While many farmers wait for news about tax extenders and Section 179 expensing for tax year 2015, the biodiesel industry has an additional concern – a reformed biodiesel producer's tax incentive.
Tax negotiations heated up Thursday in D.C. as lawmakers introduced updated biodiesel tax legislation in the House and Senate.
"The biodiesel industry cannot grow and support good-paying jobs without some level of predictability on tax policy, and the legislative clock is winding down," said Anne Steckel, NBB's vice president of federal affairs. "This tax incentive has strong bipartisan support, as demonstrated by the bills introduced today. It's good for the economy, it's good for the environment and it's good for consumers. And importantly the reforms included in today's bills will appropriately focus the incentive on U.S. production"
The legislation, sponsored by Sens. Chuck Grassley, R-Iowa, and Maria Cantwell, D-Wash., and Reps. Reps. Kristi Noem, R-S.D., and Bill Pascrell, D-N.J., builds on legislation that won unanimous support from the Senate Finance Committee in July.
The bills include a key reform restructuring the incentive from a blender's credit to a producer's credit focused on domestic production.
Under the existing blender's structure, biodiesel that is produced overseas and blended in the U.S. is increasingly taking advantage of the incentive, undermining U.S. production and directing U.S. tax benefits to foreign producers.
Already this year we have seen more than 500 million gallons of foreign fuel blended in the U.S. to take advantage of the incentive. By limiting the incentive to apply only to domestic production, the reform would save about $90 million, according to the Joint Committee on Taxation.
"I think lawmakers would universally agree we shouldn't be using U.S. tax dollars to support the production of foreign fuel," Steckel said. "The whole point of this policy is to create American jobs and industry while strengthening our energy security and encouraging innovation in the fuels market."
Additionally, under the blender's structure, thousands of companies are eligible to apply for the credit at a variety of points along the distribution chain – making it difficult for the RFS to monitor compliance and fraud. By narrowing the eligibility for the credit to domestic biodiesel producers, the reform would streamline the process for taking the credit. The incentive will continue benefiting consumers by lowering the cost of biodiesel blended into diesel fuel.
"Today, one-third of petroleum used in the United States is imported from foreign countries and most of it is used to fuel our vehicles," Noem said. "Especially with conflicts arising in energy-rich areas of our world, the need to decrease our reliance on foreign fuels grows every single day. A commitment to renewable fuels, like biodiesel which can be grown right here in America, is critical as we look to improve our security by becoming more energy independent."