Veto Threatened On R&D, Energy Tax Breaks

The White House is threatening to veto a $55 billion tax package (H.R. 6049) passed by the House of Representatives last week that extends expiring tax incentives for renewable energy and revives the lapsed tax credit to encourage R&D. Although the bill passed on a largely party-line vote of 263-160, it wouldn't be enough to override a presidential veto. The outlook for Senate action remains uncertain. The Administration supports continuing the tax breaks for R&D expenses and for wind, solar, and other alternative-energy projects. But it opposes several revenue-raising offsets in the legislation, including one that would delay new rules scheduled to take effect next year that help U.S. multinational firms operating overseas lower their tax bill by giving them more flexibility in how they allocate interest. The bill includes a $19.6 billion package of production tax credits for wind, biomass, and geothermal energy, and investment tax credits for solar energy. It also retroactively renews for one year the R&D tax credit, which expired at the end of 2007. At a projected cost of $8.8 billion over 10 years, the provision gives companies in the chemical, pharma and biotech, technology, and defense sectors a credit on their tax bills for part of their R&D expenditures in the U.S.