United States (Federal) Alternative Fuel Producer
Renewable Energy Systems and Energy Efficiency Improvements Grant
Competitive grant funding and guaranteed loans are available from the U.S. Department of Agriculture Office of Rural Development's Section 9006 Energy Program for the purchase of renewable energy systems and energy improvements for agricultural producers and small rural businesses. Qualified projects must occur in a rural area and implement technology that is pre-commercial or commercially available and replicable. Research and development does not qualify. Applicants must provide at least 75% of eligible project costs, and grant assistance to a single individual or entity may not exceed $750,000. Eligible projects include biofuels, hydrogen, and energy efficiency improvements, as well as solar, geothermal, and wind. The Section 9006 Energy Program has not been funded for Fiscal Year 2008. For more information, visit the Section 9006 Program Web site, and contact the appropriate State Rural Development Office. (Reference 7 U.S. Code 8106)
Point of Contact
Office of Rural Development
U.S. Department of Agriculture
Phone (202) 690-4730
http://www.rurdev.usda.gov/rd/energy/
Small Ethanol Producer Tax Credit
A small ethanol producer that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of $0.10 per gallon of ethanol that is: sold and used by the purchaser in the purchaser's trade or business to produce an ethanol fuel mixture; sold and used by the purchaser as a fuel in a trade or business; sold at retail for use as a motor vehicle fuel; used by the producer in a trade or business to produce an ethanol fuel mixture; or used by the producer as a fuel in a trade or business. A small producer is one that has, at all times during the tax year, not more than 60 million gallons of productive capacity of any type of alcohol. The incentive applies only to the first 15 million gallons of ethanol produced in a tax year and is allowed as a credit against the producer's income tax liability. Under current law, this incentive expires December 31, 2010. For more information, see IRS Publication 510 and IRS Forms 637 and 6478, which are available via the IRS Web site. (Reference 26 U.S. Code 40)
Point of Contact
Excise Tax Branch
U.S. Internal Revenue Service Office of Chief Counsel
Phone (202) 622-3130
http://www.irs.gov/
U.S. EPA Raises the Renewable Fuels Standard for 2008
In response to the Energy Independence and Security Act of 2007 (EISA), signed into law by President Bush in December 2007, the U.S. Environmental Protection Agency (EPA) has subsequently the increased the 2008 Renewable Fuels Standard (RFS) to 7.76% in order to meet the new requirement that all transportation fuels sold contain a minimum of 9 billion gallons of renewable fuel in 2008, as set by the EISA. To determine these volumes, EPA calculates the percentage-based standard annually, which applies to refiners, importers, and non-oxygenate blenders of gasoline. The new RFS supersedes the 2008 RFS that EPA published in November 2007, prior to the enactment of the EISA.
The EISA requires an increase in the overall volume of renewable fuels that must be blended into transportation fuels each year, increasing to 36 billion gallons per year by 2022. In addition, beginning in 2013, a certain percentage of the renewable fuels must be advanced and/or cellulosic based biofuels and biomass-based diesel. For more information on these requirements and the RFS program, visit the EPA's RFS Program Web site as well as the RFS information on the Federal Incentives & Laws Web site.
Energy Independence and Security Act of 2007 Signed Into Law
President Bush signed the Energy Independence and Security Act (EISA) of 2007 (House Resolution 6), designed to improve vehicle fuel economy and help reduce U.S. dependence on oil. EISA aims to increase the supply of alternative fuel sources by setting a mandatory Renewable Fuel Standard (RFS) requiring transportation fuel sold in the U.S. to contain a minimum of 36 billion gallons of renewable fuels by 2022, including advanced and cellulosic biofuels and biomass-based diesel. In addition, the law requires the Corporate Average Fuel Economy (CAFE) standard to reach 35 miles per gallon by the year 2020. The EISA is projected to reduce energy consumption by 7% and greenhouse gas emissions by 9% by 2030. For a summary of the major provisions set forth by the legislation, visit the Energy Independence and Security Act of 2007 page of the Federal Incentives & Laws Web site. The complete legislation can be viewed on the Library of Congress Web site.
