Energy Tax Provisions: Overview and
Budgetary Cost
August 3, 2021
Congressional Research Service
https://crsreports.congress.gov
R46865

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he 117th Congress is considering multiple proposals that would deploy energy tax
provisions to pursue climate-related or infrastructure investment policy objectives. On
T May 26, 2021, the Senate Finance Committee passed the Clean Energy for America Act
(S. 1298).1 This legislation proposes tax credits for non-greenhouse gas (GHG)-emitting
electricity generating technologies, with the provisions phasing out once emissions reductions
targets are achieved. The legislation also proposes tax incentives for clean fuels (as defined in the
bil ) and transportation electrification, as wel as for building energy efficiency, and would
provide various other tax incentives for “clean energy.” Qualifying projects would be required to
meet certain workforce development requirements and pay prevailing wages. Tax incentives
supporting fossil fuels would be repealed. The Joint Committee on Taxation (JCT) has estimated
that this proposal would reduce federal revenues by $259.4 bil ion between FY2022 and
FY2031.2
The Biden Administration’s “American Jobs Plan” also proposes substantial modifications to
energy tax policy. The Administration’s proposal would expand and extend existing tax incentives
supporting renewables, provide incentives for zero-emissions vehicles and electric vehicle
infrastructure, expand tax incentives for building energy efficiency, and provide various other
“clean energy” tax incentives. Tax incentives supporting fossil fuels would be repealed. The
Treasury has estimated that the Administration’s proposed energy tax policies would reduce
federal revenues by $302.9 bil ion between FY2022 and FY2031.3
This report provides background information on current-law energy tax provisions. Specifical y,
the report includes a series of tables, each of which includes (1) the name of the provision and its
Internal Revenue Code (IRC) citation; (2) a brief description of the provision; (3) the law first
enacting the provision; (4) when the provision expires (if applicable) under current law; and (5) a
cost estimate (if available).4 For the purposes of this report, energy tax provisions have been
categorized as follows:
 Renewable energy tax incentives (Table 1)
 Energy efficiency tax incentives (Table 2)
 Tax incentives for vehicles and vehicle infrastructure (Table 3)
 Renewable and alternative fuels tax incentives (Table 4)
 Fossil fuel tax incentives (Table 5)
 Carbon capture and sequestration (CCS), nuclear, and other tax incentives (Table
6)

1 Information and files related to Senate Finance Committee consideration of this legislation can be found at
https://www.finance.senate.gov/hearings/open-executive-session-to-consider-an-original-bill-entitled-the-clean-energy-
for-america-act. On June 17, 2021, the Clean Energy for America Act (S. 2118) was introduced.
2 Joint Committee on T axation, Estimated Revenue Effects of the Revenue Provisions Contained in the Chairman’s
Modification of the “Clean Energy for America Act,” Scheduled for Markup by the Committee on Finance on May 26 ,
2021, JCX-29-21, May 26, 2021, at https://www.jct.gov/publications/2021/jcx-29-21/.
3 Department of the Treasury, General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals, May
2021, at https://home.treasury.gov/system/files/131/General-Explanations-FY2022.pdf.
4 T he cost estimates are generally tax expenditure estimates, as provided in Joint Committee on T axation, Estimates Of
Federal Tax Expenditures For Fiscal Years 2020 -2024, JCX-23-20, November 5, 2020. T hese estimates reflect tax
laws enacted through September 30, 2020, and assume that temporary provisions expire as scheduled. If legislation
enacted after September 30, 2020, extended the provision, the cost estimate associated with that extension is noted.
Congressional Research Service

1

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Table 1. Renewable Energy Tax Incentives
Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Residential energy-
A tax credit for the purchase of solar electric property, solar water
Energy Policy
Property placed in
FY2020: $1.8
efficient property
heating property, fuel cel s, geothermal heat pump property, or
Act of 2005
service by December
FY2020-FY2024: $3.6
credit (IRC §25D)
smal wind energy property. Through 2019, the tax credit was 30%
(EPACT05;
31, 2023.
of the cost of qualifying property. Qualified biomass fuel property is
P.L. 109-58)

eligible after 2020. The tax credit is reduced to 26% for property
Extension in P.L. 116-260: $3.8
placed in service in 2020, 2021, and 2022 and 22% for property
(FY2021-FY2030)
placed in service in 2023. The tax credit for fuel cel s is limited to
$500 for each 0.5 kilowatt of capacity.
Renewable electricity
A tax credit for electricity produced using qualifying renewable
Energy Policy
Construction must
FY2020: $4.6
production tax credit
energy resources. The tax credit equals 2.5 cents per kWh for
Act of 1992
begin by December
FY2020-FY2024: $17.0
(PTC) (IRC §45)
electricity produced from wind, closed-loop biomass, and
(EPACT92;
31, 2021.
geothermal energy in 2021. The tax credit equals 1.3 cents per
P.L. 102-486)

