[Congressional Record Volume 145, Number 74 (Thursday, May 20, 1999)]
[Senate]
[Pages S5758-S5759]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CONRAD (for himself and Mr. Hatch):
  S. 1095. A bill to amend section 29 of the Internal Revenue Code of 
1986 to extend the placed in service date for biomass and coal 
facilities; to the Committee on Finance.


             the biomass and coal facilities extension act

 Mr. CONRAD. Mr. President, today I join again with my friend 
from Utah, Senator Hatch, to introduce the Biomass and Coal Facilities 
Extension Act. This legislation would extend by eight months the 
placed-in-service date under section 29 of the Internal Revenue Code.
  We are offering the same bill we offered in the 105th Congress 
because the problem addressed by the bill remains uncorrected. The 
change we propose is

[[Page S5759]]

necessary in order to alleviate a hardship taxpayers are suffering as a 
result of their reliance on actions taken by Congress nearly three 
years ago.
  A number of taxpayers made substantial commitments of resources to 
develop alternative fuel technology projects in good faith reliance on 
the incentives provided in the Small Business Protection Act of 1996. 
Under that law, Congress intended to ensure that alternative fuel 
technology projects involving coal and biomass would qualify for the 
credit provided under section 29 of the Internal Revenue Code as long 
as projects were subject to a binding contract by December 31, 1996 and 
placed in service by June 30, 1998.
  That should have settled the matter. However, a proposal offered by 
the Administration in February 1997 contained a proposal to shorten the 
placed-in-service deadline by a full year for facilities producing gas 
from biomass and synthetic fuel from coal. The Administration was 
concerned about what it characterized as rapid growth in the section 29 
credit. Congress considered that argument, but concluded that no change 
in the 1996 legislation was necessary.
  In the tax legislative arena, even a mere proposal can have 
consequences. When the Joint Committee on Taxation published its 
analysis of the Administration's budget proposals in March 1997, it 
warned Congress about just such a consequence as it observed that 
``[b]ecause the binding contract date has already passed * * * the 
proposal might place an unfair financial burden on those taxpayers who 
are bound to contracts entered into prior to the Administration's 
announcement.''
  Mr. President, that is exactly what happened--many taxpayers who 
found themselves in that situation lost their sources of funding 
because financial institutions were obligated to take into account the 
possibility that the Administration's proposal could have become law. 
Because the tax credit plays a significant role in the financial 
examination lenders must make, its potential loss made securing the 
necessary financing impossible for taxpayers who were proceeding in 
good faith under binding contracts made in reliance on the provisions 
of the Small Business Protection Act of 1996.
  The bill would extend the placed-in-service date for a period eight 
months from the date of the bill's enactment. This would restore some 
of the time that taxpayers lost as a result of the confusion which 
resulted from the events of 1997.
  Let me emphasize that the bill would not authorize any ``new 
starts.'' The binding contract date provided in the 1996 Act would not 
be altered. The sole purpose of this bill is to allow taxpayers who 
began projects under the 1996 Act to proceed in an orderly manner to 
create the kinds of facilities that will help increase the country's 
useful energy resources.
  Mr. HATCH. Mr. President, I stand today with my colleague, Senator 
Conrad, to introduce legislation aimed at helping companies to develop 
technologies for cleaner burning fuels. This is important to the people 
in my home state of Utah where air pollution is one of the top concerns 
of citizens.
  I believe that cleaner burning fuels that will reduce emissions is a 
key element of the solution to this problem. The Biomass and Coal 
Facilities Extension Act would provide a tool for companies that are 
stepping into this void and developing clean burning fuels by extending 
the ``placed in service'' date under section 29 for facilities that 
produce alternative fuels.
  Section 29 was originally created to encourage the development of 
alternative fuels to reduce our dependence on imports and to reduce the 
environmental impacts of certain fuels. With the enormous reserves of 
low rank coals and lignite in the United States and around the world, 
and with the potential for use of biomass and other alternatives, it is 
particularly important to the American economy and to our environment 
that new, more environmentally friendly fuels are brought to market 
both here and in developing nations.
  Bringing new technologies to market is financially risky. In 
particular, finding investors to take a new technology from a 
laboratory table to the marketplace is difficult because working the 
bugs out of a first-of-a-kind, full-sized plant is a costly 
undertaking. Incentives to bring new, clean energy technologies to the 
market in the U.S. are a worthwhile use of the tax code.
  In 1996, Congress provided sufficient incentives to make the 
development of alternative fuels a viable pursuit by extending the 
section 29 ``placed in service'' date for facilities designed to 
produce energy from biomass or processed coals to July 1, 1998, 
provided that those facilities were constructed pursuant to a binding 
contract entered into before January 1, 1997. Many contracts were 
signed and construction projects started.
  Then the Administration released its budget in February 1997. It 
contained a proposal to eliminate the extension granted just one year 
before, cutting off the section 29 credit for plants not completed by 
July 1, 1997, which is an impossible deadline to meet for many of these 
projects.
  Without the assurance of the section 29 tax credit, financing for 
these projects dried up. Taxpayers were stranded in contracts, some of 
which contained significant liquidated damages clauses. As a result of 
the Administration's proposal, taxpayers essentially lost a significant 
amount of the extension given them by Congress in 1996.
  The bill before us would give companies with projects already in 
progress and contracts signed by January 1, 1997 some additional time 
to finish these projects. The bill does not extend the contract 
deadline, allow more projects to be initiated, or change the 2008 
deadline for receiving the section 29 tax credit. This bill simply 
restores some of the time that taxpayers lost in their efforts to 
develop environmentally friendly fuels under section 29.
  Bringing new alternative fuel technologies to the market is an 
important part of our commitment to a cleaner environment and a secure 
economy. Congress reflected that commitment in our efforts to mitigate 
some of the financial risk involved in developing this much needed 
technology in 1996. This bill maintains that commitment. I urge my 
colleagues to support this legislation.
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