Bioenergy

Ethanol Tax Credit Extension Introduced

The federal tax credit for ethanol is set to expire on December 31 of this year, but a bill was introduced earlier this week by U.S. Representatives Earl Pomeroy (D-ND) and John Shimkus (R-IL) to extend the ethanol credit for five years at the current level of 45 cents per gallon.

The Volumetric Ethanol Excise Tax Credit (VEETC) is known as the “blender’s credit” because it goes not to ethanol producers, but to entities that blend ethanol with gasoline as an economic incentive to get renewable fuel to the retail marketplace. The American Coalition for Ethanol (ACE) points to the tax credit’s benefits to consumers and to the jobs created by the ethanol industry as key reasons the credit should be extended.

“In today’s economy, the focus must be on creating jobs, and extending the federal ethanol tax credit will not only save thousands of American jobs, but it will allow new American jobs to be created as U.S. ethanol production and use continues to expand,” said Brian Jennings, Executive Vice President of ACE, the nation’s largest ethanol advocacy association.

Thirty grassroots members of the American Coalition for Ethanol were on Capitol Hill earlier this week for the organization’s second annual DC fly-in.  The ethanol advocates met with more than 60 Members of Congress and their staff, asking for the reauthorization of VEETC and for support for more flex-fuel vehicles and ethanol blender pumps.

The Pomeroy-Shimkus “Renewable Fuels Reinvestment Act” also includes a five-year extension of the ethanol Small Producer Credit, the cellulosic ethanol tax credit, and the secondary tariff of 54 cents per gallon.

A recent study by LECG, LLC found that in 2009, the U.S. ethanol industry supported nearly 400,000 jobs in all sectors of the economy, including the ongoing production of ethanol, construction of new facilities, and research and development activities. The same study found that the ethanol industry more than pays for the cost of its tax credit.  The two major federal incentives for ethanol, VEETC and the Small Producer Credit, together cost an estimated $5 billion in 2009.  The combination of increased Gross Domestic Product and higher household income generated an additional $8.4 billion in tax revenue for the federal government in 2009, showing that the U.S. ethanol industry generated a surplus of $3.4 billion for the federal treasury, according to the study.