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Credit Pacific Service Union A bipartisan group of senators from coal-producing states this week stepped up pressure on the Internal Revenue Service to resolve an issue that is threatening billions of dollars of tax credits claimed by major utility companies and other manufacturers of coal-based synthetic fuels.

Credit First Service Union The unusual involvement of the lawmakers in a matter that is the subject of IRS audits came in response to warnings from industry that continuing uncertainty over the future of the tax credits could lead to mine closings and plant shutdowns in a half-dozen states.

Card Credit Mobile Service In a formal announcement in June, the IRS said it had "reason to question the scientific validity of test procedures" used to establish the eligibility for the tax credits of synthetic fuel produced by some plants. The IRS, which was then conducting individual company audits, held out the possibility that it might revoke previous rulings that have allowed the claims.

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Card Credit Discover Service At a meeting called this week by Sen. Richard C. Shelby (R-Ala.), IRS Commissioner Mark W. Everson promised to resolve the issue as soon as possible, but gave no indication of how or when that would occur, sources said. Yesterday, a spokesman for Shelby, who chairs the Appropriations Committee panel that oversees the IRS budget, said the senator "has not ruled out legislative remedies."

Credit Public Service Union Also attending the meeting were representatives of Sens. Orrin G. Hatch (R-Utah), Rick Santorum (R-Pa.), John D. Rockefeller IV (D-W.Va.), Mitch McConnell (R-Ky.) and Jim Bunning (R-Ky.).

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Card Credit Processing Service Congress became involved in the matter in July, when another Kentucky lawmaker, Rep. Harold Rogers (R), sponsored an amendment to an appropriations bill to block the IRS from revoking the tax credits. That amendment was defeated.

Center Credit Service Union The Treasury Department's top official for tax policy, Pamela F. Olson, advised the House Appropriations Committee in a letter that the administration was "very concerned about the effect of the [Rogers] amendment on the proper administration of the tax laws. . . . Passage of the amendment [would] strike at the very heart of the IRS's ability to ensure compliance."

Card Credit Service Wireless The matter then died in the House. Yesterday a Senate aide familiar with the issue said a number of senators felt it would be inappropriate for Congress to dictate a change in IRS procedures.

Credit Security Service Union Directing the lobbying strategy for the synthetic fuels industry is Kenneth Kies, a former top Republican tax counsel in the House. He represents the Coalition for Energy Independence, made up of more than a dozen companies, including several major publicly traded utilities whose balance sheets could be adversely affected if their plants lose eligibility for the credits.

Credit Report Service Among the companies facing potential losses are a Tampa-based electric utility, TECO Energy Inc., which has coal mines and synthetic fuel plants in Kentucky, including a plant in Rogers's district. But the lucrative tax credits have begun to lure other unrelated industries as well.

Blogspot Com Christian Bethesda-based Marriott International Inc., the nation's largest lodging company, branched into synthetic fuels several years ago. In the second quarter of this year, synthetic fuels contributed about $26 million to the company's $126 million in profits. The plants lost $42 million from operations, but collected about $68 million in tax benefits and credits.

Christian Counseling Credit Tax credits for synthetic fuels were first introduced in the 1970s as a spur to new energy production to offset imports of foreign oil. But today the industry produces mainly a coal-based briquette that is burned by power plants to produce electricity.

Credit Federal Service Union The key to obtaining the credit -- and the issue at the center of the industry's dispute with the IRS -- is whether the scientific process employed creates a significant enough chemical change to qualify the product as a synthetic fuel under the law. Critics have described the process as "spray and pray."

Credit Monitoring Service Kies said yesterday that this IRS review marks the fourth time the synthetic fuel companies have had to prove that their manufacturing processes qualify for the tax credit.

Credit Division Service "How many times does the IRS go back and make a taxpayer prove they're entitled?" he asked. "This is what causes people to lose respect for the way the system is administered."

Card Credit Online Service By Dan Morgan
Washington Post - 9/13/2003

Topic: Energy

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