Cellulosic Biofuel Producer Credit: Guidelines for Qualification and Registration

October 19, 2009

The Internal Revenue Code provides tax credits for certain renewable and biofuels. Included in these credit provisions are income tax credits for alcohol fuels and cellulosic biofuel under Section 40 of the Internal Revenue Code (“IRC”), income tax credits for biodiesel under §40A, and excise tax credits and payments under §§6426 and 6427 for alcohol fuel mixtures, biodiesel mixtures, alternative fuels, and alternative fuel mixtures. The cellulosic biofuel income tax credit was added to the pre-existing §40 alcohol fuel income tax credits by the Food, Conservation, and Energy Act of 2008. IRC §40(b)(6) allows a $1.01 per gallon nonrefundable income tax credit for each gallon of qualified cellulosic biofuel production of the producer for the taxable year. “Cellulosic biofuel” means any liquid fuel that meets the following requirements:

  1. The fuel must be produced in the United States and used as fuel in the United States;
  2. The fuel must be derived from lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis and;
  3. The fuel must meet registration requirements for fuels and fuel additives established by the EPA Renewable Fuel Standard Program, under §211 of the Clean Air Act (42 USC §7545);
  4. The producer must either sell or use the fuel as:
    1. A mixture with gasoline or other internal combustion engine fuel its a trade or business (other than casual non-farm production),
    2. A fuel in its trade or business, or
    3. A retail fuel delivered into the consumer’s fuel tank.

Examples of renewable lignocellulosic or hemicellulosic matter include dedicated energy crops and trees, wood and wood residues, plants, grasses, agricultural residues, fibers, municipal solid waste, and other biomass residue (See Conf. Rep. 110-627). Alcohol may qualify as cellulosic biofuel provided the alcohol meets these requirements, and is at least 150 proof without regard to denaturants.

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