Biofuels 101
By Tim Urban, Senior Principal, Bracewell LLP
The Inflation Reduction Act (IRA), with its tax incentives for biofuels and subsidies for climate-smart agriculture, represents the dawn of a new policy era supporting American farmers’ clean energy innovation. While the path to crafting fair guidance and claiming these credits presents challenges, they provide a unique opportunity to influence policymaking and put money directly into the pockets of American farmers.
Biofuels' Impact
Biofuels represent an important pillar of a circular bioeconomy, where agricultural resources are harvested, consumed and regenerated in a sustainable manner, allowing farmers to generate new sources of incomes while supporting rural communities and promoting environmental sustainability.
Congress has been attempting to facilitate circular bioeconomies for decades; however, past efforts were often fragmented and haphazard in their support, failing to create a balanced policy ecosystem. The IRA changed all of that by establishing tax credits for biomass outputs and procuring billions in funding for sustainable ag practices.
Tax Credits for Biogas
The IRA extended the Section 48 investment tax credit for biogas and the section 40A credit for renewable diesel and biodiesel, established new tax credits for clean fuels (section 45Z) and sustainable aviation fuel (section 40B), and supported several other credits with pathways for biomass (sections 48E, 48C, 25C, etc.).
There is still, however, considerable work to be done in order to unlock the benefits these policies signify. Treasury has still not issued proposed regulations for section 45Z and recent guidance on fast-approaching registration requirements has created more confusion than certainty. Biogas equipment is at risk of being excluded from key tax incentives under section 48, while the path for biogas to qualify under the new section 48E remains uncertain, and every credit faces the threat of a potential repeal under a second Trump administration.
To overcome these obstacles, it’s critical that clean fuels advocates seize the opportunity to protect these historic tax credits and support American farmers working hard to build a sustainable future.
Join me during the opening general session at the 2024 ARA Conference & Expo to explore ag retail’s role in biofuels, climate-smart ag subsidies, and the circular bioeconomy.
Drawing on his two decades at a “Big Four” accounting firm’s tax policy group, Tim’s work has spanned the breadth of the energy world. He has coordinated ad hoc coalitions of taxpayers pursuing extension of temporary tax provisions, and sector-wide groups of Washington-based energy trade associations. He has represented companies on tax issues affecting conventional energy companies; production credits for electricity from renewable resources; investment incentives for purchases of renewable energy plant property, and production and blending tax credits for biofuels including biodiesel and cellulosic ethanol.
Tim previously served as the Committee on Ways and Means Staff Associate for a member of the House tax-writing committee. In that capacity he advised on tax, trade, pension and health policy issues; created and implemented an annual tax legislative agendas; drafted legislation and related materials; and coordinated closely with Committee and Joint Committee staff.
Tim Urban will deliver an outlook on biofuels, sustainable aviation fuels, and renewable diesel as it relates to the ag industry.