Brady proposes biodiesel credit phase out

A Republican tax proposal issued late yesterday would phase out a key US biodiesel blending tax credit over the next five years.

The US House of Representatives' Ways and Means Committee included a predictable ending to the credit long sought by trade groups in a package that includes disaster relief, modifications to the Internal Revenue Service and other tax extensions.

The proposal has little time to navigate a lame-duck Congress already grappling with agricultural programs, government funding and maneuvering ahead of a Democratic-controlled House next year. The longer the discussion drags toward 2019, the greater the likelihood of a familiar, brief extension, sources told Argus.

But energy lobbyists were encouraged by Republican leaders adopting a longer biodiesel tax credit (BTC) proposal.

"This is a really welcome development," Advanced Biofuels Association president Michael McAdams said. "I look forward to seeing if we can get it across the finish line."

The BTC provides $1 for every gallon of biodiesel blended into the US fuel supply. Trade groups and the Environmental Protection Agency (EPA) have described the credit as more influential than even federal biofuel mandates in encouraging US use of the fuel.

Brady's proposal reinstates a $1/USG credit for 2018 and extends that credit through 2021. The credit would fall to 75¢/USG in 2022, 50¢/USG in 2023 and 33¢/USG in 2024, the program's final year.

Congress has allowed the credit to repeatedly expire, only to retroactively renew the credit for the past five years. Such renewals, while welcome, make longer-term planning unpredictable.

"Too often, the credit has been allowed to lapse and then reinstated retroactively, which does not provide the certainty businesses need to plan, invest and create jobs," National Biodiesel Board vice president of federal affairs Kurt Kovarik said in a statement.

But the package was included with proposed tax changes unlikely to attract Democratic support. A spokeswoman for ranking Senate Finance Committee member Ron Wyden (D-Oregon) said the proposal was not discussed with Democrats before it was released last night.

"There was no communication from his staff, including a heads up that something was coming," Rachel McCleery said in a Tweet. "That is not how you negotiate."