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Agriculture, Refined Products, Energy Transition, Biofuel, Fuel Oil, Renewables
November 14, 2024
HIGHLIGHTS
Industry fears effects of new tax credit uncertainty
Hopes to extend current subsidies before end of 2024
The US Congress should pass a short-term tax package before the end of 2024 to ensure energy and biofuel industry stability, 36 groups representing fuel retailers, energy marketers and biofuels producers said in a letter to US lawmakers sent late Nov. 13.
The combination of uncertain and still-unissued guidance for Inflation Reduction Act provisions set to take effect in 2025 and existing subsidies set to expire at the end of 2024 could create "unnecessary disruption" in energy and fuel markets before the incoming 119th Congress, the groups said.
"Absent the certainty provided by a bridge package, American consumers would face rising energy and fuel prices, and our organizations and the members we represent would face regulatory, legal, and tax filing uncertainty," the letter said. "The combination of these effects would be economic headwinds at a time when Congress and tax-writers are attempting to consider more broad, holistic reforms and extensions in the tax system."
The letter was issued by NATSO, which represents US truck stops and travel centers; SIGMA, which represents fuel marketers, and the National Association of Convenience Stores (NACS). Other groups that signed the letter include the Renewable Fuels Association, a leading ethanol lobby, the Coalition for Renewable Natural Gas, as well as state energy marketers, trucking companies and soybean growers.
The letter calls on current leadership in both the Senate and House of Representatives to pass a tax package designed to extend current incentives until the 119th Congress can decide the fate of IRA provisions for which the Biden administration has yet to issue guidance.
The current credits the groups are seeking to extend include the 40A biodiesel tax credit, the 40B sustainable aviation fuel tax credit, the 40(b)(c) second generation biofuel producer credit, the 48(c)(1) qualified fuel cell investment tax credit, the 48(c)(7) qualified biogas investment tax credit and the 6426/6427 alternative fuel tax credit.
On Nov. 14, Clean Fuels Alliance America and nine national and state soy grower associations also wrote to House and Senate leaders requesting a one-year extension of the 40A credit, saying its members were facing "tremendous confusion in the marketplace."
Those credits are set to expire at the end of 2024, and be replaced by IRA credits that promise a more streamlined and technology-neutral approach. New provisions include the 45Z credit, as well as the Section 48E clean electricity investment tax credit and the 45Y clean electricity production tax credit. Industries impacted by the new tax incentives have been seeking emissions scoring eligibility guidance from the administration throughout 2024.
The 45Z credit, which is designed to encourage the domestic production of fuels with 50% lower lifecycle greenhouse gas emissions than petroleum, has been the subject of frequent biofuels industry concern in 2024. The industry remains unclear whether feedstocks like ethanol and biodiesel will be eligible, or whether -- like the 40B credit guidance issued in the spring -- producers will need to apply a range of so-called "climate-smart" agriculture techniques like no-till and cover cropping to qualify.
In September, US Secretary of Agriculture Tom Vilsack told an industry convention he was pushing for more "flexible" requirements than 40B, and that he expected clarity on 45Z to be issued by the end of 2024.
"I remind my staff repeatedly how many days are left in the administration, because it is important for us," Vilsack said. "We've prioritized a number of things that need to get done before Jan. 20... I think there's just a genuine effort and interest on behalf of the administration to get this done before Jan. 20. It's at the top of my list."
"Treasury and IRS are working diligently to implement the IRA tax incentives including the Clean Fuel Production Credit in partnership with other federal agencies," a US Treasury Department spokesperson told S&P Global Commodity Insights in September. "Treasury and IRS issued guidance regarding the registration requirements for the credit on May 31 and, as stated in that notice, we plan to issue additional guidance on more aspects of the section 45Z credit."
Additional questions over the future of the IRA credits arrived alongside the Nov. 5 election of President-elect Donald Trump. Whatever guidance the Biden administration finalizes before January could change in 2025, when the incoming administration's agency leadership could promulgate revised qualification parameters for a host of provisions.
"I like to think of the IRA like a memorandum of understanding, and like any MOU there's a lot to be done after it's signed and executed, and that's being done by Treasury and the Department of Energy and other aspects of the administration," Shariff Barakat, a partner in Akin Gump Strauss Hauer & Feld LLP's project finance group, said on a webinar Nov. 12. "There's an incredible amount of public policy that's running through those agencies, and that could very well change."
On Sept. 25, a bipartisan group of Senators and House representatives introduced the Farmers First Fuel Incentives Act, seeking to extend 45Z from 2027 to 2034 and require the US Treasury to restrict eligibility to domestic feedstock sources, preventing foreign feedstocks like Chinese cooking oil from being eligible. That bill was "a strong signal that extending the 45Z credit is going to be a top, bipartisan priority in this Congress and the next," Growth Energy CEO Emily Skor said in a statement.
Trump and Republican leadership have indicated they will seek to overhaul or repeal significant portions of Biden's signature 2022 legislation as they prioritize extending the previous Trump administration's 2017 Tax Cuts and Jobs Act, which is set to expire in 2025.
"Particularly given the upcoming 2025 tax policy debate, enacting a modest, short-term tax package this fall would help to ensure energy and agriculture market stability and predictability while preserving grounds for an open energy and tax debate in the 119th Congress," the groups wrote in their Nov. 12 letter.
"Absent the certainty provided by a bridge package, American consumers would face rising energy and fuel prices, and our organizations and the members we represent would face regulatory, legal, and tax filing uncertainty. The combination of these effects would be economic headwinds at a time when Congress and tax-writers are attempting to consider more broad, holistic reforms and extensions in the tax system," they added.
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