Biodiesel Incentives and Laws
***United States (Federal) Incentives and Laws***
Biodiesel Mixture Excise Tax Credit
A biodiesel blender that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of $1.00 per gallon of pure biodiesel, agri-biodiesel, or renewable diesel blended with petroleum diesel to produce a mixture containing at least 0.1% diesel fuel. Only blenders that have produced and sold or used the qualified biodiesel mixture as a fuel in their trade or business are eligible for the tax credit. The incentive must first be taken as a credit against the blender’s fuel tax liability; any excess over this tax liability may be claimed as a direct payment from the IRS. Claims must include a copy of the certificate from the registered biodiesel producer or importer that: identifies the product; specifies the product’s biodiesel, agri-biodiesel, and/or renewable diesel content; confirms that the product is properly registered as a fuel with the U.S. Environmental Protection Agency; and confirms that the product meets the requirements of ASTM specification D6751. Renewable diesel is defined as liquid fuel derived from biomass that meets EPA’s fuel registration requirements and ASTM specifications D975 or D396; the definition of renewable diesel does not include any fuel derived from co-processing biomass with a feedstock that is not biomass. Under current law, this incentive expires December 31, 2009. For more information, see IRS Publication 510 and IRS Forms 637, 720, 4136, 8849, and 8864, which are available via the IRS Web site. (Reference Public Law 110-343, Section 202, and 26 U.S. Code 6426)
Alternative Fuel Mixture Excise Tax Credit
An alternative fuel blender that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive on the sale or use of the alternative fuel blend (mixture) for use as a fuel in the blender’s trade or business. The credit is in the amount of $0.50 per gallon of alternative fuel used to produce a mixture containing at least 0.1% gasoline, diesel, or kerosene. Qualified alternative fuels are: compressed natural gas (based on 121 cubic feet), liquefied natural gas, liquefied petroleum gas, liquefied hydrogen, P-Series fuel, liquid fuel derived from coal through the Fischer-Tropsch process, and compressed or liquefied gas derived from biomass. The incentive must first be taken as a credit against the blender’s alternative fuel tax liability; any excess over this fuel tax liability may be claimed as a direct payment from the IRS. The tax credit is not allowed if an incentive for the same alternative fuel is also determined under the rules for the ethanol or biodiesel tax credits. Under current law, this incentive expires December 31, 2009, except in the case of the credit for liquefied hydrogen, which expires September 30, 2014. For more information, see IRS Publication 510 and IRS Forms 637, 720, 4136, and 8849, which are available via the IRS Web site. (Reference Public Law 110-343, Section 204, and 26 U.S. Code 6427)
Cellulosic Biofuel Producer Tax Credit
A cellulosic biofuel producer that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of up to $1.01 per gallon of cellulosic biofuel that is: sold and used by the purchaser in the purchaser’s trade or business to produce a cellulosic biofuel mixture; sold and used by the purchaser as a fuel in a trade or business; sold at retail for use as a motor vehicle fuel; used by the producer in a trade or business to produce a cellulosic biofuel mixture; or used by the producer as a fuel in a trade or business. If the cellulosic biofuel also qualifies for alcohol fuel tax credits, the credit amount is reduced to $0.46 per gallon for biofuel that is ethanol and $0.41 per gallon if the biofuel is not ethanol. Cellulosic biofuel is defined as liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable basis, and meets U.S. Environmental Protection Agency fuel and fuel additive registration requirements. Alcohol with a proof of less than 150 is not considered cellulosic biofuel. The incentive is allowed as a credit against the producer’s income tax liability. Under current law, only qualified fuel produced in the U.S. between January 1, 2009, and December 31, 2012, for use in the U.S. may be eligible. For more information, see IRS Publication 510 and IRS Forms 637 and 6478, which are available via the IRS Web site. (Reference Public Law 110-234, Section 15321, and 26 U.S. Code 40)
Small Agri-Biodiesel Producer Tax Credit
A small agri-biodiesel producer that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of $0.10 per gallon of agri-biodiesel that is: sold and used by the purchaser in the purchaser’s trade or business to produce an agri-biodiesel and diesel fuel mixture; sold and used by the purchaser as a fuel in a trade or business; sold at retail for use as a motor vehicle fuel; used by the producer in a trade or business to produce an agri-biodiesel and diesel fuel mixture; or used by the producer as a fuel in a trade or business. A small producer is one that has, at all times during the tax year, not more than 60 million gallons of productive capacity of any type of agri-biodiesel. Agri-biodiesel is defined as diesel fuel derived solely from virgin oils, including esters derived from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats; renewable diesel does not qualify for the credit. The incentive applies only to the first 15 million gallons of agri-biodiesel produced in a tax year is allowed as a credit against the producer’s income tax liability. Under current law, this incentive expires December 31, 2009. For more information, see IRS Publication 510 and IRS Forms 637 and 8864, which are available via the IRS Web site. (Reference Public Law 110-343, Section 202, and 26 U.S. Code 40A)
Small Ethanol Producer Tax Credit