Biobased Products and Bioenergy Program
The goal of the Biobased Products and Bioenergy Program is to help finance technologies that are needed to convert biomass into biobased products and bioenergy in a cost-competitive manner in national and international markets. Loans for biomass conversions are eligible for financing under the Business and Industry Guaranteed Loan Program. For the purpose of this program, biomass is defined as any organic matter that is available on a renewable or recurring basis, excluding timber, and including dedicated energy crops and trees, agricultural food and feed crop residues, aquatic plants, wood and wood residues, animal wastes, and other waste materials. A biobased product is considered any commercial or industrial product that utilizes biological products or renewable domestic agricultural or forestry materials, including biofuels. For more information, visit the Biobased Products and Bioenergy Program Web site and contact the appropriate State Rural Development Office. (Reference 7 U.S. Code 8109)
Point of Contact
Office of Rural Development
U.S. Department of Agriculture
Phone (202) 690-4730
http://www.rurdev.usda.gov/rd/energy/
Biomass Research and Development Initiative
The U.S. Department of Agriculture Office of Rural Development, in conjunction with U.S. Department of Energy, provides grant funding for projects addressing research and development of biomass-based products, bioenergy, biofuels, and related processes under the Section 9008 Biomass Research and Development Initiative. Eligible recipients may receive up to $1 million for projects that involve feedstock production for biobased fuels and products, converting cellulosic biomass into biobased fuels, technologies for co-producing biobased products in biofuel production facilities, and strategic guidance for improving overall sustainability and environmental quality of biomass technologies. For more information, visit the Biobased Products and Bioenergy Program Web site and contact the appropriate State Rural Development Office. (Reference 7 U.S. Code 8601)
Point of Contact
Office of Rural Development
U.S. Department of Agriculture
Phone (202) 690-4730
http://www.rurdev.usda.gov/rd/energy/
Value-Added Producer Grants (VAPG)
The U.S. Department of Agriculture Office of Rural Development awards Value-Added Producer Grants for planning activities and working capital for marketing value-added agricultural products and farm-based renewable energy. Eligible applicants include independent producers, farmer and rancher cooperatives, agricultural producer groups, and majority-controlled producer-based business ventures. Eligible participants may apply for either a planning grant or a working capital grant, but not both. In addition, no more than 10% of program funds may be awarded to majority-controlled producer-based business ventures. Grants will only be awarded if projects are determined to be economically viable and sustainable. For more information about grant eligibility, visit the VAPG Web site and contact the appropriate State Rural Development Office. (Reference 7 U.S. Code 1621)
Point of Contact
Office of Rural Development
U.S. Department of Agriculture
Phone (202) 690-4730
http://www.rurdev.usda.gov/rd/energy/
Renewable Fuel Standard (RFS) Program
The national RFS Program was developed to increase the volume of renewable fuel that is blended into gasoline and other transportation fuels. As required by the Energy Policy Act of 2005, the U.S. Environmental Protection Agency (EPA) finalized RFS Program regulations, effective September 1, 2007. The Energy Independence and Security Act of 2007, signed into law in December 2007, increased and expanded this standard. In 2008, 9 billion gallons of renewable fuel must be used, increasing to 36 billion gallons per year by 2022. Beginning in 2013, a certain percentage of the renewable fuels must be advanced and/or cellulosic based biofuels and biomass-based diesel, pending final rulemaking by EPA. Cellulosic biofuel is defined as any renewable fuel derived from cellulose, hemicellulose, or lignin, and achieves a 60% greenhouse gas (GHG) emissions reduction. Advanced biofuel is defined as any renewable fuel, other than ethanol derived from corn, derived from renewable biomass, and achieves a 50% GHG emissions reduction.
Each year, EPA will determine the Renewable Volume Obligation (RVO) for parties required to participate in the RFS Program. This standard is calculated as a percentage, by dividing the amount of renewable fuel (gallons) required by the RFS to be blended into gasoline for a given year by the amount of gasoline/transportation fuel expected to be used during that year. Any party that produces gasoline for use in the U.S., including refiners, importers, and blenders (other than oxygenate blenders), is considered an obligated party under the RFS Program. Parties that do not produce, import, or market fuels within the 48 contiguous states are exempt from the renewable fuel tracking program. Small refineries and refiners are also exempt from the program until 2011. A small refinery is defined as one that processes fewer than 75,000 barrels of crude oil per day, has a total crude capacity of less than 150,000 barrels per day, and employs fewer than 1,500 employees company-wide. All obligated parties are expected to meet their RVO beginning in 2007.
