Proposed Technical Tax Corrections Limit Qualified Energy Research Credits

In the Tax Technical Corrections Act of 2007, technical corrections are being proposed with respect to a number of Acts and Legislation going back to 1998 and includes the Energy Policy Act of 2006. The bill is being introduced as H.R. 4195 in the House of Representatives by House Ways and Means Committee Chairman Charles Rangel and Ranking Member Jim McCrey and as S. 2374 in the Senate by Senate Finance Committee Chairman Max Baucus and Ranking Member Charles Grassley.

Primary Excerpts Relating to Energy Research Consortiums:

Excerpt from Page 2, First Paragraph.

“Except as otherwise provided, the amendments made by the technical corrections contained in the bill take effect as if included in the original legislation to which each amendment relates.”

Excerpt from Page 8, Clarify that research eligible for the energy research credit is qualified research (Act sec. 1351).

“The energy research credit is available with respect to certain amounts paid or incurred to an energy research consortium. The provision clarifies that the credit is available with respect to such amounts paid or incurred to an energy research consortium provided they are used for energy research that is qualified research.”


Page 8 discusses the clarification of the Energy Research Consortium Credit (e.g. payments to EPRI). This amendment would require that payments to EPRI (and other Energy research consortium entities) would qualify for the special 20% with no base reduction only if the payments are actually spent on qualified research. The Energy Tax Act of 2005 did not have this provision, which meant that amounts contributed to EPRI qualified whether or not they were spent on qualified research. The technical correction also seems to indicate that the provision amendment, if adopted, would be retroactive to August 2005.

Unfortunately, if this provision passes, it may require EPRI and/or the taxpayer added work and documentation requirements to shoulder the burden of proof as it relates to the use of consortium contributions.

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