Extension of Liquid Fuel Tax Credits Still Not Resolved

Both the Senate and the House have passed bills that would extend for one year the $1-per-gallon tax credit for alternative biofuels and biodiesel but the chairman of the House Ways and Means Committee, Representative Sander Levin (D-MI), said recently that it may be Memorial Day before differences in the two bills are resolved and the legislation becomes law.

Many alternative fuel and biodiesel curtailed operations or shut down completely at the end of 2009 when their excise tax programs expired.  If the 2010 extension doesn't become law until the year's mid-point it will have only limited value to the industry. 

Fred Bosselman, Jr. sees the effects of congressional gridlock in his business as president of Bosselman Energy.    It supplies fuels to his family's chain of truck stops, Bosselman Travel Centers and its convenience gas stations, Pump and Pantry.

Even though the biodiesel tax credit, if passed, would be retroactive to the beginning of 2010, uncertainty has translated into higher prices for biodiesel, which makes blends of biodiesel and diesel fuel uncompetitive at the pump.

"The economics aren't there," Bosselman said in a phone interview with Agriculture.com last week. "I don't know why they start something and then decide to quit," he said, referring to the tax credit, which so far has had to be renewed by Congress each year.

Recently the National Association of Truck Stop Operators (NATSO)  joined farm and fuel marketing groups to urge Congress to quickly renew the tax credit.

"The lapse of the biodiesel tax incentive and the resulting decline in customer demand is undermining the ability of fuel retailers and marketers to offer Advanced Biofuels like biodiesel to the public," said an April 13th  letter to Speaker of the House Nancy Pelosi, Minority Leader John Boehner, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell. 

Other groups signing the letter included the National Biodiesel Board, Petroleum Marketers Association of America, American Soybean Association, National Farmers Union and American Farm Bureau Federation.

Under pay-as-you-go rules adopted by the Senate earlier this year, any tax credits, including the biodiesel tax credit, have to be paid for by either raising taxes or cutting spending. The House bill closes one loophole that had the potential to let paper mills use a biofuels tax credit for burning a paper-making byproduct called black liquor. The Senate has also closed the black liquor loophole, but used the funds to help pay for the health care reform bill.  That conflict between the House and Senate bills is causing the delay in the tax credit extension.   That means congressional leaders will have to look elsewhere for offsets that will make the tax credits in the jobs bill appear budget neutral.

In the House, Representatives Earl Pomeroy (D-ND) and John Shimkus (R-IL) and 28 others have introduced H.R. 4070 to extend the tax credit through 2014. In the Senate, the Biodiesel Tax Reform and Extension Act (S. 1589) would do the same thing. Its sponsors include Senators Maria Cantwell (D-WA) and Chuck Grassley (R-IA).

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