kWh for electricity produced from open-loop biomass, landfil gas,
Extension in P.L. 116-260: $1.7
trash combustion, qualified hydropower, and marine and
(FY2021-FY2030)
hydrokinetic sources in 2021. Tax credit amounts are adjusted
annual y for inflation. The tax credit is available for 10 years after
the date the facility is placed in service. Taxpayers may elect to
receive a 30% investment tax credit (ITC) in lieu of the PTC. The
tax credit for wind is reduced by 20% for facilities that began
construction in 2017, 40% for facilities that began construction in
2018; 60% for facilities that began construction in 2019; and 40% for
facilities that began construction in 2020 or 2021.
For more, see CRS Report R43453, The Renewable Electricity
Production Tax Credit: In Brief, by Mol y F. Sherlock.
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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Energy investment tax
A tax credit for investments in qualifying energy property.
The Energy
Construction must
FY2020: $6.8
credit (ITC)(IRC §48)
Investments in geothermal, microturbine, or combined heat and
Tax Act of
begin by December
FY2020-FY2024: $35.5
power (CHP) property qualify for a 10% credit. From 2006 through
1978 (P.L. 95-
31, 2023, except for
2019 the credit rate was increased to 30% for solar, fuel cel s, and
618)
geothermal and solar,

smal wind property. The tax credit rate for these technologies is
where there is a
Extension in P.L. 116-260: $7.0
26% through 2022 and 22% in 2023. Waste energy recovery
permanent 10% credit.
(FY2021-FY2030)
property is eligible for the ITC after 2020, at the increased credit
For offshore wind

amounts. Offshore wind facilities that begin construction after 2016
property,
are eligible for a 30% credit.
Application of credit to waste
construction must
energy recovery and offshore
For more, see CRS In Focus IF10479, The Energy Credit or Energy
begin by December
wind in P.L. 116-260: $0.6
Investment Tax Credit (ITC), by Mol y F. Sherlock.
31, 2025.
(FY2021-FY2030)
Credit for investment
A 30% tax credit for selected qualified investments in advanced
American
Al ocation limit;
FY2020: (i)
in advanced energy
energy property. A total of $2.3 bil ion was al ocated for advanced
Recovery and
credits ful y al ocated.
FY2020-FY2024: $0.4
property (IRC §48C)
energy property investment tax credits, which were competitively
Reinvestment
awarded by the Departments of Energy (DOE) and the Treasury.
Act (ARRA;

P.L. 111-5)
Credit for holders of
An income tax credit for holders of the bond. Clean Renewable
EPACT05
Al ocation limit;
FY2020: (i)
clean renewable
Energy Bonds (CREBs) are subject to a volume cap of $1.2 bil ion
(P.L. 109-58)
authority to issue
FY2020-FY2024: $0.3
energy bonds (IRC
with a credit rate set to al ow the bond to be issued at par and
Energy
repealed in P.L. 115-
§§54, 54C)
without interest. New Clean Renewable Energy Bonds (New

Improvement
97.
CREBs) are subject to a volume cap of $2.4 bil ion with a credit rate and Extension
set at 70% of what would permit the bond to be issued at par and
Act of 2008
without interest. Tax credit bonds were repealed in the 2017 tax
(P.L. 110-343)
revision (commonly cal ed the “Tax Cuts and Jobs Act” [TCJA]; P.L.
115-97).
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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Depreciation recovery
Accelerated depreciation al owances are provided under the
Tax Reform
Construction must
FY2020: (i)
periods for energy-
modified accelerated cost recovery system (MACRS) for
Act of 1986
begin by December
FY2020-FY2024: $0.3
specific items: five-
investments in certain energy property. Specifical y, certain solar,
(P.L. 99-514)
31, 2023, for solar
year MACRS for
wind, geothermal, fuel cel , microturbine, CHP, waste energy
il umination, fuel cel ,

certain energy
recovery, and biomass property have a five-year recovery period.
microturbine, CHP,
property (IRC
smal wind,
§168(e)(3)(B)(vi))
geothermal heat
pump, and waste
energy recovery
property. None
otherwise.
Sources: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2020-2024, JCX-23-20,
November 5, 2020; and Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Contained In Rules Committee Print 116-68, The “Consolidated
Appropriations Act, 2021”, JCX-24-20, December 21, 2020.
Notes: IRC = Internal Revenue Code. kWh = kilowatt-hour. MACRS = modified accelerated cost recovery system. An “(i)” indicates a revenue loss of less than $50
mil ion. A de minimis tax expenditure is less than $50 mil ion FY2020-FY2024.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.
CRS-4

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Table 2. Energy Efficiency Tax Incentives
Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Credit for energy-
A 10% tax credit for qualified energy-efficiency improvements
EPACT05
Property instal ed
FY2020: $0.5
efficient improvements to
and expenditures for residential energy property including
(P.L. 109-58)
by December 31,
FY2020-FY2024: $0.8
existing
qualifying improvements to the building’s envelope, the HVAC

2021.
homes/nonbusiness
system, furnaces, or boilers. The credit is subject to a $500 per

energy property credit
taxpayer lifetime limit. Property must be instal ed in the
Extension in P.L. 116-260: $0.4
(IRC §25C)
taxpayer’s primary residence.
(FY2021-FY2030)
Credit for energy-
A tax credit for eligible contractors for building and sel ing
EPACT05
Property acquired
FY2020: $0.2
efficient new homes (IRC
qualifying energy-efficient new homes. The credit is equal to
(P.L. 109-58)
by December 31,
FY2020-FY2024: $0.6
§45L)
$2,000, with certain manufactured homes qualifying for a

2021.
$1,000 credit.

