Biodiesel Blenders Tax Credit Survives Year-End Deal

EDITOR’S NOTE: New England Fuel Institute today released the following recap of the year-end spending and tax bill approved by Congress.

Moments ago the United States Senate gave final approval to a massive year-end spending and tax deal that funds the federal government through September, 2016 and extends or makes permanent scores of tax incentives for corporations and individuals. President Obama is expected to sign it into law later today. Enactment of the $1.8 trillion package effectively brings to an end legislative business for the year.

 Biodiesel/Bioheat® Tax Credit Renewed

In a significant victory for biodiesel-blended heating oil, known as Bioheat® Fuel, the deal retroactively renews the $1 per gallon biodiesel tax credit through 2016. The New England Fuel Institute (NEFI) was successful in preserving the tax credit at the blender level. NEFI had warned members of Congress that a proposal to move the credit to the producer level was premature and could have unforeseen consequences on the heating oil market and biodiesel supplies and prices in New England.

The proposal to move to a producer-only tax credit is likely to resurface next year. NEFI continues to communicate its concerns on the issue with its long-time partners at the National Biodiesel Board (NBB) and with the region’s biodiesel producers, and biodiesel and heating fuel wholesalers and suppliers. All parties are committed to a robust and competitive Bioheat® industry in the Northeast and we are confident this shared vision will ultimately result in smart public policy.

 Ban on U.S. Crude Oil Exports Repealed with Protections for Northeast

Under a historic bipartisan agreement, the deal also lifts the 40-year old ban on U.S. crude oil exports, a major priority for Republicans, in exchange for several Democratic concessions including a five-year extension to wind and solar tax breaks. Northeast lawmakers also secured a new tax break designed to help independent petroleum refiners in the region offset Jones Act shipping costs. Independent refiners (defined as refiners with no upstream production operations) will be able to count 75 percent of the cost of transporting crude oil towards an existing manufacturing tax deduction. The goal is to help refiners that serve the Northeast remain competitive with those overseas and minimize the potential for higher energy costs in the region caused by crude oil exports. The bill also allows the President to freeze exports for up to a year under certain circumstances, such as a supply shortage or a significant increase in U.S. oil prices versus the global market.

 Small Business Tax Breaks Made Permanent or Extended

The package includes a permanent extension to higher Section 179 expensing limits and expands the definition of eligible property to include air conditioning and heating units. It also extends bonus depreciation, a key tax benefit for many small businesses, through 2019. Bonus depreciation was renewed at 50% through 2017, after which it will fall to 40% for 2018 and 30% for 2019.

 No Fuel Switching Language

The bill provides a total of $3.39 billion for states under the federal Low Income Home Energy Assistance Program (LIHEAP). It does not include a measure requested by President Obama that would have required states to set-aside a portion of their LIHEAP grants for “efficiency improvements” in low-income homes including fuel switching from heating oil and propane to “other fuels.” It also does not provide $200 million requested by the administration for a state-utility partnership program that would seek to encourage residential fuel switching. The industry made pushing back against these proposals a top priority at this year’s “Day on the Hill” event and has pressed the issue with members of Congress and the Obama Administration ever since.

 No Harmful Commodity Trading Provisions

NEFI and its allies were successful in preventing a cut to funding for the Commodity Futures Trading Commission (CFTC), the federal agency responsible for oversight of the commodity futures, swaps and options markets. Also absent from the bill were the many anti-Dodd-Frank “policy riders” advocated by Wall Street lobbyists. This includes a proposal approved by the Senate appropriations committee earlier this year that would have weakened new limits on debit card transaction fees. The Petroleum Marketers Association of America (PMAA) and its allies in the Merchant Payments Coalition were successful in preventing its inclusion in the final bill.

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