To facilitate and track compliance with the RFS, a producer or importer of renewable fuel must generate Renewable Identification Numbers (RINs) to represent renewable fuels produced or imported by the entity on or after September 1, 2007, assigned by gallon or batch. Assigned RINs are transferred when ownership of a batch of fuel occurs, but not when fuel only changes custody. A trading program is in place to allow obligated parties to comply with the annual RVO requirements through the purchase of RINs. Obligated parties must register with the EPA in order to participate in the trading program. For each calendar year, an obligated party must demonstrate that it has sufficient RINs to cover its RVO. RINs may only be used for compliance purposes in the calendar year they are generated or the following year. Obligated parties must report their ownership of RINs to the EPA's Office of Transportation and Air Quality on a quarterly and annual basis.(Reference 42 U.S. Code 7545(o) and 40 CFR 80.1100-80.1167)
Point of Contact
U.S. Environmental Protection Agency
Phone (202) 272-0167
http://www.epa.gov
Import Duty for Fuel Ethanol
The U.S. Customs and Border Protection imposes a 2.5% ad valorem tariff on the import of ethanol for use in fuel which is based on the percent volume of the fuel at the time of transaction. The 2009 Normal Trade Relations duty rate (formerly known as the Most Favored Nation duty) of $0.54 per gallon of ethanol also applies to imports from most countries to offset the Volumetric Ethanol Excise Tax Credit (VEETC) available from the U.S. Internal Revenue Service (IRS). Ethanol imports from countries that are part of the North Atlantic Free Trade Agreement, Caribbean Basin Initiative, and Andean Trade Preference Act may not be subject to the secondary duty provided the ethanol is produced with feedstocks from those nations (specific feedstock percentage requirements apply). Importers of ethanol must follow the same regulations as domestic producers, including registering with the IRS. (Reference Harmonized Tariff Schedule Number 99010050, and Public Laws 96-499, 99-514, 109-423, and 110-234)
Point of Contact
U.S. Customs and Border Protection
Phone (703) 526-4200 or (877) 227-5511
http://www.cbp.gov/
Alternative Fuel Definition - Internal Revenue Code
The Internal Revenue Service (IRS) defines alternative fuels as liquefied petroleum gas, compressed natural gas, liquefied natural gas, liquefied hydrogen, liquid fuel derived from coal through the Fischer-Tropsch process, liquid hydrocarbons derived from biomass, and P-Series fuels. Biodiesel, ethanol, and renewable diesel are not considered alternative fuels by the IRS. While the term "hydrocarbons" includes liquids that contain oxygen, hydrogen, and carbon and as such "liquid hydrocarbons derived from biomass" includes ethanol, biodiesel, and renewable diesel, the IRS specifically excluded these fuels from the definition. (Reference 26 U.S. Code 6426)
Point of Contact
U.S. Internal Revenue Service
Phone (800) 829-1040
http://www.irs.gov/
Volumetric Ethanol Excise Tax Credit (VEETC)
An ethanol blender that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of $0.45 per gallon of pure ethanol (minimum 190 proof) blended with gasoline. Only entitles that have produced and sold or used the qualified mixture as a fuel in their trade or business are eligible for the tax credit. The incentive must first be taken as a credit against the blender's fuel tax liability; any excess over this tax liability may be claimed as a direct payment from the IRS. Under current law, this incentive expires December 31, 2010. For more information, see IRS Publication 510 and IRS Forms 637, 720, 4136, 6478, and 8849, which are available via the IRS Web site. (Reference Public Law 110-234, and 26 U.S. Code 6426)
Point of Contact
Excise Tax Branch
U.S. Internal Revenue Service Office of Chief Counsel
Phone (202) 622-3130
http://www.irs.gov/
Congress Passes Food, Conservation, and Energy Act of 2008 (Farm Bill)
In May, Congress overrode a presidential veto to pass the Food, Conservation, and Energy Act of 2008 (House Resolution 2419), which provides funding for commodity, rural development, conservation, and energy programs. The bill includes language that authorizes $1 billion in funds for renewable energy programs and new feedstock production, and reauthorizes many 2002 Farm Bill programs, including the Biomass Research and Development Initiative, the Biobased Products and Bioenergy Program, and a biodiesel education program. The bill also allows for a cellulosic biofuel production credit.