Extension in P.L. 116-260: $0.3
(FY2021-FY2030)
Credit for holders of
The federal government has authorized the issue of $3.2 bil ion
Energy
Al ocation limit
FY2020: (i)
qualified energy
in Qualified Energy Conservation Bonds (QECBs). QECBs
Improvement
(al ocated to the
FY2020-FY2024: $0.1
conservation bonds (IRC
provide a tax credit worth 70% of the tax credit bond rate
and Extension states); authority to
§54D)
stipulated by the Secretary of the Treasury. QECBs issued by
Act of 2008
issue repealed in

state and local governments must fund an energy-savings
(P.L. 110-343) P.L. 115-97.
project, such as the green renovation of a public building, R&D
in alternative fuels, and public transportation projects. Tax
credit bonds were repealed in the 2017 tax revision (TCJA; P.L.
115-97).
Exclusion of energy
Subsidies provided by public utilities to customers for the
EPACT92
none
FY2020: (i)
conservation subsidies
purchase or instal ation of energy conservation measures are
(P.L. 102-486)
FY2020-FY2024: $0.1
provided by public
excluded from taxable income. For the purposes of this
utilities (IRC §136)
provision, public utilities are entities sel ing electricity or

natural gas.

CRS-5

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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Exclusion of interest on
Tax-exempt private activity bonds can be issued to finance (or
American
Does not apply to
de minimis
state and local qualified
refinance) qualified green building and sustainable design
Jobs Creation
any bond issued
private activity bonds for
projects.
Act of 2004
after September 30,
green buildings and
(P.L. 108-357) 2012.
sustainable design
projects (IRC
§142(a)(14))
Energy-efficient
A deduction of up to $1.80 per square foot is al owed for
EPACT05
none
FY2020: (i)
commercial building
certain energy-saving property used in domestic commercial
(P.L. 109-58)
FY2020-FY2024: $0.1
deduction (IRC §179D)
buildings. Qualifying energy-efficient commercial building

property includes property instal ed as part of (1) the interior

lighting system; (2) the heating, cooling, ventilation, or hot
Extension in P.L. 116-260: $0.7
water system; or (3) the building envelope. To be deductible,
(FY2021-FY2030)
property must reduce a building’s annual energy and power
costs by 50% or more as compared to a similar reference
building meeting certain minimum energy standards. A reduced
deduction may be available if a single system is upgraded
(lighting, heating and cooling, or building envelope) and the 50%
reduction threshold is not met. Government entities making
energy-efficiency upgrades to public buildings, such as schools,
can al ocate the Section 179D deduction to designers of
energy-efficient commercial building property.
Source: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2020-2024, JCX-23-20,
November 5, 2020; and Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Contained In Rules Committee Print 116-68, The “Consolidated
Appropriations Act, 2021”, JCX-24-20, December 21, 2020.
Notes: IRC = Internal Revenue Code. An “(i)” indicates a revenue loss of less than $50 mil ion. A de minimis tax expenditure is less than $50 mil ion FY2020-FY2024.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless oth erwise noted.
CRS-6

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Table 3. Tax Incentives for Vehicles and Vehicle Infrastructure
Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Credits for fuel cel
A tax credit for fuel cel vehicles. Fuel cel vehicles receive a
EPACT05
Property purchased
de minimis
vehicles (IRC §30B)
base credit of $4,000 for vehicles weighing less than 8,500
(P.L. 109-58)
by 12/31/2021.
pounds. Heavier vehicles qualify for up to a $40,000 credit. An

additional credit of up to $4,000 is available for cars and light
trucks that exceed the 2002 base fuel economy.
Credit for alternative fuel
A tax credit for the cost of any qualified alternative fuel vehicle
EPACT05
Property placed in
FY2020: (i)
refueling property (IRC
refueling property instal ed by a business or at a taxpayer’s
(P.L. 109-58)
service by
FY2020-FY2024: $0.1
§30C)
principal residence. The credit is equal to 30% of these costs,

