House tax proposal would alter biofuel, bioenergy tax credits

By Erin Voegele | February 26, 2014


On Feb. 26, House Ways and Means Committee Chairman David Camp, R-Mich., released draft legislation to reform federal tax code. The draft, titled the “Tax Reform Act of 2014,” would alter, and in some cases repeal, tax incentives for biofuels and bioenergy.

Documentation released by the committee specifies that Section 3201 under Subtitle C would repeal tax credits for alcohol used as fuel. The bill summary explains that tax credit for first-generation ethanol and other alcohol fuels, which expired in 2011, would be repealed. The $1.01 per gallon cellulosic biofuel producer credit that expired at the end of 2013 would also be repealed.

Section 3202 of the bill would repeal credits associated with biodiesel and renewable diesel. The biodiesel fuel-mixture credit, the biodiesel credit and the small agri-biodiesel producer credit, all of which expired at the end of 2013, would be repealed.

Tax credits benefiting the bioenergy sector would also be impacted by the proposal. According to a bill summary released by the House Ways and Means Committee, Section 3206 of the bill would phase out and eventually repeal the credit for electricity produced from certain renewable resources, including closed-loop biomass and open-loop biomass. Under current law, the production tax credit (PTC) is 1.5 cents per kWh, indexed for information. The summary said the amount of the credit was generally 2.3 cents per kWh in 2013. Under Section 3206 of the draft bill, the inflation adjustment of the PTC would be repealed, revering the PTC amount back to 1.5 cents per kWh. The credit would be repealed in 2024.

 The nearly 1,000-page draft includes numerous other tax provisions, including the establishment of a permanent research and development tax credit. It also repeals the enhanced oil recovery credit and the credit for producing oil and gas from marginal wells.

Brooke Coleman, executive director of the Advanced Ethanol Council, released a statement responding to the measure.  “While the draft plan falls well short of the goal of ensuring that the multi-trillion dollar global clean energy sector sets up shop in the United States, Chairman Camp should be commended for taking tough positions on many of the most distortive oil and gas subsidies in the federal tax code,” he said. “Inequitable provisions like percentage depletion, last-in/first-out (LIFO) and various incentives for the production of marginal oil and gas distort investment decision-making and drive capital away from renewable fuels. Chairman Camp is right to point out that only extractive industries are allowed to recover more than their investment under current percentage depletion and depreciation rules. Doing away with these provisions will do little to dissuade oil and gas investment given the magnitude of the opportunity, but will help level the playing field when it comes to investments in next generation fuels of all types.”

“While we are not supportive of this proposal’s treatment of the emerging cellulosic and advanced ethanol industry, we look forward to working with the Committee going forward to ensure that the United States puts itself in the best position possible to develop new technologies and commercialize clean energy on American soil,” Coleman continued.

Additional information on the legislative draft, including links to a full-text version of the bill and detailed summary, is available on the House Ways and Means Committee website.