Senate bill introduced to extend, reform US biodiesel tax credit

By Ron Kotrba | April 30, 2017

U.S. Sens. Chuck Grassley, R-Iowa, and Maria Cantwell, D-Washington, introduced a bipartisan bill to renew the $1-per-gallon biodiesel tax credit for three years and to reform it from a blenders incentive to a domestic producers tax credit. Along with Grassley and Cantwell, the legislation, called the American Renewable Fuel and Job Creation Act of 2017, has 14 other original sponsors from both sides of the aisle.

The bill also provides an additional 10-cent-per-gallon credit for small U.S. biodiesel producers.

“The biodiesel tax credit already has a sterling track record of reducing emissions and greening our economy, removing the equivalent of 16 million cars from the road,” said Cantwell. “This legislation will remove millions more cars while promoting energy independence, saving taxpayer dollars, and accelerating by up to 45 percent the creation of clean energy jobs in the domestic biodiesel production industry.”

“U.S. tax policy should support U.S. products and U.S. jobs,” Grassley said. “This bipartisan bill would end a system that gives many foreign producers a leg up over U.S. producers and give certainty to the biodiesel industry, which is responsible for employing thousands of Americans. U.S. producers shouldn’t be put at a disadvantage by foreign producers that in many cases are double dipping by benefiting from U.S. tax incentives on top of their own significant government subsidies. These reforms supporting domestic producers would also save U.S. taxpayers money. Policies ought to encourage the production of domestic renewable fuels to meet consumer demand and support the creation of American jobs.”

The measure is the latest of several attempts over the past few years to reform the biodiesel credit in order to exclude use of U.S. tax dollars to subsidize foreign manufacturing of biodiesel and bring idled U.S. production capacity back online. In 2016, roughly a third of the biodiesel and renewable diesel consumed in the U.S.—or more than 900 million of nearly 3 billion gallons—came from imports that were eligible for the $1-per-gallon tax credit. The reform would not block imported biodiesel from entering the U.S. market, but it would rather make imported product ineligible for the federal tax incentive. Imports would still be eligible for incentives under the Renewable Fuel Standard in the form of RIN credits and carbon credits under California’s low carbon fuel standard, along with any subsidies available in the originating countries.

“Well-crafted and efficient tax incentives can be powerful policy mechanisms to achieve the nation’s energy objectives and to create jobs,” said Anne Steckel, vice president of federal affairs for the National Biodiesel Board, “but subsidizing foreign manufacturing and hurting U.S. workers were not Congress’ intent. We applaud the senators’ bill to close this loophole by reforming the credit as a domestic production credit. Updating this tax credit is necessary to create a level playing field for U.S. biodiesel producers—and it has the added benefit of saving millions of taxpayer dollars.”

The NBB also filed an antidumping and countervailing duties petition with the U.S. Department of Commerce and the U.S. International Trade Commission, which are currently investigating the matter, against Argentine and Indonesian biodiesel imports. This would impose variable tariffs on specific companies that ship biodiesel from those countries to the U.S.

Argentine biodiesel receives reduced export tax obligations under that country’s differential export tax regime, and NBB said without this reform, U.S. tax policy is increasingly creating competitive disparities in which U.S. companies are losing U.S. jobs and market share to subsidized foreign production.

On the introduction of the legislation, Iowa Renewable Fuels Association Executive Director Monte Shaw said, “Once again, Sen. Grassley is leading the fight to extend and reform the federal biodiesel tax credit. Taking these steps is vital to maximize the impact U.S. biodiesel producers can have on powering our economy, cleaning our air and enhancing our energy security. IRFA thanks Sen. Grassley for his unrelenting work on leveling the playing field for U.S. biodiesel.”

Roughly half the U.S. biodiesel produced comes from soybean oil. Ron Moore, president of the American Soybean Association and Illinois soybean farmer, said, “This bill allows producers the security they need to grow their operations and will help to continue biodiesel’s success in diversifying the fuel market. This tax credit and extension is vital to the industry’s continued growth, and will maximize the added value of domestic production of biofuels.”

Both Grassley and Cantwell say modifying the credit is estimated to have little to no impact on the consumer. 


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