Senate Committee Advances Tax Extenders, Shifts Biodiesel Tax Credit Upstream

The Senate Finance Committee on July 21 voted 23-3 to extend a $95.2 billion package of individual and business tax provisions known as tax extenders through 2016, including a modified version of the $1 per-gallon biodiesel tax credit.

Although many of the tax provisions would be beneficial to business owners, the measure includes a controversial amendment offered by Senators Chuck Grassley (R-Iowa), Maria Cantwell (D-Wash.) and John Thune (R-S.D.) that would shift the biodiesel tax credit upstream to producers. This provision, which would significantly alter biodiesel blending dynamics, would take effect on Jan. 1, 2016. The credit would remain at the blender level for 2015 retroactive to Jan. 1.

NATSO, along with the Petroleum Marketers Association of America (PMAA), Society of Independent Gasoline Marketers of America (SIGMA), and the National Association of Convenience Stores (NACS), strongly opposes the amendment because it would alter the biodiesel tax credit to act more as a subsidy for domestic production. It would no longer would be tied to consumption in the marketplace.

In a letter that was distributed to senators on the Finance Committee, the trade groups said providing a tax credit to biodiesel blenders “fosters favorable blending economics, enabling fuel marketers that blend the product into conventional diesel fuel to offer consumers more competitive prices, thereby increasing consumer demand.”

Under the legislation, biodiesel that is imported into the United States and then blended with diesel fuel would no longer trigger the credit; at the same time, biodiesel that is produced in the United States and then exported would trigger a credit for the producer. The groups argued that shifting the credit upstream is contrary to the original intent of the biodiesel tax credit, which was to promote the use of biodiesel in the United States and ultimately reduce dependence on fossil fuels while increasing energy independence.

NATSO supports a retroactive clean extension of the $1 per-gallon biodiesel tax credit to enablefuel retailers to offer consumers less expensive fuel. This promotes biodiesel consumption rather than biodiesel production.

In addition to the structural changes to the biodiesel tax credit, the package includes a 30 percent investment tax credit for alternative fuel pumps, a provision that enables small business to deduct certain property expenses from their taxes known as Section 179 expensing, as well as bonus depreciation provisions and the work opportunity tax credit (WOTC) for employers that hire certain categories of employees, including veterans and food stamp beneficiaries.

The measure also contains a provision that would ensure that excise taxes on liquefied natural gas, compressed natural gas and propane for highway use are levied at a rate consistent with their energy output relative to diesel and gasoline. It also ties the excise tax credits for liquefied natural gas to the same energy equivalent basis. Similar provisions were included in the short-term highway bill that the House of Representatives passed last week.

Lawmakers now must find a legislative vehicle for the tax extenders package and could attach it to the highway bill that the Senate will be considering in the coming days. Its ultimate prospects for enactment remain uncertain.


Tiffany Wlazlowski Neuman's photo

Tiffany Wlazlowski Neuman

Tiffany Wlazlowski Neuman develops and executes communications strategies to advance NATSO’s public relations and advocacy goals. Tiffany also develops and oversees partnerships related to the NATSO Foundation’s public outreach initiatives. Tiffany lives in the D.C. metro area with her husband and their two sons.More

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