Senate bill could extend biorefining, biopower tax incentives

By Erin Voegele | August 08, 2012

The U.S. Senate Committee on Finance recently approved the Business Tax Cut Certainty Act of 2012. The bill includes a wide variety of tax incentives that would benefit the biorefining and biopower sectors, including those related to cellulosic biofuel, algae, renewable diesel, biogas and biomass power.

The proposal would extend the $1.01 per gallon production tax credit for cellulosic biofuels for one year, through the end of 2013 and expand the definition of qualified cellulosic biofuels production to include algae-based fuel.

“The Algae Biomass Organization is extremely grateful that algae-based biofuels are being recognized as part of the existing cellulosic biofuel tax credit,” said Mary Rosenthal, executive director of the Algae Biomass Organization. “Algae-based biofuels can be made right here in the [U.S.] and work in existing engines and infrastructure, in many cases outperforming petroleum-based fuels. This credit and its bipartisan support will help our industry accelerate the commercial production of domestic fuels and hire workers across the [U.S.]. 

The legislation would also allow renewable energy facilities that begin construction before the end of 2013 to claim 2.2 cent per kilowatt hour tax credit over a 10-year period. Alternatively, the bill seeks to allow electrical production facilities the qualify for the existing production tax credit, and begin construction by the end of 2013, to take a 30 percent investment tax credit in lieu of the production tax credit. Qualified projects may include close-loop biomass, open-loop biomass, landfill gas and waste-to-energy projects.

“We are highly encouraged that the Senate Finance Committee passed this tax credit extension, and we urge the full Senate and the House to approve the credit before the end of the 112th Congress,” said Bob Cleaves, president and CEO of Biomass Power Association.  “The construction of new biomass facilities can be prohibitively expensive, and our industry relies on one-time tax credits to attract private investors to support the building of new plants. An extension of [production tax credits] will help ensure that renewable energy sources continue to produce a growing share of electricity for our nation.” 

In addition, the legislation would extend the 30 percent investment tax credit for alternative vehicle refueling property for two years, through 2013.

For renewable diesel and biodiesel, the bill would extend the $1.00 per gallon tax credit for two years, through 2013. It would also extend the 10 cent per gallon small agri-biodiesel producer credit.

The legislation would expand the cellulosic biofuels bonus depreciation. Under current law, facilities producing cellulosic biofuels can expense 50 percent of eligible capital costs in the first year for facilities placed-in-service by the end of 2012. This provision would extend bonus depreciation through 2013, and expand the definition to include algae-based fuel.

Finally, the bill would extend the research and development tax credit for two years, through 2013. The credit allows taxpayers to claim 20 percent of the amount by which a taxpayer’s qualified research expenses for a taxable year exceed its base amount for that year. An alternative simplified credit of 14 percent is also available.

The Biotechnology Industry Organization has spoken out in support of many of these measures. “Tax policy should be focused on driving innovation to reduce our dependence on foreign oil, lower gas prices, and create high quality U.S. based career opportunities,” said Jim Greenwood, BIO president and CEO. “Perhaps more than any other investment, biorefineries can help achieve these objectives by leveraging U.S. biotech innovation and agricultural productivity to revitalize domestic manufacturing… U.S. tax policy should support the full range of biorefinery opportunities—biofuels, biobased products, and renewable chemicals—and extending the tax credits helps to do just that. Producing affordable domestic alternatives to all products that come from foreign oil is vital to renewed economic growth and energy security. These tax credits give companies that are innovating a stable policy to bring commercial-scale alternatives to the market. By extending the cellulosic biofuels producer tax credit and accelerated depreciation allowance for cellulosic biofuel plant property, and by adding algae-based biofuels to these two sections of the code, this proposal sends an important signal to investors that Congress continues to support the key role these technologies must play in securing our energy future.”