Fischbach, Ways and Means Colleagues Request Input from Stakeholders on Biofuel Tax Policy

November 22, 2024

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(Office of Congresswoman Michelle Fischbach (R-MN-07) ) Yesterday, Congresswoman Michelle Fischbach (MN-07) and several of her colleagues on the U.S. House Ways and Means Committee released a request for information from relevant stakeholders on biofuel tax policy.

Public Law 117-169, enacted in 2022, made significant modifications to biofuel tax policy without any Republican input. With unified Republican government in Washington, the House Ways and Means Committee is seeking feedback from stakeholders on how these provisions could be improved to support domestic energy production and rural economic development.

This request for information is a follow-up to the House Ways and Means Tax Team submission deadline of October 15th. The Supply Chains and Rural America Tax Teams are leading this effort to gather additional information on biofuel tax policy specifically.

“I am proud to represent biofuel producers across western Minnesota, and I am proud to help lead this effort with Republican members of the Ways and Means Committee,” said Rep. Michelle Fischbach. “As a Vice Chair of the Rural America Tax Team and a member of the Supply Chains Tax Team, I know that this invitation for dialogue with stakeholders is incredibly important. When our Democrat colleagues rammed through their changes to biofuels tax credits, they left the industry with disappointing timelines and unworkable regulations. Our rural communities deserve a meaningful seat at the table when Congress makes discussions that directly impact them. This Request For Information will help give them a voice.”

“Biofuels are a major economic engine in Iowa and across the Midwest, and our tax policies should help this important industry to Rural America thrive. Although Republicans represent most of America’s rural districts and agricultural producers, the revisions in 2022 made significant changes to biofuel tax policy without any Republican input,” said Rep. Feenstra. “That’s why several of my colleagues on the House Ways and Means Committee and I are requesting information from our biofuel producers, farmers, and relevant stakeholders to improve these tax provisions to support domestic energy production and rural economic growth. For example, we need to ensure that farmers have flexibility on the agricultural practices that they implement to qualify for the clean-fuel production tax credit. I look forward to reviewing the input we receive and building upon the work of the Ways and Means Tax Teams.”

“As a reliable and sustainable energy source, biofuels are an essential part of an all-of-the-above approach to American energy abundance,” said Rep. Adrian Smith. “Unfortunately, the Biden administration’s refusal to provide timely guidance and its track record of creating unworkable and out of touch standards reflects an ignorance of the biofuels marketplace. It is clear we need more input from industry stakeholders to determine the best path forward for these tax credits and ensure our hard-working farmers and producers have the certainty they deserve.”

“Once again, the Democrat elites have ignored the American people. When they wrote the 45Z tax credit to incentivize biofuel production, farmers and other stakeholders were left out of the conversation. For the past six months, the Supply Chains Tax team has met with real Americans whose businesses and lives are impacted by energy tax credits, and our goal is to ensure they have every resource available to produce American energy,” said Rep. Carol Miller. “I am happy to continue Ways and Means Republican efforts to work with stakeholders to better understand the real-world impacts of these tax credits.”

“Illinois 16th Congressional District is one of the largest corn and soybean producing districts in the nation, making biofuels a critical industry for our farmers,” said Rep. Darin LaHood. “We must continue to support biofuels as part of our solution to restoring America’s energy independence. I am proud to work with several of my Ways and Means Republican colleagues on this RFI so that we can continue to gather information as we consider reforms to our tax code next year. I look forward to hearing from our farmers and biofuels stakeholders on how tax policy can promote growth for this emerging industry and our rural communities.”

“Ways and Means Republicans are soliciting input from key stakeholders across various sectors of our economy on how to support our nation’s emerging biofuel and clean fuel production industry. Continuing to bolster domestic energy production and rural economic development is at the forefront of our America First agenda,” said Rep. Claudia Tenney. “We are dedicated to unleashing domestic energy dominance to lower costs for families, farmers, and businesses, and create American jobs.”

The request for information can be found HERE. READ MORE

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Clean Fuels Thanks Representatives for Urging IRS to Complete Timely 45Z Registration (Clean Fuels Alliance America/Biomass Magazine)
SABR Coalition Submits Comments to House Committee on Section 45Z (Sustainable Advanced Biofuel Refiners Coalition)
NACS Seeks to Advance Biofuel Tax Policies (National Association of Convenience Stores)

Excerpt from Clean Fuels Alliance America/Biomass Magazine: Clean Fuels Alliance America thanks Reps. Nikki Budzinski, D-Ill., and Mike Carey, R-Ohio, for writing to IRS Commissioner Danny Werfel and urging the agency “to ensure that taxpayers’ registrations under §45Z Clean Fuel Production Credit are completed before January 1, 2025.” Under the law, registered fuel producers can only claim the credit for fuels produced after the date on their registration letter from the IRS. Many producers have not received these letters.

