WASHINGTON – U.S. Representative Kristi Noem (R-SD) introduced legislation on May 13, H.R. 5240, the Biodiesel Tax Incentive Reform and Extension Act, to change the biodiesel tax credit.

Specifically, the legislation would eliminate the biodiesel blenders’ credit and replace it with a biodiesel producers’ credit beginning in 2017. This credit would be available only to U.S. producers of biodiesel fuel, regardless of whether the produced biodiesel is used in the United States or exported abroad.

NACS supported an extension of the biodiesel tax credit in its current form—a blenders’ credit—and opposes eliminating the tax credit and replacing it with a biodiesel producers’ credit, as the Noem legislation envisions. The blenders’ credit is currently authorized through 2016 and has previously been included in congressional tax extenders packages.

Congress established a tax credit for biodiesel blending to reduce U.S. dependence on petroleum-based products by incentivizing the use of renewable fuels in the United States, and to achieve improvements in air quality by incorporating into diesel fuel a component with more attractive emissions characteristics. The biodiesel blenders’ tax credit is important for retailers selling biodiesel fuels and has been successful in bringing more renewable diesel fuels into the marketplace.

If this tax credit shifts from the blender to the producer, it would ultimately act as a subsidy for biodiesel producers and result in fuel retailers paying a higher price for biodiesel that could be passed on to consumers. This would lead to less biodiesel consumption in the United States and undercut the policy goals of the program.

Last month, NACS, along with other supporters of the biodiesel blenders’ tax credit, cosigned a letter to the Senate Finance Committee in support of the biodiesel blenders’ credit. The letter asked the committee to reject any changes to the tax credit and extend the blenders’ credit in its current form.