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Issue Summaries

 Other Tax Issues 

I. Energy Efficiency Tax Incentives for Homes, Appliances and Commercial Buildings

Background: Natural gas homes, appliances and buildings are generally more efficient and less expensive to operate than those that use electricity. It is more difficult for natural gas homes to achieve energy savings required to secure proposed tax incentives. These proposed credits could make gas homes, appliances and buildings less attractive and have the inverse effect of increasing total energy consumption.

AGA Viewpoint: While AGA supports energy efficiency and conservation, certain proposed tax incentives are biased against homes, appliances and buildings that use natural gas. To encourage energy efficiency and reduce emissions, the procedures that measure energy efficiency should be based on the use of total energy consumed over the full fuel cycle, from production through the point of final use. Currently, the government measures energy efficiency at the point of final use (the “site-based” method). This method ignores the energy consumed in production, generation and transmission. The government should change its measurement standards, as well as any incentives programs, to measure all of the energy consumed over the full fuel cycle. New site based programs should not be encouraged, and prevailing code standards should be used as the baselines to qualify for the incentive.

ll. Prohibit Last-In, First-Out (LIFO) Accounting

Background: In 2006, Congress considered a proposal to prohibit the use of “Last In, First Out” (LIFO) accounting as a revenue raiser. The proposal was not well received, so it was withdrawn.

Some AGA members use LIFO accounting and have large amounts of natural gas in storage. Some companies have also indicated that the change from LIFO to another accounting method could trigger a tax increase of several million dollars.

AGA Viewpoint: AGA supports the use of LIFO accounting. AGA has met with key members of the House and Senate tax-writing committees and has joined a broad-based coalition to coordinate efforts to defeat this proposal should it be proposed in the future.

III. Contributions in Aid of Construction (CIAC)

Background: Current federal law imposes a tax on the costs or contributions in aid of construction (CIAC) that homeowners, businesses and public facilities make to connect to utilities. This tax increases the cost of connecting with natural gas companies and other utilities by 30 to 50 percent.

AGA Viewpoint: The CIAC tax should be repealed. It would remove a financial burden that impedes economic growth, thus enabling more customers to use natural gas.

IV. Deductibility of Fines, Penalties and Settlements

Background: Current tax law prohibits the deduction of fines and penalties. Congress has considered expanding this concept to deny the deduction for expenses paid in settlement of lawsuits that involve the government.

AGA Viewpoint: Public policy dictates that fines and penalties should not be tax deductible. The over-expansion of this concept to certain settlements would increase litigation and discourage the use of creative resolutions to litigation. The proposal could deny the deduction for environmental remediation or mitigation expenditures.

AGA Contact: George Lowe, 202-824-7000,


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