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Federal Biodiesel Tax Credit

 

A couple of days ago, Representatives Diane Black (R-Tenn) and Ron Kind (D-Wisc.) introduced a piece of bipartisan legislation extending the biodiesel blenders’ tax credit so that it can be phased out over a five-year period. The bill, entitled the Biodiesel, Renewable Diesel, and Alternative Fuels Extension Act of 2017, is an effort to correct for the fact that the biodiesel tax credit requires renewal at the end of every tax year, giving market participants more notice of expiration.

Congress created the biodiesel tax credit in 2005, giving blenders of biodiesel a $1.00 per gallon tax credit. The purpose of this tax credit was to give biodiesel blenders a competitive edge in the market. The tax credit allowed biodiesel blenders to become competitive with diesel, providing a greater consumer incentive for the consumption of biodiesel.

The provisions of the tax credit maintain the $1.00 per gallon tax credit for the years 2017 and 2018, reduce the credit to $0.75 per gallon for the year 2019, $0.50 per gallon in 2020 and 2021, and finally, grants no tax credit for the year 2022 and beyond. Under the introduced bill, the tax credit will remain at the blender level, ensuring that consumers will continue to benefit from the tax credit. An additional benefit is that the tax credit, by being claimed at the blender level, is less of a barrier to the promotion of renewable fuels.

Various national trade associations have offered their support of the legislation including: NATSO, The National Association of Convenience Stores (NACS), Society of Independent Gasoline Marketers of America (SIGMA), Petroleum Marketers Association of America (PMAA), and the American Trucking Associations (ATA).

Rob Underwood, President of PMAA is quoted as saying, “The legislation introduced by Representatives Black and Kind will enable PMAA’s members to charge customers less money for heating oil and motor fuel. We applaud Representatives Black and Kind for introducing this important legislation.” Lisa Mullings, President and CEO of NATSO echoed this sentiment by stating, “We applaud Representatives Black and Kind for introducing a measure that will enable consumers to have access to cleaner-burning fuel at the lowest possible cost. The five-year phaseout contained in this legislation…is designed to provide much-needed policy certainty to the market. The phaseout is also compatible with congressional efforts to reform and simplify the tax code.”

Given the bipartisan support for this piece of legislation, the bill will hopefully gain momentum in the federal legislature. With the backing of many of the larger market participants in the biodiesel industry, the bill has the industry support needed to pass the scrutiny of the House.

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