12/31/2021.
limited to $30,000 for businesses at each separate location with

qualifying property, and $1,000 for residences.
Extension in P.L. 116-260: $0.2
(FY2021-FY2030)
Credit for plug-in electric
A tax credit for the purchase of qualifying plug-in electric
Energy
Credit phases out
FY2020: $0.7
vehicles (IRC §30D)
vehicles. The credit ranges from $2,500 to $7,500 per vehicle,
Improvement
after reaching a
FY2020-FY2024: $3.0
depending on the vehicle’s battery capacity. The tax credit
and Extension 200,000 per-
phases out once a vehicle manufacturer has sold 200,000
Act of 2008
manufacturer limit.

qualifying vehicles. If the vehicle is purchased by a tax-exempt
(P.L. 110-343)
organization, the sel er of the vehicle may be able to claim the
credit.
For more, see CRS In Focus IF11017, The Plug-In Electric Vehicle
Tax Credit, by Mol y F. Sherlock.
Credit for electric
A 10% credit, up to $2,500, is available for the cost of two-
ARRA (P.L.
Property purchased
de minimis
motorcycles (IRC §30D)
wheeled plug-in electric vehicles. Eligible vehicles must have a
111-5)
by 12/31/2021.
weight rating of less than 14,000 pounds; be propel ed by a
battery-powered electric motor with a battery capacity of at
least 2.5 kilowatt-hours; be manufactured for use on streets,
roads, and highways; and be capable of achieving a speed of at
least 45 miles per hour.
Sources: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2020-2024, JCX-23-20,
November 5, 2020; and Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Contained In Rules Committee Print 116-68, The “Consolidated
Appropriations Act, 2021”, JCX-24-20, December 21, 2020.
Notes: IRC = Internal Revenue Code. An “(i)” indicates a revenue loss of less than $50 mil ion. A de minimis tax expenditure is less than $50 mil ion FY2020-FY2024.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless oth erwise noted.
CRS-7

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Table 4. Renewable and Alternative Fuels Tax Incentives
Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Credit for second-
A per-gal on tax credit for qualified second-generation biofuel
The Food,
Fuel produced by
de minimis
generation biofuel
production. The amount of the credit is general y $1.01 per
Conservation,
12/31/2021.

production (IRC
gal on. Qualifying fuels include cel ulosic biofuel, which is
and Energy Act
§40(a)(4))
produced using lignocel ulosic or hemicel ulosic matter
of 2008 (P.L.
Extension in P.L. 116-260: (i)
(cel ulosic feedstock) available on a renewable or recurring basis,
110-246)
(FY2021-FY2030)
as wel as second-generation biofuels, which include cultivated
algae, cyanobacteria, or lemna.
Credits for biodiesel and
There are three tax credits for biodiesel: the biodiesel mixture
American Jobs
Fuel sold, used, or
FY2020: $8.1b
renewable diesel fuel
credit, the biodiesel credit, and the smal agri-biodiesel producer
Creation Act
removed by
FY2020-FY2024: $15.2b
(IRC §§40A, 6526, &
credit. Each gal on of biodiesel, including agri-biodiesel (biodiesel
of 2004 (P.L.
12/31/2022.
6427)
made from virgin oils), may be eligible for a $1.00 tax credit.
108-357)
Additional y, an eligible smal agri-biodiesel producer credit of 10
cents is available for each gal on of “qualified agri-biodiesel
production.” The mixtures tax credit may be claimed as an
instant excise tax credit against the blender’s motor and aviation
fuels excise taxes. Credits in excess of excise tax liability may be
refunded. The biodiesel and smal agri-biodiesel credits may be
claimed as income tax credits.
50-percent expensing of
Second-generation biofuel plant property was al owed an
Tax Relief and
Property placed in
de minimis
cel ulosic biofuel plant
additional first-year depreciation deduction equal to 50% of the
Health Care
service by
property (IRC §168(l))
property’s adjusted basis.
Act of 2006
12/31/2020.
(P.L. 109-432)
CRS-8

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Enacting
Cost or Tax Expenditure
Provision
Description
Legislation
Expiration Date
Estimate (billions)a
Alternative Fuels and
A tax credit for certain alternative fuels and alternative fuels
Safe,
Fuel sold or used
FY2020: $0.2c
Alternative Fuels Mixture
mixtures. The credit is a 50-cents-per-gal on excise tax credit
Accountable,
by 12/31/2021.
FY2020-FY2024: $0.3c
Credit (IRC §§6426 &
for certain alternative fuels used as fuel in a motor vehicle,
Flexible,
6427)
motor boat, or airplane and a 50-cents-per-gal on credit for
Efficient

