Bill aims to establish tax credit for biobased chemicals

By Erin Voegele | July 17, 2017

Rep. Bill Pascrell, D-N.J., recently introduced legislation that aims to establish a 15-cent-per-pound production tax credit for renewable chemicals made from biomass.

The bill, known as the Renewable Chemicals Act of 2017, or H.R. 3149, was introduced June 29 and referred to the House Committee on Ways and Means. To date, Reps. Linda Sanchez, D-Calif.; Brian Fitzpatrick, R-Pa.; and Ryan Costello, R-Pa., have signed on to cosponsor the bill.

According to the text of the bill, the production credit would be 15 cents per pound of biobased content of each renewable chemical produced during the taxable year by the taxpayer or for the taxpayer by a contract manufacturer under a binding written agreement.

Eligible renewable chemicals would include those made in the U.S. from renewable biomass that are sold or used by the taxpayer for the production of chemical products, polymers, plastics or formulated products, or as chemicals, polymers, plastics for formulated products. To claim the tax credit, the renewable chemicals would have to contain at least 95 percent biobased content and be produced using biological conversion, thermal conversion or a combination of the two processes using renewable biomass as a feedstock. Renewable chemicals sold or used for the production of any food, feed or fuel are not eligible. Certain other exemptions are listed within the bill.

The legislation would also allow the taxpayer to claim an investment tax credit in lieu of the production tax credit. The investment tax credit for any taxable year would be equal to 30 percent of the basis of any eligible property that is part of a renewable chemical production facility placed in service by the taxpayer during such taxable year.

The bill also places an aggregate limit of $500 million on the total amount of credits that may be allocated under the program, with the limit on credits that may be allocated to any taxpayer for any taxable year set at $25 million.

The legislation calls for a program to be established to allocate credit amounts to taxpayers based on job creation, innovation, environmental benefits, commercial viability and contribution to U.S. energy independence.

The Biotechnology Innovation Organization has spoken out in support of the bill. “The Biotechnology Innovation Organization and its members thank Representatives Pascrell, Costello, Fitzpatrick and Sanchez for supporting innovation and helping U.S. companies compete in a rapidly growing global renewable chemicals market,” said Brent Erickson, executive vice president of BIO’s Industrial and Environmental Section. “Industrial biotechnology is helping renewable chemical producers innovate, revitalize domestic manufacturing, and bring new energy efficient products to market. That in turn is creating millions of new jobs and opportunities for economic growth. This new legislation will help U.S. companies capture their fair share of worldwide growth in renewable chemical production.”

“There is clear momentum for the biobased industry to commercialize cost-competitive pathways to bio-materials and renewable chemicals,” said Mark Schweiker, senior vice President of Renmatix. “This bill will help leverage a variety of under-utilized, non-food biomass in America for conversion into renewable materials. Stimulating the nascent U.S. renewable chemicals market will reinvigorate rural economies and create sustainable jobs.”

“We are grateful for Congressman Pascrell’s continued leadership and vision on innovation, renewable chemicals and a U.S. manufacturing renaissance as reflected in his sponsorship of the Renewable Chemicals Act of 2017,” added Hugh Welsh, president of DSM NA. “This legislation will further support employment, economic growth and continue to encourage global companies like DSM to make additional investments in New Jersey and the entire United States.”