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Kentucky Governor Ernie Fletcher signed wide-ranging energy legislation last week that creates a variety of incentives for biofuels and renewable energy. House Bill 1 creates incentives of up to half the capital investment in a project that creates alternative fuel from biomass or that creates electricity from renewable energy sources.
The bill also expands an existing tax credit for biodiesel and adds new tax credits for other biofuels. The biodiesel tax credit of $1 per gallon is expanded to include renewable diesel, and the cap on the total tax credit is increased from $1.5 million to $5 million in 2008, and then further increased to $10 million in 2009.
To qualify, a biofuel facility must involve a capital investment of at least $25 million and a renewable power facility must involve a capital investment of at least $1 million. If the renewable power facility uses solar energy, it must be at least 50 kilowatts in size, but other renewable power facilities must be at least 1 megawatt in size.
The incentives can include an advanced disbursement of the labor costs on a new project; a reimbursement of up to 100% of the sales and use taxes on property bought during construction; and a tax credit of up to 100% of the income tax and limited liability entity tax owed by the company. Under certain conditions, companies can also assess 4% of employee gross wages, which the employees can then take as a credit against their income tax. The bill's incentives will be funded with the proceeds from $100 million in bonds.
The bill also expands an existing tax credit for biodiesel and adds new tax credits for other biofuels. The biodiesel tax credit of $1 per gallon is expanded to include renewable diesel, and the cap on the total tax credit is increased from $1.5 million to $5 million in 2008, and then further increased to $10 million in 2009. The bill creates separate new tax credits of $1 per gallon for ethanol produced from corn, soybeans, or wheat and for ethanol produced from cellulosic biomass, each of which includes a cap of $5 million.
However, if some of the $5 million in cellulosic ethanol tax credits go unused, they can be used to increase the cap for the corn ethanol tax credit.
Among other features in the wide-ranging bill are the creation of the Governor's Office of Energy Policy; the creation of the Kentucky Alternative Fuel and Renewable Energy Fund to promote research and development; and an effort to create a Center for Renewable Energy Research and Environmental Stewardship.
This article first appeared in the EERE Network News, a weekly newsletter from the U.S. Department of Energy's Office of Efficiency and Renewable Energy.
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