On December 16, 2015, Congressional leaders reached agreement on a year-end spending and massive tax deal that would prevent a government shutdown and extend a series of tax breaks that benefit businesses and individuals. The agreement has major implications for the future of the energy industry and is being hailed by many as a dramatic victory for those in the renewable energy community. For more analysis of the deal, read on!

The Investment Tax Credit (ITC), which was slated to drop to 10 percent from 30 percent for solar systems on commercial properties after 2016, would now remain at 30 percent for projects that start construction by December 31, 2019. Projects that start construction in 2020 would qualify for a 26 percent credit and that level would drop to 22 percent for facilities started in 2021. From 2022 on it would remain at 10 percent. The ITC for residential systems, which was slated to drop to zero after 2016, would be phased down through 2021 along the same schedule and then fall away after 2022. Eligibility for the ITC would be based on when construction begins on a project, putting it on equal footing with the Production Tax Credit (PTC) “commence construction” language long-desired by solar producers. The PTC was similarly extended for five years, with a phase-out to 40% by 2019.

Many within the renewable energy community praised the deal, as the elongated, gradual ITC and PTC phase-outs will provide a bridge to Clean Power Plan implementation in 2020. The deal provides certainty to an industry that had been stuck lurching from year to year waiting for tax credit extensions. According to the Solar Energy Industries Association (SEIA), the five-year extension of the ITC “is likely to add another 140,000 jobs or more”, and “will lead to more than $125 billion in new, private sector investment in the U.S. economy. And much of this growth will come from small businesses, which make up more than 85 percent of America’s 8,000 solar companies.”

Though early analysis has focused heavily on the many concessions made by House Republicans to the renewable energy agenda promoted by House Democrats, it is significant to note the agreement allows for the lifting of the crude oil export ban – long a Republican priority in the energy sphere. Republicans had also planned originally to pack the legislation with policy riders designed to block EPA greenhouse gas, ozone, fracking, and other rules and regulations, but most of these riders were ultimately dropped.

All of the above progress rests on the assumption that the agreements will be formally passed by both houses of Congress and signed into law by President Obama. According to the Rules Committee, the House will vote today, December 17, on the $680 billion tax package before voting tomorrow, December 18, on the $1.15 trillion omnibus appropriations bill. They’ll then send the package to the Senate as a consolidated bill for consideration soon thereafter. The Senate is expected to vote Friday evening on the consolidated bill and the President will likely sign it shortly thereafter.

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