The Senate on Friday began debating whether to add a long-stalled extension of renewable energy tax credits to its bipartisan housing package, a move that could threaten the bill’s progress in the House.

Sen. John Ensign, R-Nev., and Maria Cantwell, D-Wash., offered the one-year, $6 billion extension proposal as an amendment to a bill (HR 3221) serving as the vehicle for the housing legislation.

Before the Senate wrapped up business for the day, Majority Leader Harry Reid, D-Nev., filed a cloture motion to limit debate on the housing package and move toward passage next week. Minority Leader Mitch McConnell, R-Ky., encouraged Reid to take the action, noting the two leaders could cancel the scheduled 2:15 p.m. April 8 cloture vote if they work out an agreement before then on limiting further amendments.

The energy tax credits expire at the end of this year, and previous efforts to extend them have failed narrowly in the Senate because Republicans objected to using tax increases on the oil and gas industry to offset the cost of the renewables credit.

Cantwell said, “We are at a critical point. We are at the precipice of projects actually being cancelled ... because we aren’t giving certainty to their investors about the tax code.”

The Ensign-Cantwell amendment carries no offsets, and that could create problems in the House, where Democrats have demanded strict adherence to pay-as-you-go budget rules.

It was not clear whether the Senate would adopt the amendment when it votes on it next week. Christopher J. Dodd, D-Conn., chairman of the Banking, Housing and Urban Affairs Committee, protested efforts to attach the energy tax credits because he said it could stall the housing bill in a fight with the other chamber.

“This is a housing bill! This isn’t a Christmas tree!” he cried. “It’s a housing bill! I’m going to oppose every one of these (unrelated amendments) from here on out.”

The Cantwell-Ensign proposal would continue existing tax incentives for producing energy from wind, sunlight and other renewable sources. Lamar Alexander, R-Tenn., and Jon Kyl, R-Ariz., offered a second-degree amendment to extend the tax breaks for two years instead of one. The amendment would hold the overall cost to the same $6 billion as the one-year version by paring back the current tax break for wind power.

Wind power, Alexander said, has enjoyed preferential treatment compared with most other renewable energy sources since 1992 and has “gobbled up most of the money spent through the production tax credit.”

Senate Finance Chairman Max Baucus, D-Mont., said adding the energy tax credits to the housing legislation could be “problematic” in the House. But he said he was willing to give it a shot.

“Let’s at least try and see if the other body will pass it,” he said.

The underlying proposal, hammered out by Dodd and Richard C. Shelby of Alabama, the ranking Republican on the Banking committee, would overhaul the Federal Housing Administration and offer expanded tax breaks to homebuilders and other businesses losing money in the current economic slump.

The Senate on Friday adopted two amendments expanding tax help for businesses or individuals.

The first, offered by Debbie Stabenow, D-Mich., and George V. Voinovich, R-Ohio, would allow companies operating in the red to use accumulated but unused research and development and alternative minimum tax credits. It was adopted 76-2.

The Senate also approved an amendment from Mary L. Landrieu, D-La., would allow taxpayers in Louisiana and Mississippi to avoid interest and penalties they might face for dual compensation they received for losses from the 2005 hurricanes.

The underlying bill contains a number of other tax provisions.

It would offer a $7,000 tax credit spread over two years for the purchase of homes in foreclosure, an extra $10 billion in bond authority for refinancing distressed subprime mortgage, $100 million for expanded counseling for borrowers at risk of default and $4 billion in Community Development Block Grants to purchase and rehabilitate foreclosed properties.

It also would provide a one-year standard deduction of $500 ($1,000 for married couples) for property tax payers who do not itemize their deductions.

“It’s a step in the right direction, a positive one and a good one,” Dodd said Friday. “But it doesn’t go far enough.”

Dodd said the current package was all that could be moved quickly on a bipartisan basis. But he said it does not offer sufficient help to home owners facing the imminent loss of their homes.

The Senate on Thursday voted, 58-36, to table, and consequently kill, an amendment by Majority Whip Richard J. Durbin, D-Ill., that would have allowed bankruptcy judges to modify subprime and non-traditional mortgages, including reducing the outstanding principal, to help struggling borrowers stay in their homes.

Dodd said his committee and the House Financial Services Committee will turn next to proposals aimed at helping those consumers.

Both Dodd and Financial Services Chairman Barney Frank, D-Mass., plan hearings on proposals to allow the FHA to back refinanced mortgages of home owners who currently owe more than their property is worth if lenders agree to reduce the principal and write new terms that the borrower can meet.

First posted April 4, 2008 11:04 a.m.