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Capitol Report

Tax-credit expansion sought by Tesla, other EV players fails to make it into lawmakers’ tax-break deal

As 2019 winds down, Washington sees the usual lobbying from industry groups on ‘tax extenders’ and other possible tax breaks

Tesla, General Motors and other players in the electric-vehicles sector have come up short in the scramble around a Congressional year-end tax package and failed to score an expansion for a credit.

Following the usual lobbying by industries for last-minute legislation to renew expiring tax cuts and subsidies, lawmakers agreed late Monday on a package that does not include an extension for electric vehicles (EV).

The potential expansion for the EV credit had been included by House Democrats in a proposed GREEN Act that had aimed to deliver a wide range of energy-related tax incentives. It would have raised the sales level at which the credit starts to get phased out.

The current $7,500 EV tax credit, which allows taxpayers to deduct part of the cost of buying an electric car, phases out once an automaker hits 200,000 cumulative EV sales, and both Tesla TSLA+5.04% and GM GM-0.38% already have sold more than 200,000 electric vehicles. If the extension had gotten the green light, there would have been a $7,000 credit until a manufacturer hit 600,000 vehicles sold.

The extension has been an issue in Washington throughout 2019, with some lawmakers backing it in the spring as they rolled out a bipartisan Driving America Forward Act, which then was folded into the GREEN Act.

But in an example of the opposition to the EV tax credit, Republican Sen. John Barrasso of Wyoming had argued this year that it’s “time to pull the plug” on the subsidy for EV buyers as he rolled out a “Fairness for Every Driver Act.” President Donald Trump also weighed in, and he helped nix an extension for the credit, a Bloomberg News report said.

The Driving America Forward Act has been the bill that Tesla lobbied on the most in 2019, according to an OpenSecrets.org analysis of disclosures. It also has been a focus for GM.

Don’t miss: Tesla stock ‘bull case’ is $500 at Morgan Stanley

Before the expansion of the EV tax-credit failed to make it into the year-end package that features many so-called “tax extenders,” some supporters of it had sounded upbeat about its chances.

“Thanks to bipartisan, broad-based support, we believe the EV tax-credit extension is very well-positioned for enactment,” said Mike Carr of the EV Drive Coalition in an email to MarketWatch last week. The group’s members range from Tesla, GM and Nissan NSANY-0.22% to electrical equipment giant ABB ABB+0.12% , as well as from the Nature Conservancy to charging station providers Volta and ChargePoint.

Related: Tesla Model 3 named ‘best electric car’ by Edmunds

And see: This surging stock looks like a promising bet on electric cars — and it’s not Tesla

On the other hand, some analysts had been downbeat on the prospects of an extension for the EV tax credit. “There’s a chance,” but it’s “not very likely” and just “theoretical,” said James Lucier, an analyst and managing director at Capital Alpha Partners, in an email to MarketWatch before the recent negotiations among lawmakers. Lucier had likened the situation to a scene in the movie “Dumb and Dumber,” when Jim Carrey’s character gets excited by a “one out of a million” chance and says, “So you’re telling me there’s a chance.”

The tax breaks that made it into the year-end package include a credit that benefits railroads, incentives for biodiesel producers and tax relief for brewers and distillers, a Wall Street Journal report said.

“We are thrilled that lawmakers included a one-year extension of the federal excise tax reduction for distillers in the year-end legislative package,” said the Distilled Spirits Council of the United States in a statement on Tuesday. “While not yet a done deal, this is a significant relief for craft distillers across the country who were facing a 400% tax increase beginning Jan. 1. We will continue to urge Congress to do the right thing, support small businesses and pass this critical piece of legislation.”

See: Here are some of the business tax credits Congress could approve by year’s end

Republican and Democratic lawmakers have been showing interesting in some year-end dealmaking, even as an impeachment effort against Trump ramps up and divides Washington. On Thursday, they reached a deal in principle on a dozen spending bills, in an agreement that likely heads off a government shutdown.

Related: Spending deal to repeal certain ‘Obamacare’ taxes, lift tobacco-buying age to 21

This is an updated version of an article that first ran on Dec. 13, 2019.

See original version of this story