ABFA Speaks Out on Proposed Changes to Biodiesel Tax Credit

(Advanced Biofuels Association) Today the Advanced Biofuels Association sent a letter to Senate Finance Committee leadership that expressed concern about changes to the biodiesel and renewable diesel blenders tax credit. The full letter is available below and the following statement is attributable to ABFA President Michael McAdams:

“At this time common sense dictates that Congress should not be looking to revise an effective, long-term policy with changes to the biodiesel and renewable diesel blenders tax credit as part of legislation to extend various expired tax benefits. The current biodiesel and renewable diesel blenders tax credit is helping incentive the production and use of renewable fuels, which help reduce greenhouse gas emissions and lower fuel cost for consumers. We urge the Senate Finance Committee to pass a clean two year tax extenders bill.”

The undersigned organizations are writing to express concern about changes to the biodiesel and renewable diesel blenders tax credit the Finance Committee adopted in July as part of legislation to extend various expired tax benefits. We believe a change of this magnitude requires further examination by both the Senate and House committees and the opportunity for affected taxpayers and consumers to inform Senators of the effects of this change. Therefore, we respectfully ask, that as the Finance Committee works with the House of Representatives on a final package of tax benefit extensions, the Committee extend the biodiesel and renewable diesel blenders tax credit in its longstanding form.

Since 2005 there has been a biodiesel and renewable diesel blenders tax credit of $1.00 for each gallon of biodiesel or renewable diesel used in a qualified mixture. This tax credit, which expired at the end of 2014, was created to stimulate production and use of biodiesel and renewable diesel, an agricultural alternative to fossil fuels.

In the Finance Committee’s July markup, Senator Grassley offered an amendment, co-sponsored by Senator Cantwell, that would extend the biodiesel and renewable diesel tax credit for two years but, starting in 2016, convert the credit from one for blenders (those who make biodiesel mixtures) to one for those who produce biodiesel and renewable diesel. The amendment would also deny the tax credit to imported biodiesel or renewable diesel.

We believe that any change such as that adopted by the Committee in July should be subject to a more careful and deliberative process. There has been no Finance Committee hearing or other opportunity for stakeholders to be heard on this proposed change. Nor has the House Ways and Means Committee had an opportunity to consider this change.

The Committee should carefully consider the following issues when evaluating such a change:

Converting the tax credit to a producer’s tax credit and denying its availability to imported fuels will benefit a small group of biodiesel producers and come at the expense of fuel retailers and consumers.

The biodiesel and renewable diesel tax credits stimulate consumption of these fuels by reducing fuel prices for the millions of trucks that move two-thirds of the country’s freight. Limiting the supply and/or availability of biodiesel will severely impact fuel blenders, who have incurred significant costs to purchase and maintain the equipment to dispense blended fuels. Additionally, this will result in an increase cost for fuel consumers and the overall nation’s consumer who will pay higher prices for the shipment of goods.

There is also significant concern that the provision will limit the amount of supply of biofuels heating oil into the Northeast this winter. Moreover, the excise tax system in combination with this change could lead to consumers paying as much as an additional 24 cents per gallon for their biofuels mixed heating oil this winter.

Finally, converting the tax credit to a domestic production credit may also result in a trade violation, a concern Senator Grassley acknowledged when he said during markup, “[I]f this has trade implications, as the Senator has indicated through staff, I would be glad to do it, but I would like to have a vote on this and have it included in the mark and then if there are problems afterwards, work on that.” This trade concern is just another example of why any change to the longstanding blenders tax credit requires a more deliberative process.

The current blenders’ credit for biofuels is successfully creating a market for biodiesel and renewable diesel and building consumer acceptance. Continuing the policy that allows truckers to share in the value and encourage consumer acceptance of these fuels benefits American consumers, those who blend those fuels, and those who provide the wide range of feedstocks that make these fuels. We believe the current blenders credit should be extended in its longstanding form as was originally intended.