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Leaders Weigh Inflation Reduction Act’s Benefits, Drawbacks For Coal

photo by: Steven Allen Adams

An excise tax on a ton of coal that helped fund benefits for those with black lung disease could return to pre-2021 levels in the Inflation Reduction Act.

CHARLESTON — U.S. Sen. Joe Manchin fought to include provisions in the latest renamed version of Build Back Better to help West Virginia’s oil and natural gas industries, but opponents and supporters differ on whether the bill will benefit the state’s coal industry.

Manchin, D-W.Va., announced last week he had come to an agreement with Senate Majority Leader Chuck Schumer, D-N.Y., on the Inflation Reduction Act of 2022, the latest incarnation of President Joe Biden’s Build Back Better social and environmental spending package. The bill, as presented, would effectively double the tax burden on the domestic coal industry — a move that state coal associations across the country say will impact the nation’s ability to produce the resource.

The Inflation Reduction Act has a total cost of $733 billion, including $433 billion for clean energy projects and $300 billion for reducing the nation’s deficit. The bill is nearly paid for with $739 billion in new revenue, including $288 billion in prescription drug pricing reform, $124 billion for the Internal Revenue Service, and $14 billion to close the carried interest loophole.

Manchin and supporters of Inflation Reduction Act point to several provisions of the bill that would help spur development of carbon capture and sequestration projects to extend the life of coal-fired power plants and a permanent extension of a tax to provide funding for miners with Black Lung.

“We’re going to have our coal industry,” Manchin said to state reporters Thursday in a virtual briefing from his office on Capitol Hill. “We might transform how we use it and when we use it and the types of high-value products that we make from it. But right now, we still need a base load of fuel.”

However, opponents — including U.S. Sen. Shelley Moore Capito, R-W.Va. — believe the act’s other provisions will speed up the demise of the coal industry.

“There’s also here several things … which would definitely allow the administration to regulate our power sector and to regulate our coal sector,” Capito said Thursday morning in her own virtual press conference with West Virginia reporters. “We know that’s not good from past practice.”


The largest revenue source for the Inflation Reduction Act would come a 15% minimum tax on corporate book income for corporations with profits of more than $1 billion in average annual earnings the previous three years beginning at the end of December. According to the Joint Committee on Taxation, the tax is estimated to bring in $313 billion.

The corporate minimum tax, also called a book minimum tax, was also in the $1.75 trillion Build Back Better social spending bill that died last December when Manchin said he could not support the bill’s level of spending.

According to an analysis of the book minimum tax updated Wednesday by the Tax Foundation in Washington, D.C., the coal industry would take the biggest hit by percentage compared to other industries. The foundation’s analysis found that the coal industry would face a 16.8% net tax increase from the current book minimum tax, taking a $329 million hit on pre-tax book income over a 10-year period.

The entire U.S. mining industry would see 6.3% net tax hike between 2023 and 2032, resulting in $17.8 billion in tax collections.

The Tax Foundation defines book income as the total income that corporations put on public finance statements made available to the corporation’s shareholders. But Garrett Watson, senior policy analyst and modeling manager for the Tax Foundation, said that there is a difference between revenue reported to shareholders and taxable income.

“Sometimes, corporations have reported profits to their shareholders on their books, but they aren’t paying any taxes or a low rate of tax,” Watson said on an episode of the foundation’s podcast “The Deduction” Wednesday. “… These two sets of books are really serving different purposes. One is to inform shareholders; the other to ensure that the tax code is incentivizing investment.”

While soaking some corporations and industries, such as the coal industry, Watson said that revenue from the book minimum tax over the next 10 years of the budget window would likely be offset by minimum tax credits from prior tax years.

“It is far from a perfect solution. It seems that even politically a lot of folks who otherwise will support this are also skeptical of it,” Watson said. “It’s really far from ideal because it is moving us in a more complicated direction. It’s also not clear it will close this gap between taxable income because the items that cause the gap are still exempted from this tax — green energy credits, (research and development) credits — that still will push corporate effective rates below 15%, and this tax will not touch that at all.”

The current corporate tax rate is 21%, but Manchin and fellow Democrats point out that many corporations use tax loopholes to pay less than 15%. Setting a minimum tax rate of 15% would ensure that corporations pay their fair share, Manchin said.

“There’s just not a fairness to the system. That’s all we’re saying,” Manchin said. “If 90% of the corporations are paying 21% or greater, all the West Virginia corporations … they’re probably paying their fair share.”

Manchin said it is highly unlikely most coal companies would have to pay the book minimum tax since only a handful of coal companies earn more than $1 billion annually, such as Peabody Energy, Arch Coal, and Alliance Resource Partners.

“If they’re saying it’s hurting the coal companies and energy companies, there’s not a coal company in the country that has had those type of revenues to be subjected to the 15% minimum,” Manchin said.

Capito said supporters of the 15% book minimum tax leave out several details on what exactly would be included in book income, which could ensnare more coal companies than otherwise would be included.

“This is not based on you being able to say that you made a billion dollars,” Capito said. “This incorporates all of your other assets as well, and then you are taxed the 15%. It’s much more complicated and inclusive.”


The Inflation Reduction Act includes numerous tax breaks and incentives for renewable energy projects including solar and wind, and even hydrogen and nuclear power. Companies can receive tax breaks for switching to renewables. Drivers can receive credits for buying new or used electric vehicles.