Treasury issued guidance in May 2024 encouraging fuel producers to register by July 15 to give the IRS sufficient time to process applications and issue the registration letters by January 1, when the credit becomes available.

“These delays are creating confusion in the marketplace and stand to have a significant negative economic impact on clean fuel producers, transportation fleets, fuel marketers, farmers and other economic sectors,” the Representatives write. “We urge IRS to complete these registrations as soon as possible, and to ensure that U.S. producers who have initiated the registration process in a timely manner are found to be eligible to generate the credit beginning on January 1, 2025.”

A copy of the letter from Reps. Budzinski and Carey is available on cleanfuels.org READ MORE

Excerpt from Sustainable Advanced Biofuel Refiners Coalition: The Sustainable Advanced Biofuel Refiners Coalition offered federal lawmakers numerous ways to improve the Clean Fuel Production Tax Credit.

JEFFERSON CITY, MO, UNITED STATES, December 18, 2024 /EINPresswire.com/ -- The Sustainable Advanced Biofuel Refiners Coalition submitted comments Dec. 13 to the U.S. House Committee on Ways and Means in response to a request for information (RFI) from Republican committee members about approaches to fixing the Clean Fuel Production Tax Credit (Section 45Z). The new incentive was passed in the Inflation Reduction Act of 2022. The U.S. Department of the Treasury and the Internal Revenue Service have yet to provide any meaningful guidance on the new tax credit, which goes into effect Jan. 1, 2025.

In light of the fact that the IRS has not issued guidance on this new and flawed credit, SABR urged the committee to extend the $1 per gallon biodiesel blenders tax credit (40A) promptly. This is absolutely critical in order to provide the necessary time for Congress to make improvements to 45Z and for the IRS to issue implementation guidance. The blenders credit is set to expire Dec. 31, 2024. Guidance on 45Z is likely to be even further delayed if the incoming administration puts a review hold on all regulatory actions of the previous administration as is common when the White House changes parties.

SABR told the committee that the current structure of 45Z will effectively provide preferences for questionably sourced imported feedstock, primarily from Asia, over domestic agricultural feedstock grown here by American farmers. SABR believes that the credit should preference domestic feedstock, as this would better direct U.S. taxpayer investments to the benefit of the U.S. economy. This would be similar to domestic procurement preferences for other tax credits.

SABR noted, however, that there should be a distinction between Canadian feedstock railed into the U.S. versus feedstock that comes from overseas. Canadian feedstock is regulated and highly traceable and should not be excluded from the program. There are several precedents for this.

SABR also shared with the committee that indirect land-use change (ILUC) should be excluded from use in federal tax policy. “ILUC is a failed theory that uses highly flawed assumptions,” said SABR CEO Joe Jobe. “This highly uncertain estimate of global land use is unmeasurable, unverifiable and unobservable. It is an academic exercise that failed to materialize.”

Based on an Amicus brief filed as a part of SABR’s Petition before the U.S. Court of Appeals, eight of the nation’s most preeminent lifecycle scientists concur that the failed ILUC theory is riddled with flawed assumptions.

SABR pointed out that in the early 2000s there was much academic discussion about Peak Oil—a modeled prediction of the time when global oil production would begin a precipitous decline, leading to economic decline. The theory of Peak Oil did not take into account the fracking revolution enabled by technology advances in hydraulic fracturing and horizontal drilling. These advances were made possible by direct research investment by the federal government to develop the technologies, and major subsidies to support them in the 2005 Energy Policy Act.

Because of this oversight, nobody is talking about Peak Oil anymore unless it is in the context of famous failed academic theories. ILUC theory should join that list. Like Peak Oil, ILUC theory contained a major oversight: the revolution of technology advances in modern precision agricultural equipment, farming practices, and plant science research over the past 20 years that has resulted in massive yield improvements with less energy inputs on less land every year—not more.

