Congress and Tax Legislation: It Is Not Just about Biofuels.

by Brent Erickson (Biotechnology Innovation Organization) ... BIO has led the effort to prompt Congress to recognize the important and emerging biobased sector. Congress’ current effort to reform taxes can revitalize U.S. manufacturing and grow the economy by including legislation supporting production of renewable chemicals.

The biobased economy involves the entire value chain from harvesting organic biomass and waste, to producing renewable chemicals and biofuels, and to manufacturing biobased products. At the heart of this economic activity, industrial biotechnology transforms feedstocks into valuable products, while improving sustainability. BIO estimates that the U.S. biobased economy currently generates $135.4 billion in economic activity and employs nearly 1.7 million Americans. Because this economic activity creates opportunities and jobs in service and other industries, the overall boost to the U.S. economy is $435 billion and 4.63 million jobs.

The United States has a competitive advantage in building the biobased economy. Congress should seek to preserve that lead.

At a minimum, Congress must ensure that the tax code presents a level playing field for renewable chemical technologies. Various tax incentives are critical to attract capital investment for renewable chemicals and biobased products, especially since tax credits are available to other incumbent U.S. sectors. Further, it is more difficult for renewable chemical companies to develop projects in the United States when other nations offer more attractive investment incentives.

Senators Chris Coons (D-DE) and Jerry Moran (R-KS) have introduced legislation that would allow renewable chemical companies to operate as publicly traded Master Limited Partnerships (MLP). Senator Orrin Hatch (R-Utah), Chairman of the Senate Finance Committee, has offered an amendment to current tax reform legislation based on this bill. Fossil fuel companies already use this MLP structure to reduce their tax liabilities. Renewable chemical companies and others should be able to use the same rules to increase their liquidity and access to lower cost capital. Access to capital is essential to the success of emerging industries, particularly those building new infrastructure. Congress should adopt Senator Hatch’s amendment and help U.S. renewable chemical and advanced biofuel companies compete for investment dollars.

Congress should also open existing renewable energy, manufacturing and environmental tax credits to renewable chemical producers. Renewable chemicals and biobased plastics ease reliance on petroleum, increase energy security, and reduce greenhouse gas emissions just like other renewable energy projects. For this reason, BIO has helped formulate and push a renewable chemical tax credit proposal. Congress should consider including the bipartisan Qualifying Renewable Chemical Production or Investment Tax Credit Act – legislation already introduced this year in both the House and Senate – as an amendment to tax reform legislation. Like current renewable electricity production credits, this legislation would provide general business credits for a limited period to new renewable chemical production facilities.

Congress should also seek to expand Section 45Q of the Tax Code to include innovative new carbon capture and utilization (CCU) technologies, which recycle carbon to create advanced biofuels, renewable chemicals, food and feed, and other useful products.

Senator Heidi Heitkamp’s (D-N.D.), Furthering Carbon Capture, Utilization, Technology, Underground Storage, and Reduced Emissions (FUTURE) Act, would expand 45Q to include CCU technologies. READ MORE