US: Fuels: Biofuel tax credits

Overview

 * Program: Biofuel tax credits
 * Regulating body: Internal Revenue Service (IRS)

Background
The U.S. federal government has several tax credits available for the production and blending of biofuels. A tax credit is an amount that can be deducted from a person's total tax liability. This differs from a tax deduction, which reduces the amount of someone's income that is taxable. All tax credits are administered by the Internal Revenue Service (IRS). Some individual |state-level states offer additional biofuel tax credits.

The major federal biofuel tax credits in the U.S. are for biodiesel and cellulosic biofuel. The Volumetric Ethanol Excise Tax Credit (VTEEC), which applied to fuel blenders, expired at the end of 2011.

The U.S. biofuels industry is supported by the Renewable Fuel Standard.

Biodiesel tax credit
The biodiesel tax credit was established in 2005 by the American Jobs Creation Act of 2004. It was extended by the Energy Policy Act of 2005, amended by the Energy Improvement and Extension act of 2008, and extended again by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The American Taxpayer Relief Act of 2012 (Pub. L. 112-240) retroactively extended the tax credits for biodiesel and renewable diesel for 2012, and extended them through 31 December 2013.

Producers of pure biodiesel and renewable diesel that meet ASTM specifications are eligible for a $1.00 per gallon tax credit upon use or sale or said fuel. Blenders who purchase biodiesel or renewable diesel from a producer cannot claim credits themselves.

The tax credits included are:
 * $1.00 per gallon biodiesel tax credit for producers or blenders of pure biodiesel
 * $1.00 per gallon renewable diesel tax credit for producers or blenders of biomass-based diesel or diesel/renewable diesel blends
 * 10-cents per gallon tax credit for small producers of agri-biodiesel ("biodiesel produced from virgin agricultural products such as soybean oil or animal fats" (Expired 31 December 2011)

Cellulosic biofuel tax credit
The credit for production of cellulosic biofuel started January 1, 2009, by the Food, Conservation, and Energy Act of 2008 and was originally scheduled to expire December 31, 2012. The cellulosic ethanol producers' credit was extended by The American Taxpayer Relief Act of 2012 (Pub. L. 112-240; AKA "Fiscal Cliff deal"), and now is scheduled to expire December, 2013. When VEETC was still active, producers of cellulosic ethanol could not claim combined credits of more than $1.01 per gallon.

The tax credit is:
 * $1.01 per gallon credit for producers of cellulosic biofuel

VEETC
The Volumetric Ethanol Excise Tax Credit (VEETC) was created by the American Jobs Creation Act of 2004, which applied through December, 2010. The Renewable Fuels Reinvestment Act (RFRA) extended the tax credits for another year. VEETC expired on December 31, 2011.

The tax credits included in VEETC were:
 * 45-cents per gallon credit for blending ethanol in gasoline
 * 54-cents per gallon tariff on ethanol imports
 * 10-cents per gallon credit for small producers of ethanol

Links
U.S. Department of Energy on Biodiesel Tax Credit

IRS Frequently Asked Questions

References