alternative fuels mixed with a traditional fuel (gasoline, diesel, or
Transportation
Extension in P.L. 116-260: $0.2
kerosene) for use as a fuel. Qualifying fuels include liquefied
Equity Act: A
(FY2021-FY2030)
petroleum gas; P Series fuels (certain renewable, nonpetroleum,
Legacy for
liquid fuels); compressed or liquefied natural gas (CNG or
Users
LNG); any liquefied fuel derived from coal or peat through the
(SAFETEA-LU;
Fischer-Tropsch process that meets certain carbon-capture
P.L. 109-59)
requirements; liquefied hydrocarbons derived from biomass; and
liquefied hydrogen.
Sources: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2020-2024, JCX-23-20,
November 5, 2020; and Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Contained In Rules Committee Print 116-68, The “Consolidated
Appropriations Act, 2021”, JCX-24-20, December 21, 2020; Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Contained In The House
Amendment To The Senate Amendment To H.R. 1865, the Further Consolidated Appropriations Act, 2020, JCX-54R-19, December 17, 2019.
Notes: IRC = Internal Revenue Code. An “(i)” indicates a revenue loss of less than $50 mil ion. A de minimis tax expenditure is less than $50 mil ion FY2020-FY2024.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.
b. The tax incentives for biodiesel and renewable diesel were extended for five years, through 2022, in the Further Consolidated Appropriations Act of 2020 (P.L. 116-
94). This cost estimate reflects the extension, as estimated in Joint Committee on Taxation, Estimated Budget Effects of the Revenue Provisions Contained in the House
Amendment to the Senate Amendment to H.R. 1865, the Further Consolidated Appropriations Act 2020 (Rules Committee Print 116-44), JCX-54R-19, December 17, 2019.
The income tax credit portion is de minimis.
c. The tax incentives for alternative fuels and alternative fuel mixtures were extended for one year, through 2021, in the Consolidated Appropriations Act, 2021 (P.L.
116-260). This cost estimate is the estimate associated with that extension.
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Table 5. Fossil Fuels Tax Incentives
Enacting
Provision
Description
Legislation
Expiration Date
Costa
Enhanced Oil Recovery
A tax credit for Enhanced Oil Recovery (EOR) costs available
Omnibus
None
de minimis
(EOR) Credit (IRC §43)
when oil prices are below a certain threshold. The credit amount
Budget
is 15% of qualified domestic EOR costs. The EOR credit phases
Reconciliation
out over a $6 range once oil’s reference price exceeds $28 per
Act of 1990
barrel (adjusted for inflation after 1991; $49.392 in 2019). The
(P.L. 101-508)
EOR credit was ful y phased out every year from 2006 through
2016. Low oil prices led to the EOR credit becoming available in
2016 and 2017. A partial credit was available for 2018, but it was
ful y phased out in 2019 and 2020.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences,
by Mol y F. Sherlock; and CRS Insight IN11381, Low Oil Prices May
Trigger Certain Tax Benefits, but Not Others, by Mol y F. Sherlock
and Phil ip Brown.
Coal Production Credits:
A tax credit for Indian coal produced from reserves that were
EPACT05
Coal produced by
FY2020: (i)
Refined Coal and Indian
owned by an Indian tribe or held in trust by the United States for
(P.L. 109-58)
12/31/2021
FY2020-FY2024: $0.2
Coal (IRC §45)
a tribe on June 14, 2005. The amount of the credit is $2.00 per
ton (adjusted for inflation; $2.60 per ton in 2021). Tax credits may

also be available for refined coal produced at refined coal
Extension in P.L. 116-260: (i)
production facilities placed in service after the date of the
(FY2021-FY2030)
enactment of the American Jobs Creation Act of 2004 and before

January 1, 2012.

CRS-10

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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Credit for producing oil
A tax credit for producing oil and gas from marginal wel s,
American
None
de minimis
and gas from marginal
available when oil and gas prices are below certain thresholds. The Jobs Creation
wel s (IRC §45I)
credit amount is $3 per barrel of qualified crude oil and 50 cents
Act of 2004
per 1,000 cubic feet (mcf) of qualified natural gas (adjusted for
(P.L. 108-357)
inflation after 2005; $3.90 for oil and 65¢ for gas in 2019; 66¢ for
gas in 2020). The credit starts phasing out if the reference price
for oil exceeds $15 per barrel or natural gas exceeds $1.67 per
mcf for the preceding year (adjusted for inflation after 2005;
$19.52 for oil and $2.17 for gas in 2019; $2.21 for gas in 2020).
The credit is ful y phased out if the reference price exceeds $18
per barrel or $2.00 per mcf (adjusted for inflation after 2005;
$23.43 for oil and $2.60 for gas in 2019). The credit for crude oil
has never been triggered. In 2016 and 2017, and again in 2019, a
partial credit (in the phaseout range) was available for natural gas.
For 2020 the credit for natural gas was not phased out; the ful
66¢ per mcf credit was available.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences,
by Mol y F. Sherlock; and CRS Insight IN11381, Low Oil Prices May
Trigger Certain Tax Benefits, but Not Others, by Mol y F. Sherlock
and Phil ip Brown.
Credits for Investments
A tax credit al ocated for investment in certain advanced coal
EPACT05
Credits al ocated.
FY2020: $0.2
in Clean Coal Facilities
technologies. In EPACT05, the tax credit was 20% of investment
(P.L. 109-58)