Observable and measurable indirect land-use change did occur, but not because of biofuels. Due to the fracking revolution and the significant incentives that supported it, fracking wells that were not there 15 years ago now dot the landscape and can be seen from most commercial airline flights. Yet biofuels are still assumed to create ILUC and the baseline petroleum that it is compared to is assumed to not have any indirect effects, when the opposite is true.

California and three other states have adopted low carbon fuel standards (LCFS). These states now make up over half of the nation’s biomass-based diesel market and soon it will be two-thirds. Those LCFS programs assign ILUC penalties as well as multiple additional layers of disincentives to crop-based feedstocks. When a gallon of soy biomass-based diesel is assigned a land use-change penalty at the federal level and then again at the state level, it effectively doubles the ILUC penalty on the same gallon, as if the gallon were burned twice and the land converted twice when, in reality, there is no compelling evidence that land was converted at all due to that gallon of biofuel.

If the federal government is compelled to use carbon intensity as a metric to determine tax credit eligibility, then Congress and tax writers should consider using a direct land-use change (DLUC) mechanism since DLUC is observable and measurable. DLUC would allow for continued safeguards to protect against deforestation, while also ensuring that domestic agricultural feedstocks are not penalized for land conversions outside of the U.S. Reliance on DLUC for biofuel markets would also help align the biofuels export value chain with the whole soybean and soybean meal export value chain, which currently relies on DLUC when estimating environmental impact against competitors in the global marketplace.

SABR’s complete comments to the House ways and means committee’s RFI may be accessed here.

About the SABR Coalition
SABR is a coalition of stakeholders that have invested in building out America’s first advanced biofuel—biodiesel. Biodiesel is the most cost-effective means to reduce greenhouse gas emissions from medium- and heavy-duty vehicles, providing numerous economic, environmental, performance and energy security benefits.

SABR represents every link in the biodiesel value chain from soybean farmers and processors to biodiesel producers, distributors, retailers and consumers, as well as infrastructure, product and service providers. For more information, please visit www.sabrcoalition.org. READ MORE

Excerpt from National Association of Convenience Stores: NACS, NATSO (Representing America’s Travel Centers and Truckstops) and SIGMA: America’s Leading Fuel Marketers, sent a letter to the Ways and Means Committee last week asking it to advance biofuel tax policies that continue to result in lower fuel prices for consumers.

“Fuel retailers blend biofuels into the fuel supply for the same reason consumers purchase biofuels at the pump: it lowers the price of fuel. Today, light-duty drivers pay less money for E15 than they do E10 or straight gasoline, and truck drivers pay less for renewable diesel and biodiesel blends than they pay for straight diesel fuel,” the letter stated. “Biofuels extend fuel supplies and thus help keep transportation costs low. Higher gas prices are generally among the most visible impacts of inflation that consumers experience. When diesel costs go up, it tends to have an infectious inflationary impact on the broader economy because so many goods are moved by truck.”

The letter continued: “Passage of the Inflation Reduction Act (‘IRA’) significantly disrupted the biofuels tax incentive regime: Whereas today there are tax incentives for blenders of renewable advanced biofuels (biodiesel, renewable diesel and sustainable aviation fuel, or ‘SAF’), the IRA stipulates that starting in 2025 there will be a new producer incentive for all biofuels.”

In the letter, NACS, NATSO and SIGMA recommend these actions to the committee:

Near-Term:
• Extend the biodiesel blenders tax credit to prevent production plants from shutting down and higher diesel prices and emissions throughout the country. With the credit in place, Congress can consider long-term solutions without the threat of the biodiesel industry’s demise hanging over its head.

Medium-Term:
• Bifurcate the incentive scheme for fuels that are made from soybeans, used cooking oil, animal fats, and other advanced biofuel feedstocks, from the scheme that incentivizes fuels made from ethanol. Allowing subtle yet important structural differences that reflect each respective value chain to exist within each scheme will inevitably unlock sound market outcomes and political resolutions that are unavailable if all feedstocks and fuels are subject to the same regime.

Long-Term:
• Establish and extend separate tax schemes for (i) feedstocks that make diesel substitutes and (ii) feedstocks that make gasoline substitutes.
o The existing biodiesel blenders tax credit has been successful and should form the basis for any diesel substitute incentive.
o Similarly, the 45Z credit represents a reasonable starting place for discussions around a gasoline substitute incentive.
• Ensure that incentives are in place for a sufficient duration to provide market certainty and unlock the capital investments necessary to allow these industries READ MORE