Grassley, Cantwell introduce tax credit bill

By Erin Voegele | June 28, 2011

New legislation proposed by Sen. Chuck Grassley, R-Iowa, and Sen. Maria Cantwell, D-Wash., seeks to extend and modify the existing tax incentive for domestic biodiesel production. According to Grassley’s office, the bipartisan bill, titled the “Biodiesel Tax Incentive Reform and Extension Act of 2011,” would help provide predictability for investors. If signed into law, the bill would extend the new incentive for 5 years.

Grassley and Cantwell note that the current lack of certainty regarding biodiesel tax policy inhibits access to capital and could undermine progress made by the U.S. biodiesel industry. “America is trying to kick its addiction to foreign oil, and biodiesel is part of the cure,” said Grassley.  “The more we can encourage domestic production and meet demand, the better off we’ll be economically, environmentally, and geopolitically.  This legislation simplifies the tax credit for producers.  It also gives investors predictability so they’ll be more likely to put their money into biodiesel production.  And it’s directly tied to jobs.”  

The bill, also known as S. 1277, would convert the tax incentive from a blender credit to a production tax credit. Information released by Grassley’s office states that this would better incentivize the continued growth of the domestic biodiesel industry. “The change would focus the benefits of the credit on the production capacity of these cleaner, greener fuels rather than on the activity of just blending them with petroleum diesel,” noted Grassley’s office in a statement. “By focusing on the production of 100 percent biobased fuel, this bill will shut down, once and for all, any remaining opportunity for the abuse known as “splash and dash,” in which oil companies add a few drops of biodiesel to their petroleum diesel just to qualify for the tax credit.”

The new legislation would also make the $1 per gallon production tax credit available for biodiesel, renewable diesel and aviation jet fuel. The level of the credit would be increased to $1.10 per gallon for the first 15 million gallons of biodiesel produced by small producers, which are defined as those with an annual production capacity of less than 60 million gallons per year. In addition, the bill would simplify the definition of biodiesel and simplify the coordination between the income tax credit and excise tax liability to improve compliance and reduce administrative burdens.

“Today’s high gas and diesel prices are slowing our economic recovery and burdening families,” said Cantwell. “For economic reasons, national security reasons, and environmental reasons, we must continue to invest in America’s clean energy economy. Biodiesel is America’s first advanced biofuel, it can be made from a variety of feedstocks, and is less polluting than today’s petroleum-based diesel fuel.  This bipartisan bill is smart federal policy because it is helping launch a nascent, domestically-based industry, reforms an existing credit to make sure it supports American biodiesel producers, and provides the industry the certainty it needs to continue to grow.”

The legislation was introduced on June 23 and referred to the Senate Finance Committee. Cosponsors of the bill include Sen. Roy Blunt, R-Mo.; Sen. Al Franken, D-Minn.; Sen. Tom Harkin, D-Iowa; Sen. Amy Klobuchar, D-Minn.; and Sen. Patty Murray, D-Wash.


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