After much arm wrestling, the Senate came to an agreement on energy tax breaks which are set to expire later this year. Both Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa), of the Senate Finance Committee, made the announcement on Tuesday.

The tax package will provide $17 billion in renewable energy tax breaks. It will also adjust the alternative minimum tax, extend tax credits for children and create several business tax cuts. It will also set aside $7 billion in tax relief for those affected by recent floods and hurricanes. The bill extends the solar and wind investment tax credit for eight years, and the production tax credit for biomass and hydropower for up to two years.

The definition of a system that would qualify for the credit has also been updated. They now include small wind investment and geothermal heat pumps.

“This month, the Senate can act to create jobs, break America’s dependence on foreign oil, support working families, and help businesses thrive,” said Baucus in a statement [PDF]. “This agreement will lead America toward clean, homegrown energy and the good-paying jobs that come with it.”

In the past, how to fund these extensions has been quite messy. Republicans have squawked at anything where oil industry tax breaks were affected and Democrats have insisted that the source funding be specified. The compromise was to freeze tax breaks for oil and gas at the current rate, and to tighten the rules on taxes for the industry. This will effect income earned by the companies in overseas markets. The Oil Spill Liability Trust fun was also adjusted.

Hopefully the bill will pass when voted upon.

Image source: Ryan McD on Flickr