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Biodiesel production, distribution, and use, as with many emerging alternative energies, has been aided in large part by recent government incentives making biodiesel fuel production and distribution more attractive. These tax incentives put money back in the pockets of biodiesel producers who, presumably, pass the benefits on to you, the consumer, with lower biodiesel prices.
Not just any biodiesel is eligible for tax incentives. The definition of biodiesel fuel, as its used for tax purposes, is ‘monoalkyl esters of long chain fatty acids’. Biodiesel production companies seeking any of these credits must ensure that they are making biodiesel fuel that meets the Environmental Protection Agency (EPA) requirements for registration of fuels and fuel additives as described in the Clean Air Act, as well as requirements put forth by the American Society of Testing and Materials.
All companies, whether a biodiesel production company or not, that are selling or using biodiesel may qualify for the Biodiesel and Ethanol (VEETC) Tax Credit, on their income taxes. There are two such types of credit.
* the Straight Biodiesel Credit (considered a ‘general business credit’ by the IRS) – the biodiesel in question must not have been mixed with any petroleum-based diesel fuel, and the company itself must be the biodiesel production company making it;
* the Biodiesel Mixture Credit – the biodiesel in question must contain only biodiesel fuel and petroleum-based diesel, with absolutely no kerosene added, and the company itself must be the biodiesel production company making it.
Additionally, for either tax credit on biodiesel cost, one of the following criteria must also be met;
othe biodiesel production company actually uses the biodiesel itself as a fuel;
othe biodiesel production company sells the biodiesel retail which is then used in the fuel tank of the buyer.
The tax credits on Straight Biodiesel are equal to $1 per gallon of agri-biodiesel and $0.50 per gallon of waste grease biodiesel. The tax credits on Biodiesel Mixtures are $0.01 (a penny) per percentage point of agri-biodiesel and $0.005 (half-a-cent) per percentage point of waste grease biodiesel.
That is, unless the amount of credit approved to taxpaying biodiesel companies applying for the credit in a given year exceeds the annual cap of $1.5 million, in which case the Department of Revenue will prorate credits to biodiesel production companies accordingly.
These tax credits, however, are currently temporary, and set to expire in 2008 – an added incentive to get started now on that biodiesel production company of your own that youve been dreaming about. Theres literally no time to waste.
Another Federal Tax Credit, the Small Agri-Biodiesel Producer Credit (Section 1345: Energy Policy Act of 2005), grants $0.10 per gallon on up to 15 million gallons to small agri-biodiesel production facilities producing less than 60 million gallons per year.
Incidentally, there are local and state tax credits all over the country available on biodiesel cost and costs on other alternative fuels. Visit: www.eere.energy.gov/afdc/laws/incen_laws.html to find out what your locality offers.
According to recent U.S. Department of Agriculture (USDA) study, demand for biodiesel production is set to increase by at least 124 million gallons per year, however fears about the rapidly rising prices of crude oil suggest that facilities might be making biodiesel fuel in even larger amounts and at an even faster rate.
Mike Cubert
Biodisel is clean, renewable, cheap and popular. The best part is that its very easy to make it at home. Visit our biodiesel making section for how to information.
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