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Facing a Century of Subsidies for Petroleum, Biodiesel Tax Incentive Allowed to Lapse Four Times in Six Years

JOHNSTON, IOWA – The Iowa Renewable Fuels Association’s (IRFA) biodiesel producers today sent a letter to all members of the Iowa Congressional delegation urging them to help level the energy playing field by pushing for swift passage of a multi-year biodiesel tax incentive.

“While facing more than a century of uninterrupted subsidies for petroleum, the biodiesel tax incentive has been allowed to expire four times in six years,” stated IRFA Executive Director Monte Shaw. “Now more than ever, the biodiesel community needs certainty and a level playing field in order to continue to build upon the vast energy security, economic and air quality benefits producing and using biodiesel currently provides to this country.”

The letters stated, “We urge you to do all you can to push for swift passage of a tax extenders package that includes an amendment to shift the biodiesel tax incentive to a producer’s credit, as was unanimously passed out of the Senate Finance Committee in the Tax Relief Extension Act of 2015 (S.1946) on July 21, 2015.

“The biodiesel tax incentive is a proven job creator that is critically important to the U.S. biodiesel industry, and specifically to Iowa biodiesel producers. However, the $1.00 per gallon incentive lapsed on January 1, 2015, marking the fourth time in six years that the incentive has expired—even as favorable tax incentives for petroleum have continued uninterrupted for more than a century. This has created significant disruption and uncertainty in the industry. It is imperative that Congress end this piecemeal tax policy for biodiesel by passing a long-term tax incentive that paves the way for growth.

“S. 1946 would extend the incentive through 2016, and importantly it also includes a common-sense reform long advocated by the U.S. biodiesel industry. As you know, U.S. tax dollars and energy policy should be aimed at incentivizing domestic production, not foreign production. Under the existing structure of the credit, biodiesel produced overseas can qualify for the tax incentive if it is blended in the U.S. Subsidizing foreign manufacturing is obviously not the intent of Congress, and we should close this loophole by reforming the credit as a domestic production credit, consistent with S. 1946. According to the Congressional Budget Office, this change would save U.S. taxpayers some $90 million per year. It will also streamline administration of the incentive by the IRS to prevent waste, fraud and abuse.”

The IRFA letters were sent to Senators Joni Ernst and Chuck Grassley, and Representatives Rob Blum, Steve King, Dave Loebsack, and David Young.

A copy of one of the letters is available here.

Iowa is the nation’s leader in renewable fuels production. Iowa has 12 biodiesel facilities with the capacity to produce nearly 315 million gallons annually. In addition, Iowa has 42 ethanol refineries capable of producing more than 3.8 billion gallons annually, including 22 million gallons of annual cellulosic ethanol production capacity and one cellulosic ethanol facility currently under construction.

The Iowa Renewable Fuels Association was formed in 2002 to represent the state’s liquid renewable fuels industry. The trade group fosters the development and growth of the renewable fuels industry in Iowa through education, promotion, legislation and infrastructure development.

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