Legislation Extends Biodiesel Tax Incentive

Senators Grassley and Baucus introduce bill to offer tax incentive through 2010. Compiled by staff

Published on: Mar 17, 2006

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Max Baucus, D-Mont., introduced legislation this week to extend the biodiesel tax incentive. The Grassley/Baucus bill, S. 2401, extends alternative energy tax incentives, including the biodiesel excise and income tax incentive for biodiesel and biodiesel blends. It also gives a one-year extension until 2010 to a tax credit for the cost of installing pumps that offer a 20% blend of biodiesel (B20).

Darryl Brinkmann, chairman of National Biodiesel Board and a soybean producer from Carlyle, Ill., says that biodiesel and soybean leaders have already seen the results of the biodiesel tax incentive. Last year, U.S. biodiesel production tripled to 75 million gallons. "Passage of the tax incentive gave the biodiesel industry the confidence to grow as we work to keep up with the skyrocketing demand for biodiesel," Brinkmann says. "Consumers across the nation have benefited because the biodiesel tax incentive has helped make biodiesel more cost competitive."

By amending the Internal Revenue Code of 1986, the Grassley/Baucus bill would:

Biodiesel and Alternative Fuel Excise Tax Credit: Extend the biodiesel excise and income tax credit for biodiesel and biodiesel blends until December 31, 2010. The credit was originally established as part of the American JOBS Creation Act of 2004 (H.R. 4520), which President Bush signed into law in October 2004. The credit was extended from 2006 until 2008 when President Bush signed the Energy Bill on August 8, 2005. The excise tax credit amounts to a penny per percentage point of biodiesel blended with petroleum diesel for "agri-biodiesel," such as that made from soybean oil, and a half-penny per percentage for biodiesel made from other sources, like recycled cooking oil. It lowers the cost of biodiesel to consumers in taxable and tax exempt markets.

Credit for Refueling Property: Extend for one-year a 30 percent tax credit, enacted in the Energy Policy Act of 2005, for the cost of installing clean-fuel vehicle refueling property. Clean fuels include biodiesel blends of 20 percent or more as well as ethanol and hydrogen.

Biodiesel has become America’s fastest growing alternative fuel according to the Department of Energy. More than 600 filling stations make biodiesel available to the public, and 1,500 petroleum distributors carry it nationwide. More than 600 fleets use biodiesel, including government and military, commercial and school bus fleets

Based in Jefferson City, Mo., NBB is a nonprofit trade association coordinating the industry and educating the public about biodiesel. ASA serves as the collective policy voice of 25,000 U.S. soybean producers on national issues important to all U.S. soybean farmers.