A small ethanol producer that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of $0.10 per gallon of ethanol that is: sold and used by the purchaser in the purchaser’s trade or business to produce an ethanol fuel mixture; sold and used by the purchaser as a fuel in a trade or business; sold at retail for use as a motor vehicle fuel; used by the producer in a trade or business to produce an ethanol fuel mixture; or used by the producer as a fuel in a trade or business. A small producer is one that has, at all times during the tax year, not more than 60 million gallons of productive capacity of any type of alcohol. The incentive applies only to the first 15 million gallons of ethanol produced in a tax year and is allowed as a credit against the producer’s income tax liability. Under current law, this incentive expires December 31, 2010. For more information, see IRS Publication 510 and IRS Forms 637 and 6478, which are available via the IRS Web site. (Reference 26 U.S. Code 40)
Value-Added Producer Grants (VAPG)
The U.S. Department of Agriculture Office of Rural Development awards Value-Added Producer Grants for planning activities and working capital for marketing value-added agricultural products and farm-based renewable energy. Eligible applicants include independent producers, farmer and rancher cooperatives, agricultural producer groups, and majority-controlled producer-based business ventures. Eligible participants may apply for either a planning grant or a working capital grant, but not both. In addition, no more than 10% of program funds may be awarded to majority-controlled producer-based business ventures. Grants will only be awarded if projects are determined to be economically viable and sustainable. For more information about grant eligibility, visit the VAPG Web site and contact the appropriate State Rural Development Office. (Reference 7 U.S. Code 1621)
Volumetric Ethanol Excise Tax Credit (VEETC)
An ethanol blender that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of $0.45 per gallon of pure ethanol (minimum 190 proof) blended with gasoline. Only entitles that have produced and sold or used the qualified mixture as a fuel in their trade or business are eligible for the tax credit. The incentive must first be taken as a credit against the blender’s fuel tax liability; any excess over this tax liability may be claimed as a direct payment from the IRS. Under current law, this incentive expires December 31, 2010. For more information, see IRS Publication 510 and IRS Forms 637, 720, 4136, 6478, and 8849, which are available via the IRS Web site. (Reference Public Law 110-234, and 26 U.S. Code 6426)
***South Carolina Biodiesel Laws and Incentives***
Biofuels Retail Incentive
Beginning July 1, 2009, a $0.05 incentive payment is available to E85 retailers for each gallon of E85 fuel sold, provided that the E85 fuel is subject to the South Carolina motor fuel tax. Additionally, a $0.25 incentive payment is available to biodiesel retailers for each gallon of pure biodiesel (B100) sold, provided that the resulting blends contain at least 2% biodiesel (B2). These incentives apply only to fuel sold before July 1, 2012. Biodiesel fuel is defined as a fuel for motor vehicle diesel engines comprised of vegetable oils or animal fats and meeting ASTM specifications D6751 or D975. (Reference South Carolina Code of Laws 12-63-20)
Biofuels Production Tax Credit
An income tax credit is available to qualified ethanol and biodiesel producers for taxable years beginning after 2006 and before 2017. Corn-based ethanol and soy-based biodiesel producers are eligible for a tax credit of $0.20 per gallon of fuel produced. Producers using feedstocks other than corn or soy oil are eligible for $0.30 per gallon tax credit. An eligible production facility must be operating at a production rate of at least 25% of its name plate design capacity, before denaturing, on or before December 31, 2011. The credit is allowed for 60 months beginning with the first month for which the facility is eligible to receive the credit and ending not later than December 31, 2016. The credit may only be claimed if the facility maintains an average production rate of at least 25% of its name plate design capacity for at least six months after the first month for which it is eligible to receive the credit. Beginning January 1, 2017, the credit changes to $0.075 per gallon of fuel produced. (Reference House Bill 3649, 2008, and South Carolina Code of Laws 12-6-3600)
Biofuels Distribution Infrastructure Tax Credit
A taxpayer that constructs, installs, and places into service a qualified commercial facility for distribution or dispensing of renewable fuels in the state is eligible for an income tax credit of up to 25% of the construction and installation costs. Eligible property includes pumps, storage tanks, and related equipment used exclusively for distribution, dispensing, and storing renewable fuel. A qualified facility must clearly label the equipment used to store or dispense the fuel as being associated with the renewable fuel. The credit must be taken in three equal annual installments beginning with the taxable year in which the facility is placed into service. Renewable fuel is defined as ethanol fuel blends of 70% or greater (E70) dispensed at the retail level for use in motor vehicles, and pure ethanol or biodiesel fuel dispensed by a distributor or facility that blends these non-petroleum liquids with gasoline fuel or diesel fuel for use in motor vehicles. (Reference South Carolina Code of Laws 12-63-3610)
Biofuels Production Facility Tax Credit
A taxpayer that constructs and places into service a commercial facility for the production of renewable fuel is eligible for a tax credit of up to 25% of the cost of constructing or renovating a building and equipping the facility, not to exceed $1 million. Production of renewable fuel includes intermediate steps such as milling, crushing, and handling feedstock and the distillation and manufacturing of the final product. The entire credit must be taken in seven equal annual installments beginning with the taxable year in which the facility is placed in service. Renewable fuel is defined as liquid non-petroleum based fuel that can be placed in motor vehicle fuel tanks and used to operate on-road vehicles, including all forms of fuel commonly or commercially known or sold as biodiesel and ethanol. (Reference South Carolina Code of Laws 12-63-3610)
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