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| "Today we make a major step ... toward reducing our dependence on oil, confronting global climate change, expanding the production of renewable fuels and giving future generations of our country a nation that is stronger, cleaner and more secure."
-- George W. Bush, December 19, 2007 |
The new Energy Independence and Security Act of 2007 was signed into law by President Bush on December 19, 2007.
One of the highlights of the wide-ranging bill is an increase in the Corporate Average Fuel Economy (CAFE) standards for automobiles and light trucks. It requires auto manufacturers
to raise fuel economy to a fleet-wide average of 35 miles per gallon by 2020. Congress had not increased fuel economy standards for passenger cars since 1975.
Among the other provisions in the new law:
- It includes incentives for manufacturers to build small cars in the U.S., while preserving about 17,000 domestic assembly plant jobs.
- The law increases the use, research and development of biofuels, such as cellulosic ethanol.
- It improves energy efficiency in appliances, such as dishwashers, refrigerators, freezers and clothes washers.
- Many common types of incandescent light bulbs will be phased out by 2014.
- The law establishes an office that will promote green building technology implementation in federal government buildings.
Tax Provisions In addition, the Energy Independence and Security Act includes two tax changes:
1. FUTA Surcharge Extended Through 2008
The Federal Unemployment Tax Act (FUTA) generally imposes a 6.2 percent tax rate on the first $7,000 of annual wages paid to each employee. The 6.2 percent rate is actually composed of: (1) a 6 percent permanent rate plus (2) a .2 percent temporary surtax. The Energy Act extends the temporary .2 percent surtax through the end of 2008. So the combined FUTA rate will continue to be 6.2 percent through the end of that year.
(Note: The FUTA surtax was passed as a temporary offset in the 1970s but has been regularly extended ever since.)
2. Longer Amortization Period for Big Oil G&G Costs
Under prior law, major integrated oil companies could amortize their geological and geophysical (G&G) expenditures over five years. A provision in the Energy Act imposes a longer seven-year amortization period for G&G costs that are paid or incurred by major integrated oil companies after December 19, 2007 (the law's date of enactment).
Important: There were some other energy-related tax breaks that expired at the end of 2007 and were not part of the Energy Independence and Security Act. They include the residential energy efficiency tax credits. We'll keep you posted if Congress decides to reinstate them in 2008.
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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