Critical Biodiesel Measure Passed by House; Matters Hinge on Tax Extender Bills

Report submitted by: Paul Nazzaro, Advanced Fuel Solutions, Inc.

Friday September 26, 2008, the U.S. House of Representatives approved H.R. 7060, the Renewable Energy and Job Creation Tax Act of 2008, by a 257 to 166 margin. The legislation contained the following provisions pertaining to biodiesel:

• Extends the biodiesel tax incentive and the small producers income tax credit for one year through December 31, 2009. Under current law, these provisions expire on December 31, 2008.

• Provides that all biodiesel qualifies for the $1 per gallon tax incentive, regardless of feedstock used to produce the fuel.

• Closes the so-called "splash and dash" loophole by denying the biodiesel tax incentive for fuel produced outside the U.S. for use outside the U.S. This provision would be effective as of May 15, 2008, the date the U.S. House Ways and Means Committee first unveiled the provision.

• Properly defines the renewable diesel tax incentive to apply only to free-standing, Greenfield renewable diesel production, not co-processed renewable diesel.

September 29, 2008 Update:

There has been significant activity in Washington, DC over the weekend. Here is an update on where things stand, particularly with regard to the tax extender legislation that addresses the biodiesel tax incentive.

Over the weekend, bipartisan negotiations between the House, Senate and Bush Administration yielded an agreement on an economic rescue package for the financial services industry. This has been the primary focus of Congress’ activities over the weekend. Attached you will find a section-by-section summary of this legislation should you wish to review it. The House is expected to consider this bill today, September 29, 2008, with Senate consideration to follow shortly thereafter.

The House and the Senate continue to find themselves at an impasse over how to pass an extender package and send it to the President for signature. The Senate continues to insist that the House consider H.R. 6049 as approved by the Senate. The House, from an institutional standpoint and from the standpoint of insisting that PAYGO apply to the extenders package, has thus far refused to consider the Senate bill and counters that the Senate should vote on its extender proposals that are fully offset.

The House is expected to debate two bills: H.R. 7201, the Energy Improvement and Extension Act of 2008 and H.R. 7202, the Temporary Tax Relief Act of 2008. As the bill’s name implies, H.R. 7201 would extend a host of expiring energy tax incentives, including the biodiesel tax incentive for one year. H.R. 7202 would extend several expiring tax provisions for individuals and businesses. No matter your place in the supply chain this specific legislation is very important for obvious reasons. Summaries of both bills are attached.

After the House considers the economic rescue package and the new tax extender bills the chamber plans to adjourn. Hopefully, the House and Senate will be able to reach an acceptable compromise prior to adjournment. That said, with the continued impasse between the House and Senate and adjournment drawing close, there is an increasing possibility that Congress could adjourn prior to the election without sending a tax extender package to the President for signature. At this point, it is difficult to determine with any degree of certainty whether or not there would be any legislative business considered by Congress after the elections.


MORE INFORMATION:

HR 7202 Business Extenders Summary 9-28-08 (pdf)

HR 7201 - Energy Extenders Summary 9-28-08 (pdf)

Emergency Economic Stabilization Act of 2008 section-by-section (pdf)