Republicans have a long history of supporting policies that advance innovation and expand domestic energy production, delivering affordable energy to American families and increasing the global competitiveness of American businesses. These policies range from research and development, direct support, regulatory and permitting streamlining, as well as utilizing the tax code to incentive American energy.
WHY TAX CREDITS?
Tax credits ensure that key industries have the investment certainty they need to prosper and grow in the United States. Today, targeted tax credits support industries and technologies such as nuclear, hydrogen, biofuels, advanced manufacturing, carbon capture, electricity and others. Maintaining targeted tax credits will play a vital role in achieving the Trump energy and manufacturing agenda, namely reducing energy costs, securing an American supply chain, reshoring manufacturing and countering China’s unfair subsidies.
Republicans have consistently demonstrated leadership in championing energy tax credits that have the potential to shape our energy future. Targeted tax incentives foster an all-of-the-above approach, leveraging private sector investment in domestically produced energy.
TAX CREDITS ALIGNED WITH REPUBLICAN PRIORITIES
Carbon Capture and Sequestration Tax Credit (45Q): Provides financial incentives for capturing and storing or utilizing carbon dioxide emissions; was originally signed into law by President Bush in 2008. Over the past several Congresses, Republicans have helped lead successful efforts to expand and extend the credit.
Nuclear Energy PTCs (45U & 45J): These production tax credits (PTC) support the development of nuclear assets, which provide reliable, clean and safe baseload power 24/7. Republicans first added enacted a nuclear tax incentive (45J) in the Energy Policy Act of 2005, which passed with large Republican majorities. The more recent 45U tax credit was originally introduced as a bipartisan bill, co-led by Rep. Brian Fitzpatrick (R-Pa.) in the 117th Congress.
Hydrogen PTC (45V): Supports the development of domestically produced, clean hydrogen (H2), an important feedstock for refineries and fertilizer production, as well as a new tool for energy security. Senator Todd Young (R-Ind.) first introduced legislation, the Hydrogen Utilization and Sustainability Act, to extend existing electricity PTC to include hydrogen in 2020.
Technology-Neutral Clean Electricity PTC (45Y) and ITC (48E): Provide technology-neutral support for all clean energy projects and build on the historic Republican-backed Section 45 and 48 tax credits. This ensures that all clean energy assets—including nuclear—are incentivized.
Other tax credits, such as the Advanced Manufacturing Production Tax Credit (45X) or the Clean Fuel Production Credit (45Z), align with conservative priorities by strengthening domestic supply chains for critical minerals and clean energy products, and supporting low-carbon fuel production to enhance American energy security.
TAX CREDITS: SUPPORT ENERGY AND MANUFACTURING DOMINANCE
America’s energy demands are quickly growing, driven by the resurgence of American manufacturing, the expansion of data centers and the electrification of industry. Our energy system must be prepared to meet this challenge while also leveraging American energy as a geopolitical asset.
When appropriately implemented, targeted incentives such as tax credits can unlock private investment, mitigate risk for energy entrepreneurs and accelerate the deployment of next-generation technologies. Eliminating vital energy tax credits at a time of increasing demand would add risk to the potential of higher costs for American families and businesses.
TAX CREDITS: BOLSTER U.S. ECONOMIC DEVELOPMENT
Tax credits support enhanced American competitiveness and export capabilities by enabling the accelerated deployment at scale of affordable, innovative energy technologies for which there is growing demand domestically worldwide. By incentivizing innovative, American manufactured technologies, they not only boost economic growth but also help reduce emissions. Without continued tax credit availability in the near future, new investments will slow as financing dollars are stretched.
KEY TAX TERMS TO KNOW
- Investment Tax Credit (ITC): Allows taxpayers to reduce their overall tax burden by a percentage of the capital expenditures (CapEx) of qualifying projects. Example: construction costs or necessary equipment.
- Production Tax Credit (PTC): Provides a tax credit for producing something, such as electricity, batteries or hydrogen, and helps reduce operating expenses (OpEx) for their production over a period of time.
- Transferability: A credit delivery provision that allows companies to “transfer” tax credits. Transferable tax credits reduce the cost of capital and allow developers and manufacturers to recycle their capital more quickly—this allows them to build infrastructure or expand operations faster. In practice, this allows smaller projects to be enabled or move forward. Top utilizers of transferability include biofuels, nuclear, carbon capture, direct air capture and advanced manufacturing.
Direct Pay: A credit delivery provision that allows untaxed entities like co-ops or tax-exempt entities to receive the benefits of tax credits in the form of a payment. Example: co-ops are using direct pay to reduce the cost of developing or operating innovative energy technologies, allowing them to expedite new infrastructure projects and continue existing operations.