On December 18, 2015, President Obama signed the omnibus spending bill, or Consolidated Appropriations Act, 2016, into law. The $1.1 trillion spending bill includes the retroactive extension of the $1 per gallon tax credit for biodiesel and renewable diesel blenders through December 31, 2016, while extending the second-generation biofuel production credit through January 1, 2017. In addition to extending tax credits for biofuels, the bill also funds a wide range of government programs through the end of 2016, including the Biomass Crop Assistance Program (BCAP), the Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance Program (BAP), and the Rural Energy for America Program (REAP).
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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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On August 18, 2015, the Internal Revenue Service (IRS) released a notice containing tax code information for 2014 biodiesel tax credits. The focus of the notice is the treatment of credits under Internal Revenue Code Section 6426(c) and (d) that allow a biodiesel blender to claim a credit against tax liability. Generally, the tax liability is in the form of excise taxes imposed by Sections 4041 and 4081 and is reported on Form 720, Quarterly Federal Excise Tax Return, and the Section 6426 credits are claimed on Schedule C (Form 720), Claims. The IRS notice informs claimants about the federal income tax treatment of these credits and illustrates the application of the income tax treatment for claimants. On July 29, 2015, a bill to amend the Internal Revenue Code of 1986 to provide credits for the production of renewable chemicals and investments in renewable chemical production facilities, and for other purposes (H.R. 3390) was introduced in the House. The bill would expand production and investment tax credits that are currently available to renewable energy producers to apply also to renewable chemical manufacturers. The program allows manufactures to choose either: (1) a 15 cents per pound production credit for eligible renewable chemicals; or (2) a 30 percent investment tax credit for the construction of renewable chemical production facilities. The credits will be in effect for five years after the bill is enacted, and will be capped at $500 million over the life of the program. The Biotechnology Industry Organization (BIO) has expressed its support for H.R. 3390, restating the need to create a level playing field in the U.S. for industrial biotech companies to innovate and develop new renewable chemicals and biobased products. Iowa Senate bill SF 350: the Renewable Chemical Production Tax Credit Program was introduced in March 2015, and is awaiting review in the Ways & Means Committee. If passed, the legislation will allow producers of renewable chemicals in Iowa to claim a five cent per pound tax credit, with a maximum credit of $1 million for businesses operating in Iowa for five years or less, and a maximum credit of $500,000 for businesses operating in Iowa for more than five years. Chemicals must have at least a 50 percent biobased content to qualify as renewable chemicals under the bill, and must also be sold and used for purposes other than food, feed, or fuel. On December 16, 2014, the Senate followed the House of Representatives and passed tax extender legislation that is expected to be signed by the President. The final package that passed would retroactively extend incentives that expired on December 31, 2013, through the end of 2014. It does not extend the incentives through the end of 2015, as Senate Finance Committee Chair Ron Wyden (D-OR) and other leaders would have liked. The final tax extender package includes important incentives for the biofuels industry, including the dollar-per-gallon biodiesel tax credit, as well as the biofuel production tax credit for cellulosic and algae-based biofuels and the special allowance for second generation biofuel plant property. On December 1, 2014, the U.S. House of Representatives passed H.R. 5771, the Tax Increase Prevention Act of 2014, more commonly referred to as the tax extender bill. This bill extends through 2014 the dollar-per-gallon biodiesel tax credit, as well as the biofuel production tax credit for cellulosic and algae-based biofuels and the special allowance for second generation biofuel plant property. While the Chair of the Senate Committee on Finance is reportedly still working to pass a tax extender bill that would extend these expiring incentives beyond 2014, especially given the fact that the Senate is expected to adjourn for the year today, chances are that the Senate will pass tax extender legislation similar to the House-passed version. If that happens and the President enacts it, these tax credits will be retroactively effective for the entire year of 2014 as the prior tax credits had expired on January 1, 2014. There continues to be uncertainty about the future of the tax credits, as this bill will expire on January 1, 2015, with no guarantee of renewal. During the next state legislative session, which begins in January, Iowa's Economic Development Agency will reportedly seek approximately $20 million in new incentives for companies that use chemicals derived from ethanol production to produce biobased products. The Agency reportedly believes sufficient incentives exist to promote biofuel development in Iowa. This new incentive would be needed to help further the biobased economy in the State. More information on this effort is available in The Des Moines Register news story "Biochem Tax Credit Pitched By Economic Agency." On September 19, 2014, Representatives Earl Blumenauer (D-OR) and Dave Loebsack (D-IA) introduced the Bridge to a Clean Energy Future Act of 2014 (H.R. 5559), which was referred to the House Committee on Ways and Means. The bill would extend clean energy tax incentives, including those benefiting the biofuel and bioenergy industries. Among the tax credits being extended are the second generation biofuel producer credit, the $1.00 per gallon tax credit for biodiesel and renewable diesel, and the Section 45 renewable energy production tax credit. More information is available online. On September 18, 2014, Representatives Earl Blumenauer (D-OR) and Dave Loebsack (D-IA), along with 16 other Members of Congress, introduced H.R. 5559, the Bridge to a Clean Energy Future Act of 2014. A copy of Representative Blumenauer's statement on the bill is available online.
On May 15, 2014, the U.S. Senate failed to pass a procedural measure that would have allowed for that body to consider and vote on S. 2260, the "Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act," the package of tax extenders approved by the Senate Finance Committee in April. The EXPIRE Act includes extensions through December 31, 2015 (and retroactive to January 1, 2014), of the following key biofuels incentives that have expired: the Alternative Fuel Refueling Property Credit; the Second Generation Biofuel Producer Tax Credit; the Special Depreciation Allowance for Second Generation Biofuel Plant Property; the Biodiesel and Renewable Diesel Fuels Credit; and the Alternative Fuel and Alternative Fuel Mixture Excise Tax Credit. A copy of the EXPIRE Act is available online. A summary of the bill is also available online.
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