On October 18, 2017, Senator Debbie Stabenow (D-MI) introduced to the Senate the Renewable Chemicals Act of 2017 (S. 1980), which aims to establish a short-term tax credit for the production of renewable chemicals and for investment in renewable chemical production facilities. If enacted, the legislation would allow taxpayers to claim a production credit equal to $0.15 per pound of biobased content of each renewable chemical produced. In lieu of the production credit, taxpayers would be able to claim an investment credit equal to 30 percent of the basis of any eligible property that is part of a renewable chemical production facility. The bipartisan bill was co-sponsored by Senators Susan Collins (R-ME), Chris Coons (D-DE), Al Franken (D-MN), and Tammy Baldwin (D-WI), and is companion legislation to H.R. 3149, which was introduced in the House in June 2017 by Representative Bill Pascrell (D-NJ).
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Bergeson & Campbell, P.C. (B&C®) is a Washington, D.C., law firm providing biobased and renewable chemical product stakeholders unparalleled experience, judgment, and excellence in bringing innovative products to market.
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The National Biodiesel Board (NBB) announced that on September 13, 2017, New York Governor Andrew Cuomo signed legislation that introduces bioheating fuel tax credits and bioheating fuel tax requirements to three New York counties. The bill (S5422A) requires all home heating oil sold for use in Nassau, Suffolk, and Westchester counties on or after July 1, 2018, to contain at least five percent biodiesel (B5). Assemblyman Steve Englebright and Senator Phil Boyle sponsored the bill, which received broad support from a range of industry and environmental advocates. New York City, the largest municipal consumer of heating oil in the country, instituted a citywide two percent biodiesel requirement in 2012, which increases to five percent on October 1, 2017. With the new legislation, the entire New York City Metropolitan Area, representing approximately 70 percent of the state’s heating oil market, will have a five percent biodiesel blending requirement. NBB commended Governor Cuomo for signing the bill, stating that it will provide cleaner air for more New Yorkers and support local jobs in the clean energy sector. On June 29, 2017, Representatives Bill Pascrell (D-NJ), Ryan Costello (R-PA), Brian Fitzpatrick (R-PA), and Linda Sánchez (D-CA) introduced the Renewable Chemicals Act of 2017 to the House. If enacted, the legislation would create a targeted, short-term tax credit for the production of qualifying renewable chemicals from biomass and for investments in renewable chemical production facilities. The tax credit would be provided based on job creation, innovation, environmental benefits, commercial viability, and contribution to U.S. energy independence. Numerous industry stakeholders, including the Biotechnology Innovation Organization (BIO), Renmatix, and DSM, praised the proposed legislation. On June 20, 2017, the National Biodiesel Board (NBB) announced that nearly 100 biodiesel advocates from across the country visited Capitol Hill to urge Congress to bring back the biodiesel tax incentive as proposed in both chambers of Congress. Industry participants consisted of biodiesel producers, distributors, and feedstock suppliers from over 24 states. According to Anne Steckel, the Vice President of Federal Affairs at NBB, the bipartisan biodiesel tax incentive should be reinstated since it helps support tens of thousands of jobs nationwide and the proposed reforms address the unintended consequences of the credit. The legislative proposals in Congress restructure the incentive so that U.S. producers qualify for the credit, which cuts off subsidies for foreign manufacturing and reduces the potential for tax fraud. On May 5, 2017, Senator Ron Wyden (D-OR) introduced to the Senate Finance Committee legislation focused on reducing carbon pollution over the next decade by incentivizing clean energy and promoting new technologies in the private sector. The Clean Energy for America Act, which was co-sponsored by 21 Democratic Senators, provides a simplified set of long-term, performance-based energy tax incentives to promote clean energy production and storage. The legislation would create a technology-neutral incentive for the domestic production of renewable transportation fuels based on the lifecycle carbon emissions of the fuel. The lifecycle emissions would need to be 25 percent less than the U.S. nationwide average for the fuel to be eligible for a tax credit. Zero and net-negative emission fuels would be eligible for the maximum incentive of $1 per gallon. To assist in the transition, the proposed legislation would extend the current expiring clean energy provisions through December 31, 2018. On April 26, 2017, a bipartisan bill was introduced in the U.S. Senate to reform the biodiesel tax credit and extend the new policy for three years. The American Renewable Fuel and Job Creation Act of 2017, which was sponsored by Senator Chuck Grassley (R-IA), Senator Maria Cantwell (D-WA), and 14 other senators, transfers the $1 gallon tax credit from the blenders to the producers of biofuels to ensure that it incentivizes domestic production. The bill also provides an additional $0.10 gallon credit for small biodiesel producers in the United States. According to a statement released by Grassely, the bill would incentivize domestic production, remove a system that allows foreign biodiesel producers to benefit from the tax credit, and would have little to no impact on the consumer. On April 13, 2017, the Iowa Renewable Fuels Association (IRFA) released a statement regarding the passage of a bill, HSB 187, by the Iowa House Appropriations Committee that would cut the value of the Iowa biofuels tax credits and complicate the mechanism for receiving the credit. According to the bill, the value of the tax credits would be determined based on annual sales, and the amount of the credits would be capped on an annual, statewide basis. The purpose of the biofuels tax credits was to incentivize consumers to purchase higher blends of ethanol and biodiesel, such as E15, E85, and B11, by offering a tax credit to fuel retailers. IRFA states, however, that the amendments to HSB 187 undercut the entire purpose of the tax credits since fuel retailers cannot pass the price reduction to the consumer if they do not know what the credit is at the time the fuel is sold. On April 4, 2017, the Iowa Biodiesel Board (IBB) announced that the Iowa Department of Revenue’s 2016 Retailers Fuel Gallons Annual Report demonstrated that more than half of Iowa’s fuel retailers carried biodiesel blends in 2016. In 2016, 344.8 million gallons of on-road biodiesel blends were sold, which accounts for 54.7 percent of total on-road diesel fuel sales. The report also showed that twice as many gallons of 11 - 20 percent biodiesel (B11-B20) were sold compared to lower blends. IBB credits the growth in the use of higher biodiesel blends to Iowa’s proactive state policies, which are working as intended to increase production and consumption. Due to the instability at the federal level, Grant Kimberley, the IBB executive director, stated that Iowa’s biofuel producers need state tax credits to stay in place now more than ever to remain competitive. On February 9, 2017, Illinois State Senators Andy Manar and Chapin Rose introduced legislation aimed at growing Illinois’ biobased economy by providing incentives under the Renewable Chemical Production Tax Credit Program Act. The program would provide credit against taxes for eligible Illinois businesses that produce renewable chemicals within the state using biomass feedstock and other renewable sources. The legislation defines a renewable chemical as a building block with a biobased content of at least 50 percent. According to the legislation, eligible businesses will be required to submit to the Department of Commerce and Economic Opportunity an application for the tax credit that includes the amount of renewable chemical produced during the calendar year and any other information needed to verify eligibility as identified by the Department. The proposed tax credit will not exceed $1 million for businesses that have been in operation in Illinois for five years or less, and $500,000 for businesses that have been in operation longer than five years. The New York State Clean Heating Fuel Tax Credit has been extended through 2020. The personal income tax credit, which was initially authorized in 2006, is provided to eligible taxpayers for biodiesel purchases used for residential space and water heating. For each percent of biodiesel blended with conventional home heating oil, a tax credit of $0.01/gallon is available up to a maximum of $0.20/gallon. A partial credit will be calculated for buildings with a shared oil storage tank for residential and non-residential space that is based on the percentage of residential square footage. A refund will be provided to taxpayers whose allowable credit exceeds their liability for that year. |
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