Motor Fuels Tax Minute, Episode 24: Second-Generation Biofuel Credit

In this week’s episode of Motor Fuels Tax Minute, our hosts will discuss the second-generation biofuel credit.

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Detailed Description of Weaver’s Motor Fuels Tax Minute, Episode 24

00:00:00

Emilda: Welcome to Weaver’s Motor Fuels Tax Minute, where we talk all things Motor Fuels. This week Leanne will discuss the second-generation biofuel credit, which seems to be a question that’s coming up more often.

00:00:11

Leanne: That’s right. We’re getting more and more questions about this credit, especially as it was reinstated retroactively as part of the Inflation Reduction Act, and it’s quite a curious credit for a number of reasons.

First of all, it only exists as an income tax credit. Unlike most of the other biofuel credits, there’s no excise tax component. So, a producer of a second-generation biofuel can only claim it as an income tax credit. It also has had a couple of iterations. It started out as a cellulosic ethanol credit and now it’s a second-generation biofuel credit, which is supposed to have broadened the scope a little bit.

But what’s really important to note is the definition of a second-generation biofuel. It’s very limited, it’s hemi cellulosic, or lignocellulosic material, or cultivated algae and it needs to have been certified by the EPA. And that part right there is where taxpayers and industry participants are running into some roadblocks and we’re seeing very few IRS registrations actually being granted for the second-generation biofuel, because the EPA is not granting the certifications necessary from their end to the Clean Air Act to these particular fuels.

The big take away from this is, if you’re interested in the second-generation biofuel credit, or if you’re a producer of biofuel, you want to make sure that your feedstock is hemi cellulosic, or lignocellulosic, or cultivated algae and you need to be able to get it certified as such by the EPA before you start the process with the IRS. These Form 637 registrations take a very long time and to start the process and have it be stopped or come to an end after a long time because we can’t get the products certified, I can imagine would be very frustrating.

My big take away from this is make sure that your products are certified by the EPA and then go down the IRS path.

00:02:11

Kelly: That was a lot of great information on a very complex topic. I’m sure you will have some of our viewers reaching out to you to get some advice on this one.

So that’s it for our Motor Fuels Tax Minute. Just a friendly reminder, if you have any topics that you want us to address, just send us a message or drop it in our comment section, and if we pick your topic, we’ll get some Weaver swag.

Thank you again.