The New England Fuel Institute (NEFI) has called for the phase out of the $1.00 per gallon biodiesel tax credit over the next 5 years. For the past year, a debate has been raging in the industry as to whether the tax credit should be moved to the producer level or maintained at the blender level.
As an alternative, Rep. Diane Black (R-TN) has proposed a "phase out" of the tax credit...(see Background below)...which has the support of NEFI and other heating oil associations and which is expected to pick up additional bipartisan support in the Congress.
Background: The biodiesel blenders' tax credit expired at the end of 2016, along with 35 other so-called "orphaned tax extenders." These are tax breaks that were not made permanent or provided long-term extensions in the tax extenders bill (the PATH Act) at the end of 2015. It is unclear if and when lawmakers might renew the biodiesel tax credit and other recently expired tax incentives. Given the debate on tax reform may drag-on into 2018, special interests groups and their allies in Congress may push to renew orphaned tax extenders in a stop-gap spending bill in September or other must-pass legislation later this year.
Producers' Tax Credit Proposal: Earlier this year, Senator Chuck Grassley (R-IA) and Rep. Kristi Noem (R-SD) reintroduced legislation (S.944 and H.R.2382) to renew the biodiesel tax credit for five years. Unfortunately, it would also restructure it immediately as a U.S. producers-only tax credit. NEFI has long expressed concerns with moving to a producers' credit and the implications it could have on regional supplies of biodiesel. For this reason, we have been supportive of a clean, retroactive extension of the blenders' credit. That has been our position so-far and was a top priority during this year's "Day on the Hill."
(Alternative Proposal) Renew & Phase-out the Blenders' Credit: Rep. Diane Black (R-TN) will soon introduce a bill to renew the biodiesel tax credit at the blender-level for five years (retroactively for 2017, and each year through 2021). Unlike legislation offered in the previous Congress, which NEFI supported, her new bill would phase-out the tax credit, offering $1.00 for 2017 & 2018, $0.75 in 2019, and $0.50 in 2020 & 2021, and zero cents in 2022. This phase-out was added in acknowledgement of the budgetary realities of Washington and an unwillingness on the part of the Republican majority to continue renewable fuel subsidies in perpetuity. It is also consistent with the phase-out of other renewable energy tax credits renewed in the PATH Act in 2015. Existing wind production & investment tax credits phase-out by the end of 2019 and solar production tax credits by the end of 2021. The belief is that a five-year phase-out will provide market certainty and allow the Renewable Fuels Standard (i.e., the RINs market) time to adjust.
Groups supporting Rep. Diane Black's bill include:
Advanced Biofuels Association (ABFA)
American Trucking Associations (ATA)
National Association of Convenience Stores (NACS)
National Association of Truck Stop Operators (NATSO)
Petroleum Marketers Association of America (PMAA)
Society of Independent Gasoline Marketers of America (SIGMA)
(Note: Support from additional groups, including NEFI, is being requested)