Industry Hopes Expired Tax Credits Are Renewed in Lame-Duck Session

This story appears in the Nov. 17 print edition of Transport Topics.

Expired tax credits worth hundreds of millions of dollars to the trucking industry and fuel producers hang in the balance as Congress meets for a lame-duck session that could be contentious or productive.

Tax credits that expired last December and have awaited renewal all year include those for buying new trucks, for producing biodiesel and for anyone who fills trucks with natural gas.

Come January, many senators and House members will not return, which is why the lame-duck session started last week with a scramble to get dozens of tax breaks renewed before the clock runs out on the old Congress.

How the lame-duck Congress will handle tax extenders is expected to become clearer in the coming days, said Christopher Spear, vice president and chief of legislative affairs for American Trucking Associations.

“I think we’ll see an agenda come forth,” said Spear, “and what it’s going to look like could include an extenders package probably more so from the House than even the Senate.”

Spear said it’s possible the House will include the extenders in “an omnibus spending package as sort of as a sweetener to get some folks onboard.”

If the tax extenders are not approved in lame duck, Spear said he expects they will be part of discussions early next year on broader tax reform that both parties have indicated they want to tackle.

A tax extender bill has sat idle in the Senate since spring, and if the extenders are not approved the result could be costly in terms of dollars and uncertainty for carriers and alternative-fuels producers, they said.

“Over the last three years, the new innovations have been truly remarkable, but all of that comes at a cost,” said Mike DelBovo, president of Saddle Creek Transportation, a Lakeland, Florida, fleet that’s pioneered natural-gas transportation.

“To help the technology advance to the next level we really need continued investment, and that investment can’t be born just by small companies like Saddle Creek,” DelBovo said.

Until it expired last December, there was a 50-cent per gallon tax credit available to anyone filling a truck with natural gas or propane, whether it was fleets with their own fueling facilities or owners of natural gas fueling stations.

Another expired tax credit that needs to be renewed if trucking is to transition to natural gas is the $30,000 tax credit that went to builders of alternative fuel stations, DelBovo said.

“We’re improving the stations but they’re not being put in place as quickly as possible,” he said.

In April, Senate Finance Committee Chairman Ron Wyden (D-Ore.) introduced a bill containing more than 40 tax extenders, including those for alternative fuels and new trucks.

The bill easily won approval from the Finance Committee, but the measure was shelved when it became the target of partisan bickering.

“We stand behind the merits of our existing bipartisan extenders bill,” Wyden spokeswoman Lindsey Held told Transport Topics. “It’s important that Congress moves forward on this and ends the uncertainty.”

Another important tax extender for trucking that expired in December was created during the recession to boost the nation’s manufacturing sector and to help trucking with equipment replacements.

Known as bonus depreciation, the incentive allowed carriers and other businesses to write off 100% of the cost of new equipment, including trucks, in the purchase year. Normally, under the tax code, businesses must spread depreciation write-offs over two or three years.

The trucking industry has said bonus depreciation incentivizes fleets to buy new vehicles and, as a result, older trucks are replaced by new models that use less fuel and produce fewer emissions.

The Senate’s bill would extend the bonus depreciation tax credit for two years, while a separate bill already passed by the House would make the tax credit permanent, said Charles Cyrill, spokesman for the American Truck Dealers.

“ATD would like to see the bonus-depreciation tax credit extended through a compromise that respects the decisions of both chambers,” Cyrill added.

Meanwhile, the uncertainty with tax extenders has been costly for biodiesel producers, they said. A $1 dollar per gallon tax credit that expired in December helps underwrite production costs that are higher than those for diesel, said Ben Evans, spokesman for the National Biodiesel Board.

“This has been an incredibly difficult year for the industry,” Evans said. “There have been plants that have closed; we know that there are a lot of plants that are idled right now.”

Biodiesel producers are hopeful that even if Wyden’s all-encompassing tax extender bill dies, the biodiesel production credit will be renewed in lame duck or early next year.

“Because we have plants across the country we have support in almost every state, and it’s from both parties,” Evans said.

He added that renewal of the tax extenders could help lift the economy at a time when fiscal issues are at the forefront in Congress.

“There’s a lot of support for tax reform, but at the same time there’s also a realization in both parties that tax reform will take some time, and we have an urgent situation with these expiring tax incentives,” Evans said.