FY2020-FY2024: $1.2
(IRC §§48A and 48B)
for integrated gasification combined cycle (IGCC) systems and
15% for other advanced coal-based generation technologies.
$2 bil ion of §48A
Additional al ocations for a 30% advanced coal-based generation
credits are available
technologies credit were provided in the Energy Improvement and
for al ocation in
Extension Act of 2008 (P.L. 110-343). Credit al ocations are
Round 3 of the
available due to forfeitures of previously al ocated credits. Round
Phase III Program,
3 Phase III credits being al ocated in 2021 are 30% for IGCC or
taking place in 2021.
other advanced coal-based generation technologies. Credits were
also al ocated for gasification projects, with the credit amount
equal to 30% (20% for credits al ocated or real ocated before
October 4, 2008). In 2016 the IRS announced no additional
al ocation rounds would be conducted under the qualifying
gasification project program.
CRS-11

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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Safe harbor from
This provision al ows tax-exempt bonds to be used to finance
EPACT05
None
Not available.
arbitrage rules for
prepaid natural gas contracts without applying otherwise
(P.L. 109-58)
prepaid natural gas (IRC
applicable arbitrage rules.
§148(b)(4))
Amortization of
Geological and geophysical (G&G) expenditures are costs
EPACT05
None
FY2020: $0.1
Geological and
associated with determining the location and potential size of a
(P.L. 109-58)
FY2020-FY2024: $0.5
Geophysical
natural resource or mineral deposit. General y, these costs are
Expenditures Associated
viewed as capital costs, and as such would be recovered over the
with Oil and Gas
same time frame as other capital costs. Most producers amortize
Exploration (IRC
G&G expenditures over two years. Major integrated oil
§167(h))
companies amortize G&G expenditures over seven years. A major
integrated oil company, as defined in statute, has (1) average daily
worldwide production of crude oil of at least 500,000 barrels; (2)
gross receipts in excess of $1 bil ion in its tax year ending during
2005; and (3) at least 15% ownership interest in a crude oil
refinery.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences,
by Mol y F. Sherlock.
Seven-year MACRS
A seven-year MACRS recovery period is provided for any natural
American
None
de minimis
Alaska natural gas
gas pipeline system located in the State of Alaska that has a
Jobs Creation
pipeline (IRC
capacity of more than 500 bil ion Btu of natural gas per day.
Act of 2004
§168(e)(3)(C)(i i))
(P.L. 108-357)
Seven-year MACRS for
Natural gas gathering lines are treated as 7-year property. A
EPACT05
None
Not available.
natural gas gathering lines natural gas gathering line consists of the pipe, equipment, and
(P.L. 109-58)
(IRC §168(e)(3)(C)(iv))
appurtenances determined to be a gathering line by the Federal
Energy Regulatory Commission (FERC) or a gathering line used to
deliver natural gas to a gas processing plant, an interconnection
with a transmission pipeline, or an interconnection with a local
distribution company, a gas storage facility, or an industrial
consumer.
15-year MACRS
A natural gas distribution line, the original use of which
EPACT05
12/31/2010
FY2020: $0.1
Depreciation Recovery
commences with the taxpayer after April 11, 2005, and which is
(P.L. 109-58)
FY2020-FY2024: $0.3
Period for Natural Gas
placed in service before January 1, 2011, is treated as 15-year
Distribution Lines (IRC
property.
§168(e)(3)(E)(vi))
CRS-12

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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Amortization of Air
Five-year (60-month) amortization applies to a “certified pol ution
EPACT05
None
FY2020: $0.4
Pol ution Control
control facility” used in connection with a plant or other property
(P.L. 109-58)
FY2020-FY2024: $2.1
Facilities (§§169 and
in operation before January 1, 1976, and to an “atmospheric
291(a)(4))
pol ution control facility” placed in service after April 11, 2005,
and used in connection with an electric generation plant or other
property that is primarily coal fired. Seven-year (84-month)
amortization applies only to an “atmospheric pol ution control
facility” placed in service after April 11, 2005, and used in
connection with an electric generation plant or other property
that is primarily coal fired and that was placed in operation after
December 31, 1975. If an election is made under §169 with
respect to any certified pol ution control facility, the amortizable
basis of the facility is reduced by 20%.
Expensing of tertiary
Taxpayers can deduct tertiary injectant expenses, other than
The Crude
None
de minimis
injectants (IRC §193)
expenses for recoverable hydrocarbon injectants, in the year costs Oil Windfal
are incurred.
Profit Tax
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences,
Act of 1980
by Mol y F. Sherlock.
(P.L. 96-223)
Expensing of Intangible
IDCs include expenses on items without salvage value (e.g., wages,
1916
None
Oil and Gas
Dril ing Costs (IDCs) and fuel, and dril ing site preparations). Integrated oil and gas
Treasury
FY2020: $0.5
Exploration and
producers (producers who also have substantial refining or retail
regulation
Development Costs (IRC activities) must capitalize 30% of IDCs and then recover those
(T.D. 45,
FY2020-FY2024: $2.3
§§263A(c)(3), 263(c),
costs over a five-year period. The remaining 70% of IDCs can be
article 223);

