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32 Biotechnology L. Rep. 1 (2013)

handle is hein.journals/bothnl32 and id is 1 raw text is: 32 Biotechnology Law Report 1 Numbers 1 and 2, 2013 © Mary Ann Liebert, Inc. DOI: 10.1089/bir.2013.9995 The Biofuels Tax Credit By JANE C. BERGNER* T HE AMERICAN TAXPAYER RELIEF ACT of 2012 (Taxpayer Relief Act)1 extended various ex- pired federal tax credits for biofuels production2 and created new federal tax credits for algae fuel produc- tion from qualified feedstock. The previously avail- able tax credits for cellulosic ethanol production and accelerated depreciation for cellulosic biofuel refineries for biodiesel production expired on December 31, 2011, and the cellulosic biofuels credits expired on De- cember 31, 2012. Previously, proposed bills including extension packages failed to pass in 2012, but the Tax- payer Relief Act, passed in early January 2013, finally extended these credits for the next year until 2014. EXTENSION OF CREDITS Under the new Taxpayer Relief Act - Sections 404 and 410, the tax credits for cellulosic biofuel produc- tion were extended through December 31, 2013, and, under section 405, the expired biodiesel fuels tax cred- its have been retroactively extended to apply for sale or use of biodiesel fuels after December 31, 2008 and through December 31, 2013. Additionally, section 404 of the Taxpayer Relief Act extends the credits to include cellulosic biofuel production credits for certain algae- based fuels by extending the credit's availability to pro- duction of fuel derived from qualified feedstock. THE CREDITS AVAILABLE Under the Internal Revenue Code, a qualifying pro- ducer and seller of biofuels is entitled, first, to a credit under section 64263 against the excise tax paid.4 In ad- dition, section 6427 provides for an income credit equal to the difference between (i) the amount of the income tax credit specified in section 6427 with re- spect to the type of fuel sold and (ii) the total amount of the excise tax credits permitted with respect to such fuel under section 6426. In the case of the income tax credit, the Secretary of the Treasury actually writes a refund check equal to the difference between the amount of the excise tax credit and the amount of the allowable income tax credit, to the extent that the taxpayer is not otherwise made whole. Finally, after application of sections 6426 and 6427, a credit is allowed under section 34. *Q Jane C. Bergner. Jane C. Bergner is an attorney in Washing- ton, D.C. who concentrates her practice in Federal taxation. Mrs. Bergner, who is the principal in the Law Offices of Jane C. Bergner, is included in the Best Lawyers of America as well as in Who's Who in the World and Who's Who of Amer- ican Law. A former Chair of the District of Columbia Bar Tax- ation Section and a member of a number of American Bar Association Section of Taxation Committees, including the Government Relations Committee, Mrs. Bergner is an elected Fellow of the American College of Tax Counsel. Her web site is www.dctaxlawfirm.com. During the course of her practice, she has been engaged in tax issues involving the biofuels tax credit. This article expands upon a previous article that was published prior to the enactment of the Taxpayer Relief Act. 1H.R. 8 (as amended). 2Wikipedia defines a biofuel as a type of fuel whose energy is derived from biological carbon fixation. Legislation defines biofuels to include alcohol fuels, biodiesel and cellulosic fuels. 3Unless otherwise expressly stated herein, all references to section are to sections of the Internal Revenue Code of 1986; all references to Reg. @ are to the Treasury Regulations on Income Tax promulgated thereunder. 4(a) Allowance of Credits. There shall be allowed as a credit (1) against the tax imposed by section 4081 an amount equal to the sum of the credits described in subsections (b), (c), and (e), and (2) against the tax imposed by section 4041 an amount equal to the sum of the credits described in subsection (d). No credit shall be allowed in the case of the credits described in subsections (d) and (e) unless the taxpayer is registered under section 4101. Section 6426(b) provides an alcohol fuel mixture credit; sec- tion 6426(c) provides a biodiesel mixture credit; and section 6426(e) provides an alternative fuel mixture credit. Section 6426(d) provides an alternative fuel credit. The broad language of section 6426(a)(1) provides an inference that, if a seller were able to classify its fuel product under several of the sections 6426(b), (c) and (e), such seller would be able to avail itself of multiple credits against the tax due on the sale of the same product. However, even though the broad language of the stat- ute itself may support such a conclusion, it is unlikely that the IRS would permit such a result. 1 Original Articles

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