Emergency Economic Stabilization Act/Energy Improvement and Extension Act of 2008
The Emergency Economic Stabilization Act (House Resolution 1424) was signed by President Bush, enacting the Energy Improvement and Extension Act of 2008. The bill amends and extends existing biodiesel blending and production tax credits, extends existing alternative fuel excise tax credit, and extends the alternative fueling infrastructure tax credit. The bill also creates a new tax incentive toward the purchase of qualified plug-in hybrid electric vehicles, based on vehicle weight and battery capacity. Additionally, qualified idle reduction devices are exempt for heavy-duty truck retail excise taxes.
Biorefinery Assistance Program Funds Availability and Proposed Rulemaking Announced
The U.S. Department of Agriculture's (USDA) Rural Business-Cooperative Service has announced an Advanced Notice of Proposed Rule Making (PDF 94KB) and seeks comments for the development of a proposed rule to implement a Biorefinery Assistance guaranteed loan program. Download Adobe Reader. In addition, USDA published a separate notice announcing a Notice of Funds Availability (PDF 130KB) for the Biorefinery Assistance Program, which will provide guaranteed loans for the development and construction of commercial-scale biorefineries or for the retrofitting of existing facilities using eligible technology for the development of advanced biofuels. Created in the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill), the purpose of the Biorefinery Assistance Program is to assist in the development of new and emerging technologies for the development of advanced biofuels.
Cellulosic Biofuel Producer Tax Credit
A cellulosic biofuel producer that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of up to $1.01 per gallon of cellulosic biofuel that is: sold and used by the purchaser in the purchaser's trade or business to produce a cellulosic biofuel mixture; sold and used by the purchaser as a fuel in a trade or business; sold at retail for use as a motor vehicle fuel; used by the producer in a trade or business to produce a cellulosic biofuel mixture; or used by the producer as a fuel in a trade or business. If the cellulosic biofuel also qualifies for alcohol fuel tax credits, the credit amount is reduced to $0.46 per gallon for biofuel that is ethanol and $0.41 per gallon if the biofuel is not ethanol. Cellulosic biofuel is defined as liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable basis, and meets U.S. Environmental Protection Agency fuel and fuel additive registration requirements. Alcohol with a proof of less than 150 is not considered cellulosic biofuel. The incentive is allowed as a credit against the producer's income tax liability. Under current law, only qualified fuel produced in the U.S. between January 1, 2009, and December 31, 2012, for use in the U.S. may be eligible. For more information, see IRS Publication 510 and IRS Forms 637 and 6478, which are available via the IRS Web site. (Reference Public Law 110-234, Section 15321, and 26 U.S. Code 40)
Point of Contact
Excise Tax Branch
U.S. Internal Revenue Service Office of Chief Counsel
Phone (202) 622-3130
http://www.irs.gov/
Small Agri-Biodiesel Producer Tax Credit
A small agri-biodiesel producer that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of $0.10 per gallon of agri-biodiesel that is: sold and used by the purchaser in the purchaser's trade or business to produce an agri-biodiesel and diesel fuel mixture; sold and used by the purchaser as a fuel in a trade or business; sold at retail for use as a motor vehicle fuel; used by the producer in a trade or business to produce an agri-biodiesel and diesel fuel mixture; or used by the producer as a fuel in a trade or business. A small producer is one that has, at all times during the tax year, not more than 60 million gallons of productive capacity of any type of agri-biodiesel. Agri-biodiesel is defined as diesel fuel derived solely from virgin oils, including esters derived from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats; renewable diesel does not qualify for the credit. The incentive applies only to the first 15 million gallons of agri-biodiesel produced in a tax year is allowed as a credit against the producer's income tax liability. Under current law, this incentive expires December 31, 2009. For more information, see IRS Publication 510 and IRS Forms 637 and 8864, which are available via the IRS Web site. (Reference Public Law 110-343, Section 202, and 26 U.S. Code 40A)
Point of Contact
Excise Tax Branch
U.S. Internal Revenue Service Office of Chief Counsel
Phone (202) 622-3130
http://www.irs.gov/
