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Rolling out the tax benefits

February 1, 2006 By    

As the second session of the 109th Congress gets underway, the propane industry is working to take advantage of new tax advantages as outlined in the Energy Policy Act of 2005 and other recent tax laws.

 Lisa Bontempo
Lisa Bontempo

Yet even the most tax-savvy propane business men and women are scratching their heads trying to figure out how to apply the FY 2006 tax changes before they are scheduled to expire, some as early as 2008.

Credits for alternative fuel vehicles, alternative fuel refueling property, energy efficient appliances and homes are the focus for the propane industry under the new laws. But figuring out how to apply these credits is difficult even as businesses consult with financial advisors to see if they can take advantage of the tax changes. The IRS is still making changes in the tax code to reflect the new laws.

Experienced accountants, lawyers and tax professionals who make up the financial community are cautious when it comes to applying the tax changes to your business. They rely on IRS notices and guidance documents – not legislative language – for the real cues on application.

On energy issues, what seems evident to a policy maker may not be as evident as the legislation winds its way through the regulatory process to become part of the tax code. Craig Stevens, spokesperson for the U.S. Department of Energy, acknowledges that industry and consumer questions about the Energy Policy Act of 2005 ultimately get put before the IRS to answer, and that the agency is writing the new code now.

As industry members are all-too familiar from working with industry code organizations, this can take a lot of patience. The IRS notices act as interim guidance pending their final regulations.

As all of this happens at the IRS, it remains crucial to petition the agency for clarification. The National Propane Gas Association is doing just that. Mike Troop, vice president of legislative affairs, says NPGA “continues to meet with Department of Treasury officials to encourage inclusion of conversion vehicles as part of the definition of vehicles able to qualify for new tax credits, and is trying to clarify how fuel excise tax payments can be applied and for whom.”

Businesses are also wondering if they can count on their legislator’s promises for other tax benefits that did not pass in 2005.

For months, the House and Senate battled over differing bills for tax cuts and budget-cutting plans. Many think Congress will move its budget package forward, beginning this month. Then, Congress will move its tax package to address the issues of extending the tax cuts on capital gains and dividends that passed in previous sessions. Unless extended or made permanent, capital gains and dividends cuts will expire in 2008.

You’ll see $70 billion – the figure that is protected from a filibuster under Congress’ 2006 budget resolution – as the magic number that negotiators try to stick to in reconciling their different tax bills this year.

To reduce the cost of the tax cuts to the federal treasury, tax negotiators may cut back multiple-year tax provisions in the bills. This may include shortening the extension on Section 179 expensing benefits, too.

As mailboxes fill with manufacturers’ marketing pieces urging consumers to “act now” and take advantage of “significant” tax benefits for the purchase of their products and services, I am reminded how even a small tax advantage can lead to real profit in the marketplace. However, that profit – or its promise – can seem illusive when the credits are complicated and temporary.

Perhaps more important than tax credits and incentives are the propane industry’s efforts to educate consumers, farmers, builders and manufacturers to the benefits of propane.

The industry’s efforts are not negotiable. In Congress, tax incentives always are.

For more information on the new tax incentives, view and For the latest information on IRS guidance documents and notices, see as information becomes available.

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