Sponsored By

Senators propose biodiesel tax credit reformSenators propose biodiesel tax credit reform

Bipartisan legislation would reform biodiesel tax credit to domestic production credit and extend new policy for three years.

Jacqui Fatka

April 27, 2017

4 Min Read
Senators propose biodiesel tax credit reform
United Soybean Board

A biodiesel tax credit bill that would convert the blenders credit for biodiesel to a $1/gal. production credit for fuels produced in the U.S. for three years was introduced by a bipartisan group of senators led by Sens. Chuck Grassley (R., Iowa) and Maria Cantwell (D., Wash.). The bill provides an additional 10 cents/gal. credit for small U.S. biodiesel producers.

The Grassley/Cantwell-authored American Renewable Fuel & Job Creation Act of 2017 extends this important clean fuel incentive for three years and reforms the incentive by transferring the credit from the blenders to the producers of biofuels. The switch ensures that the tax credit incentivizes domestic production and that taxpayers aren't subsidizing imported fuel.

Biofuel imports have increased from 510 million gal. in 2014 to about 1 billion gal. in 2016. Already in the first quarter of 2017, imports are 10% higher than at this time in 2016. In many cases, foreign biodiesel benefits both from the existing tax credit and from additional foreign subsidies, which makes it difficult for domestic biodiesel facilities to compete.

Changing the structure of the tax credit also would save taxpayers millions of dollars. U.S. biodiesel imports have grown sharply in recent years, largely as a result of the tax credit. In 2015 alone, the U.S. Department of Treasury spent more than $600 million on tax credits for imported biodiesel and renewable diesel. Importantly, this fuel often had already received subsidies in its country of origin (Argentina, Indonesia and the European Union, for example).

According to the Joint Committee on Taxation, reforming the tax incentive would save U.S. taxpayers $90 million as imports are reduced and domestic production grows.

“U.S. tax policy should support U.S. products and U.S. jobs,” Grassley said. “This bipartisan bill would end a system that gives many foreign producers a leg up over U.S. producers and would give certainty to the biodiesel industry, which is responsible for employing thousands of Americans. Iowa producers shouldn't be put at a disadvantage by foreign producers that, in many cases, are double dipping by benefiting from U.S. tax incentives on top of their own significant government subsidies.

"These reforms supporting domestic producers would also save taxpayers money," he added. "Policies ought to encourage the production of domestic renewable fuels to meet consumer demand and support the creation of American jobs.”

Without this reform, U.S. tax policy is increasingly creating competitive disparities in which U.S. companies are losing jobs and market share to subsidized foreign production in Europe, Argentina and other nations, the National Biodiesel Board (NBB) noted. Because of this flood of imports, NBB also had to file an antidumping and countervailing duty petition against Argentina and Indonesia for violating trade laws and for harming U.S. workers and manufacturers.

“Well-crafted and efficient tax incentives can be powerful policy mechanisms to achieve the nation's energy objectives and to create jobs, but subsidizing foreign manufacturing and hurting U.S. workers were not Congress' intent. We applaud the senators' bill to close this loophole by reforming the credit as a domestic production credit,” said Anne Steckel, NBB vice president of federal affairs. “Updating this tax credit is necessary to create a level playing field for U.S. biodiesel producers — and it has the added benefit of saving millions of taxpayer dollars.”

Switching from a blenders credit to a producers credit would offer numerous additional benefits. The blenders credit can be difficult to administer, because the blending of fuel can occur at many different stages of fuel distribution. This can make it difficult to ensure that only fuel that qualifies for the credit claims the incentive, making the program susceptible to abuse.

Joining Grassley and Cantwell to co-sponsor the American Renewable Fuel & Job Creation Act of 2017 are: Sens. Joni Ernst (R., Iowa) Pat Roberts (R., Kan.), Mazie Hirono (D., Hawaii), Roy Blunt (R., Mo.), Sheldon Whitehouse (D., R.I.), Heidi Heitkamp (D., N.D.), John Thune (R., S.D.), Tom Udall (D., N.M.), Martin Heinrich (D., N.M.), Jeanne Shaheen (D., N.H.), Amy Klobuchar (D., Minn.), Al Franken (D., Minn.), Joe Donnelly (D., Ind.) and Patty Murray (D., Wash.).

Modifying the credit is estimated to have little to no impact on consumers. Much of the credit would continue to be passed on to the blender and, ultimately, the consumer, the senators said.

Additionally, the U.S. biodiesel industry is currently operating at approximately 65% of capacity. The domestic biodiesel industry has the capacity and access to affordable feedstocks to meet the demand of U.S. consumers, the senators said.

In 2005, Congress created the biodiesel tax incentive. As a result of this incentive, as well as the Renewable Fuel Standard and consumer interest, biodiesel is providing significant benefits to the nation.

Domestic biodiesel production supports tens of thousands of jobs. Replacing traditional diesel with biodiesel reduces emissions and creates cleaner air. Homegrown biodiesel improves U.S. energy security by diversifying transportation fuels and reducing dependence on foreign oil. Biodiesel itself is a diverse fuel that can be produced from a wide array of resources, such as recycled cooking oil, soybean/plant oils and animal fats.

About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

Subscribe to Our Newsletters
Feedstuffs is the news source for animal agriculture

You May Also Like