291(b), 616, 617)
ful y expensed (costs deducted in the year they are incurred).
codified in
Other Fuels
Nonintegrated producers can ful y expense IDCs. The election to
1954 (P.L. 83-
FY2020: (i)
deduct intangible dril ing and development costs applies to oil and
591)
gas wel s and to wel s dril ed for any geothermal deposit. For
FY2020-FY2024: $0.3
mineral properties, exploration and development expenditures

are deductible as an expense in the year paid, as opposed to being
capitalized.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences,
by Mol y F. Sherlock.
CRS-13

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Enacting
Provision
Description
Legislation
Expiration Date
Costa
Passive loss rules for
Deductions from passive trade or business activities, to the extent Tax Reform
None
FY2020: (i)b
working interests in oil
they exceed income from al such passive activities, general y may
Act of 1986
FY2021-FY2030: $0.2b
and gas property (IRC
not be deducted against other income (salary, interest, dividends,
(P.L. 99-514)
§469(c)(3))
and active business income). These passive activity loss rules are
(10-year estimate)
not applicable to working interests in oil or gas property.

For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences,
by Mol y F. Sherlock.
Percentage Depletion
Certain independent oil and gas producers (producers who are
Revenue Act
None
Oil and Gas
(IRC §§611, 613, and
not retailers or refiners) may elect to claim percentage depletion
of 1926 (P.L.
FY2020: $0.6
613A)
as opposed to cost depletion. The percentage depletion al owance
69-20)
is 15% of gross income from the property, not to exceed (1)
FY2020-FY2024: $2.9
100% of taxable income from the property, and (2) 65% of the

taxpayer’s taxable income. Oil and gas producers may claim
Other Fuels
percentage depletion on up to 1,000 barrels of average daily
FY2020: $0.1
production (or an equivalent amount of domestic natural gas).
Percentage depletion rates for other minerals range from 5% to
FY2020-FY2024: $0.7
22%.

For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences,
by Mol y F. Sherlock.
Fossil fuel capital gains
Certain sales of coal under royalty contracts qualify for taxation as Revenue Act
None
FY2020: $0.1b
treatment (IRC §631(c))
capital gains rather than ordinary income. Income from these sales
of 1964 (P.L.
FY2020-FY2029: $1.6b
is taxed at the preferred 20% rate applied to capital gains, as
88-272)
opposed to being taxed as ordinary income.
(10-year estimate)

Exceptions for Publicly
Publicly traded partnerships are general y treated as corporations.
Revenue Act
None
FY2020: $0.3
Traded Partnerships with The exception from this rule occurs if at least 90% of its gross
of 1987 (P.L.
FY2020-FY2024: $1.8
Qualified Income
income is derived from interest, dividends, real property rents, or
100-203)
Derived from Certain
certain other types of qualifying income. Qualifying income
Energy-Related Activities
includes income derived from certain energy-related activities,
(IRC §7704)
such as fossil fuel or geothermal exploration, development,
mining, production, refining, transportation, and marketing.
For more, see CRS In Focus IF11528, Oil and Gas Tax Preferences,
by Mol y F. Sherlock; and CRS Report R41893, Master Limited
Partnerships: A Policy Option for the Renewable Energy Industry, by
Mol y F. Sherlock and Mark P. Keightley.
CRS-14

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Sources: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2020-2024, JCX-23-20,
November 5, 2020; and Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Contained In Rules Committee Print 116-68, The “Consolidated
Appropriations Act, 2021”, JCX-24-20, December 21, 2020.
Notes: IRC = Internal Revenue Code. MACRS = modified accelerated cost recovery system. An “(i)” indicates a revenue loss of less than $50 mil ion. A de minimis tax
expenditure is less than $50 mil ion FY2020-FY2024.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.
b. Exceptions to the passive activity loss rules are not classified as tax expenditures by JCT. These estimates are from the Treasury Department. Treasury Department
tax expenditure estimates are available at https://home.treasury.gov/policy-issues/tax-policy/tax-expenditures.

Table 6. Carbon Capture and Sequestration, Nuclear, and Other Tax Incentives
Enacting
Provision
Description
Legislation
Expiration Date
Costa
Credit for production of
A tax credit for electricity produced from qualifying nuclear
EPACT05
Facilities placed in
de minimis
electricity from qualifying
facilities. The advanced nuclear production tax credit (PTC)
(P.L. 109-58)
service by January 1,
advanced nuclear power
provides a 1.8 cent per kWh tax credit for electricity sold that
2021. The IRS is to
facilities (IRC §45J)
was produced at qualifying facilities. Criteria for qualifying
al ocate unutilized

