On December 18, 2015, legislation was passed that re-instated tax credits that had expired on December 31, 2014. The legislation provides retroactive tax relief beginning January 1, 2015 and extends the incentives through December 31, 2016. See below for the list of credits and incentives affected:
- Alternative Fuel Mixture Tax Credit – $0.50/gallon alternative fuels excise tax credit – covers CNG, LNG, propane autogas and other alternative transportation fuels (ethanol, biodiesel, etc.)
- Alternative Fuel Infrastructure Tax Credit – 30% refueling infrastructure tax credits ($30,000 max benefit)
- Second Generation Biofuel Producer Tax Credit – credit of up to $1.01/gallon of second generation biofuel that is sold and used by the purchaser to (1) provide a second generation biofuel mixture as a fuel in trade or business, (2) sell as motor fuel at a retailer or (3) used by the producer to do either (1) or (2)
The passage of this $1.1 trillion spending bill will likely increase investment in the production of alternative fuels in 2016, as industry experts will spot the financial opportunity in the market.
As for 2015, the bill will act as more of a “year-end bonus” for companies operating in this space because they were never clear whether the legislation would be approved. This lack of certainty may have slowed industry growth in 2015, but regardless, the bill bodes well for future growth. Additionally, it solidifies the federal government’s support of the growth of both CNG/LNG and biofuels industries – at least for another year.
The management of excise taxes related to alternative motor fuels is especially complex, especially when tax credits and incentives are involved. Ensuring back office tax systems are set-up to accurately determine and file returns for taxes on these fuels is critical not only to remain tax compliant, but also to remain profitable.