Renewable energy tax bill advances in House

By Donna Smith

WASHINGTON (Reuters) - Legislation that would renew billions of dollars in tax breaks for solar, wind, biomass and other renewable energy sources and extend a proposed new tax credit for ethanol fuels not produced from corn advanced in the U.S. House of Representatives on Thursday.

The bill approved by the Ways and Means Committee by a vote of 25-12 would extend about $54 billion in expiring tax breaks for renewable energy sources, education and a number of business expenses including research and development.

It would also extend federal tax deductions for state and local sales taxes.

Tax breaks for investment in coal gasification projects would also be expanded under the legislation, which comes as oil hit a record just below $127 a barrel this week and hovered above $124 a barrel on Thursday.

"This is a strong, timely and fiscally responsible tax relief package," Ways and Means Committee Chairman Charles Rangel, a New York Democrat, said in a statement, adding that it would reduce U.S. dependence on foreign oil.

High prices at the gasoline pump with no relief in sight have become a major issue in this year's presidential and congressional election campaigns.

The legislation would also give an extra three years for a $1.01 per gallon tax credit for ethanol produced from grass and waste materials that was included in a $289 billion farm bill approved on Thursday by Congress. The Ways and Means legislation would provide for the tax credit through 2015, while the farm bill allows for the new tax credit through 2012.

President George W. Bush opposes the farm bill, but it passed Congress by enough votes to overturn a veto.