Biodiesel Tax Credit Change Supported by Treasury Secretary

Another big issue is whether Congress extends expired tax incentive

Treasury Secretary Steven Mnuchin said he would support a plan backed by Sens. Chuck Grassley (R-Iowa) and Maria Cantwell (D-Wash.) that would provide a tax credit to biodiesel producers rather than to the fuel blenders.

“Sounds like a good plan and I look forward to working with you on the details of that,” Mnuchin said May 25 at a Senate Finance Committee hearing about President Donald Trump’s proposed Fiscal Year 2018 budget. The plan would boost domestic production of biofuels, rather than subsidize imports, Grassley said. The amount of fuel imported in 2016 doubled from the previous year, he said. During the hearing, Mnuchin largely declined to give specifics about what types of tax policies the administration is interested in, beyond those included in a one-page plan released in April. He said the administration is reviewing all tax ideas and will give more details in the future, after reaching consensus with lawmakers in the House and Senate.

The bipartisan bill, the American Renewable Fuel and Job Creation Act of 2017, extends the “clean-fuel incentive” for three years and reforms the incentive by transferring the credit from the blenders to the producers of biofuels. The switch ensures that the tax credit incentivizes domestic production and taxpayers are not subsidizing imported fuel.

Grassley told Mnuchin the legislative proposal is “very much aligned with the president’s America First agenda.” With biofuel imports nearly doubling from 510 million gallons to almost one billion gallons in 2016, Grassley said “this change is critical to ensure the credit is supporting the domestic industry rather than subsidizing foreign imports that often already receive favorable treatment from their home country.” He told Mnuchin that, “So, it’s not really a question, but for you to understand that from Argentina we’re getting all this biofuel and the taxpayers of the US are subsidizing that import just like we’re -- we’re attempting to incentivize domestic production. And so, we want to change it so that we don’t subsidize that import.”

A big issue is getting the $1-per-gallon tax credit reinstated. It expired at the end of 2016. House GOP leaders are reportedly against another extension, while Grassley and some farm-state senators support a multi-year extension. One Congressional contact said, “The House leadership is opposed to doing any extenders package, especially this one, and feel they have already litigated this matter at the end of 2015. If we fall back to another extenders package instead of reform or rate cuts, extenders including this one will need to be offset.”

The value of Renewable Identification Numbers (RINs) tracking 2017 ethanol consumption targets rose 15 percent, to 70 cents apiece, the highest since January 20, when Donald Trump was inaugurated as president. Prices have increased 49 percent since May 11, when the US Environmental Protection Agency sent proposed 2018 biofuel quotas to the White House’s Office of Management and Budget for review. 2017 biodiesel RINs rose 2.9 percent, to $1.05 apiece.

During the hearing, Mnuchin largely declined to give specifics about what types of tax policies the administration is interested in, beyond those included in a one-page plan released in April. He said the administration is reviewing all tax ideas and will give more details in the future, after reaching consensus with lawmakers in the House and Senate.