facilities include that they must use nuclear reactor designs
national megawatt
approved by the Nuclear Regulatory Commission after 1993.
capacity after that
Qualifying facilities can claim tax credits during the first eight
date.
years of production. The credit is restricted to 6,000
megawatts (MW) of total electric generating capacity for al
qualifying facilities, with the 6,000 MW al ocated by the Internal
Revenue Service (IRS). Taxpayers can claim no more than $125
mil ion in tax credits per 1,000 MW of the al ocated capacity in
any single year.
Credit for Carbon Oxide
A credit for the capture and sequestration of carbon emissions
Energy
Construction must
FY2020: (i)
Sequestration (IRC §45Q)
(including carbon dioxide and carbon monoxide). The credit is
Improvement
begin by December
FY2020-FY2024: $0.1

the sum of four components: (1) $20 (adjusted to $23.82 for
and Extension 31, 2025.
2020) per metric ton of carbon oxide captured using carbon
Act of 2008

capture equipment placed in service before February 9, 2018,
(P.L. 110-343)
Extension in P.L. 116-260: $0.6
that is not used as a tertiary injectant; (2) $10 (adjusted to
(FY2021-FY2030)
$11.91 for 2020) per metric ton of carbon oxide captured
using carbon capture equipment placed in service before
February 9, 2018, that is used as a tertiary injectant; (3) $31.77
in 2020 per metric ton of carbon oxide captured using carbon
capture equipment placed in service on or after February 9,
CRS-15

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Enacting
Provision
Description
Legislation
Expiration Date
Costa
2018, that is not used as a tertiary injectant, during the first 12
years fol owing the facility being placed in service; and (4)
$20.22 in 2020 per metric ton of carbon oxide captured using
carbon capture equipment placed in service on or after
February 9, 2018, that is used as a tertiary injectant, during the
first 12 years fol owing the facility being placed in service.
Carbon oxide that is not used as a tertiary injectant must be
disposed of in a secure geological facility. For carbon dioxide
captured at facilities placed in service before February 9, 2018,
the credit applies until the IRS, in consultation with the
Environmental Protection Agency, certifies that 75 mil ion
metric tons of carbon dioxide has been captured or used as a
tertiary injectant. As of June 2020, 72 mil ion metric tons of
qualified carbon oxide had been taken into account.b
For more, see CRS In Focus IF11455, The Tax Credit for Carbon
Sequestration (Section 45Q), by Angela C. Jones and Mol y F.
Sherlock.
10-year MACRS for smart
10-year property includes any qualified smart electric meter
Energy
None
FY2020: (i)
electric distribution
and any qualified smart electric grid system. A smart electric
Improvement
FY2020-FY2024: $0.2
property (IRC
meter is a time-based meter and related communication
and Extension
§§168(e)(3)(D)(i i) and
equipment. Smart electric grid systems include property that is
Act of 2008
168(e)(3)(D)(iv))
used as part of a system for electric distribution grid
(P.L. 110-343)
communications, monitoring, and management.
Transmission Property
15-year property includes original-use electricity transmission
EPACT05
None
FY2020: (i)
Treated as 15-year
property that is used in the transmission of electricity for sale
(P.L. 109-58)
FY2020-FY2024: $0.2
Property (IRC
at 69 or more kilovolts.
§168(e)(3)(E)(v))
Accelerated deductions
An eligible taxpayer may deduct cash payments made by the
Deficit
None
Not available
for nuclear
taxpayer to a nuclear decommissioning reserve fund, and to
Reduction
decommissioning costs
deduct the ratable portion of any special transfer to the fund,
Act of 1984
(IRC §468A)
even if under the applicable method of accounting the taxpayer
(P.L. 98-369)
would typical y claim the deduction in a later tax year.
Special tax rate for
A special 20% tax rate for investments made by nuclear
Deficit
None
FY2020: (i)
nuclear decommissioning
decommissioning reserve funds.
Reduction
FY2020-FY2024: $0.1
CRS-16

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Enacting
Provision
Description
Legislation
Expiration Date
Costa
reserve funds (IRC
Act of 1984
§468A(e)(2))
(P.L. 98-369)
Sources: CRS analysis of the Internal Revenue Code; Joint Committee on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2020-2024, JCX-23-20,
November 5, 2020; and Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Contained In Rules Committee Print 116-68, The “Consolidated
Appropriations Act, 2021”, JCX-24-20, December 21, 2020.
Notes: IRC = Internal Revenue Code. kWh = kilowatt-hour. MACRS = modified accelerated cost recovery system. An “(i)” indicates a revenue loss of less than $50
mil ion. A de minimis tax expenditure is less than $50 mil ion FY2020-FY2024.
a. This column provides Joint Committee on Taxation tax expenditure estimates for the provision, unless otherwise noted.
b. Internal Revenue Service, Inflation Adjustment Factor Issued for Sequestration Credit, IRS Notice 2020-40, June 15, 2020.

CRS-17

Energy Tax Provisions: Overview and Budgetary Cost

Author Information

Molly F. Sherlock

Specialist in Public Finance

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
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copy or otherwise use copyrighted material.

Congressional Research Service
R46865 · VERSION 1 · NEW
18