While there are provisions to reduce methane leaks that occur when producing oil and natural gas, Manchin has secured promises from congressional Democratic leadership to cut the red tape for oil and natural gas production and pipeline projects, such as the Mountain Valley Pipeline that would connect natural gas from northern West Virginia — the pipeline begins in Wetzel County — to ports on the Atlantic coast in Virginia.

There are no such incentives or promises for coal — just higher taxes, industry leaders believe.

The coal industry has noticed, and leaders are not happy. The leaders of eight state coal associations — including the West Virginia Coal Association – released a joint statement Wednesday criticizing Manchin and the Inflation Reduction Act, saying they were “shocked and disheartened” that their “friend” Manchin would support such a bill.

“The current Schumer-Manchin draft agreement on climate and energy frankly leaves us questioning the motivation and sincerity of Manchin’s previous stance and his repeated chant: we must ‘Innovate not eliminate,'” the letter stated. “The current Schumer-Manchin draft agreement will quickly diminish our coal producing operations and all but obviate any need to innovate coal assets.”

Speaking by phone Wednesday morning, West Virginia Coal Association President Chris Hamilton said he has been in contact with Manchin about the Inflation Reduction Act and questions why there is so much urgency now to move this bill.

“A number of industries — including our renewable industries — have incentives that are turbocharged in this particular version of the Build Back Better bill, while coal gets severely penalized in multiple areas,” Hamilton said. “This is not good for the coal industry.

“This bill levies several new taxes on the coal industry,” Hamilton continued. “It effectively doubles the taxation placed on a ton of coal … the 15% corporate minimum tax does hit coal twice as hard as any other industry. We are extremely concerned and very disappointed in Sen. Manchin and Chuck Schumer’s agreement here.”

When Hamilton says the IRA doubles taxes on a ton of coal, he is referring to a provision of the bill that makes permanent a higher tax rate per ton of coal to fund the Black Lung Disability Fund. The Black Lung excise tax previously taxed a ton of underground coal at $1.10 and coal from surface mines at 55 cents. But the higher tax rate expired in 2021, dropping to 50 cents per ton for underground coal and 25 cents per ton for surface coal.

The Inflation Reduction Act would return the Black Lung excise tax rates to the higher rates and do so permanently. Advocates previously lobbied for a 10-year extension, with Manchin and other senators supporting a bill in 2021 to do that. The Black Lung Association came out in support of the act this week, having a virtual briefing with reporters Thursday with speakers from various Black Lung advocacy groups.

“We need a permanent fix for our Black Lung excise tax,” said Jerry Coleman, president of the Kanawha County Black Lung Association. “We’ve been getting year extension after year extension after year extension … It is very important we get our excise tax put back in.”

The United Mine Workers of America has lined up solidly behind the Inflation Reduction Act. In a statement released Tuesday, UMWA President Cecil Roberts said the previous Black Lung excise tax rates have been around for more than 40 years and the rates in the Inflation Reduction Act were simply a return to the status quo.

“This isn’t a tax increase — the coal companies have been enjoying a tax windfall for the last seven months and American taxpayers are picking up their tab,” Roberts said.

“Let’s be clear: Black Lung is caused by breathing too much coal and silica dust, which only happens when coal operators do not follow the law with respect to how much dust is in the atmosphere of a mine,” Roberts continued. “Scofflaw coal companies are the culprits and asking them to pay 50 cents more per ton of coal that is used domestically is only right, especially at a time when they are selling their coal for unprecedented high prices.”

Manchin agreed.

“I think for some reason, the coal associations … are believing that if they have to pay the $1.10 into the Black Lung fund, somehow that’s punishment,” Manchin said. “The big pushback I’m getting from the coal operators right now is having to pay the Black Lung fund, and that’s a shame.”

Capito acknowledged that the provisions to extend the higher Black Lung excise tax rates will be helpful to miners in West Virginia in the short term, but the other Inflation Reduction Act provisions could further bankrupt companies and reduce coal mining and reduce the tax revenue for the Black Lung Disability Fund.

“That’s one thing that probably will help West Virginians in certain instances, individuals who have black lung, but this whole bill is aimed at accelerating green energy and decelerating any kind of fossil fuels, whether it’s natural gas or coal,” Capito said.


Democratic leaders in the U.S. Senate plan to pass the Inflation Reduction Act using the budget reconciliation process, avoiding the 60-vote filibuster power Republicans have to halt legislation and allowing the bill to pass by a 51-vote majority. But the reconciliation process means the bill must be reviewed by the Senate parliamentarian, who can remove provisions that have no effect on the budget or revenues.

Senators could have a vote on the act as soon as this weekend, though other changes to the bill could happen between now and final passage.

According to Roll Call, U.S. Sen. Kyrsten Sinema, D-Ariz., is seeking changes to the bill, particularly a provision dealing with carried interest and possibly coming down from 15% on the book minimum tax rate.

Manchin himself had come out last month against the most recent version of the Build Back Better bill being negotiated between himself and Schumer due to rising inflation rates, calling for a pause to see if inflation slows down. Manchin is aware that some are upset with him reversing course and backing the Inflation Reduction Act.

“It’s unbelievable how you can be the hero one day and the villain the next in the political cycles that we’re in any more depending on how people are looking at things,” Manchin said.

“I remember that when Donald Trump was campaigning in West Virginia and saying how he was going to save all the coal jobs. We had as great, if not greater, decline in our coal industry and coal jobs during the four years when he said everything he would do and couldn’t do. Everyone’s tried. The bottom line is we’re doing something now.”


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