Bush tax cuts may revive US biodiesel credit

Posted Dec. 8, 2010

Don't count the U.S. biodiesel tax incentive out just yet. Now, caught in the debate over estate, payroll and income tax rates included in the Bush-era tax cuts, there is a strong possibility the that the retroactive $1 per gallon federal biodiesel blenders tax credit may have another chance at renewal soon. While there is no official legislative text yet, Congress and President Obama have reportedly reached a compromise on the framework of a bill that would extend a plethora of soon-to-expire taxes. But the question remains, will that legislation include the renewal of the biodiesel tax credit? If a slew of tax provisions that expired at the end of last year, including the biodiesel incentive, are included in the legislation, the chances for the reemergence of the biodiesel credit is very possible, said Manning Feraci, vice president of federal affairs for the National Biodiesel Board.

"There are obvious job creation, energy security and environmental benefits associated with extending the biodiesel tax incentive," Feraci told Biodiesel Magazine. "Since the beginning of the lame duck session, there has been noteworthy bipartisan support for extending expired tax provisions like the biodiesel tax incentive." And Feraci couldn't be any more accurate. Just days before the media storm engulfing nightly television even began, Senator Mitch McConnell, R.-Ky., wrote a letter to Sen. Harry Reid, D.-Nev., calling for the renewal of the 2009 tax extenders along with the Bush-era tax cuts. "Finally," McConnell ended his letter, "Congress still needs to act on the 'tax extenders' and the alternative minimum tax patch, all of which expired on Dec. 31, 2009."

In his own show of support, Reid also produced language that called for the reinstatement of the biodiesel tax credit. On Saturday, Dec. 4, the Congress met to discuss two amendments proposed by Reid and Sen. Charles Schumer, D.-N.Y., that called for allowing the Bush-era tax cuts to expire for certain income brackets, $250,000 in Reid's amendment and $1 million in Schumer's. Although both amendments were defeated, they both included biodiesel language that substituted the Dec. 31, 2009 expiration date for the tax incentive with a Dec. 31, 2011 date. The language of the amendments also clarified that all fuel produced or sold after Dec. 31, 2009 would also apply for the provisions of the tax incentive, essentially retroactively reinstating the credit from 2009 and extending it through 2011.

While the biodiesel tax incentive once again has garnered strong support from both Democrats and Republicans, the political wrangling in Washington may also play a large role in its fate. Typically, a piece of tax legislation that goes to the House floor enters under a closed rule, meaning no amendments can be made, Feraci said. And, in the Senate, there are also ways to structure things in a way that doesn't allow for amendments, a process known as "filling the tree," which essentially blocks the ability to file for amendments and, instead, calls for cloture.

The biodiesel tax provision that expired in 2009 was one of 72 tax provisions and will most likely be considered a traditional extender that Congress reenacted, as was the case three times for the incentive since its introduction. For now, the best chance for a renewal rests in the fate of those tax extenders, and Feraci said, "We are hopeful that the tax agreement reached by President Obama and Congress will retroactively extend the biodiesel tax incentive through 2011."