (1) of section 48(c) is amended

10 by striking subparagraph (D).

11 (3) Paragraph (2) of section 48(c) is amended

12 by striking subparagraph (D).

13 (4) Subparagraph (A) of section 48(c)(3) is

14 amended by inserting ‘‘and’’ at the end of clause

15 (ii), by striking ‘‘, and’’ at the end of clause (iii) and

16 inserting a period, and by striking clause (iv).

17 (5) Paragraph (4) of section 48(c) is amended

18 by striking subparagraph (C).

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to property placed in service after

21 December 31, 2016.

On Section 25D for individual homeowner 30% ITC, the Camp proposal does repeal this tax credit early, at the end of 2014.  This is two years earlier than the current cutoff of the end of 2016.  JTC scores this change as raising $2.3 billion over 2014-23.  See below:

 
Sec. 1304. Repeal of credit for residential energy efficient property.

Current law: Under current law, a taxpayer may claim a credit for the purchase of qualified solar electric property and qualified solar water heating property that is used exclusively for purposes other than heating swimming pools and hot tubs. The credit is equal to 30 percent of qualifying expenditures. There also is a 30-percent credit for the purchase of qualified geothermal heat pump property, qualified small wind energy property, and qualified fuel cell power plants. The credit applies to property placed in service prior to 2017.

Provision: Under the provision, the credit for residential energy efficient property would be repealed. The provision would be effective for property placed in service after 2014.

JCT estimate: According to JCT, the provision would increase revenues by $2.3 billion over 2014-2023.

Best,
Christopher Mansour
Vice President, Federal Affairs