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What’s Up Next for Ethanol Tax Policy?

December 6, 2010


Now that the weekend's CSPAN theatrics over tax cuts are over, the real work and compromises necessary to get legislation passed can commence in earnest – including if, for how long, and at what rate to extend the expiring tax credit for ethanol use known as VEETC. In his proposal over the weekend, Senate Finance Chairman Max Baucus had included language that would extend VEETC for one more year, though at a rate of 36 cents per gallon.  While the RFA has urged for a longer extension at the current rate of 45 cents, Chairman Baucus's inclusion of VEETC in his tax package is a positive development.  Ultimately, that provision was defeated as part of a larger vote to extend expiring Bush tax cuts – all done as political messaging.  The overall tax package had already been announced dead on arrival as Senate Republicans uniformly balked at any tax package that doesn't extend all the expiring tax cuts. We believe that VEETC continues to be part of the package moving forward.  Beyond Chairman Baucus, a bipartisan group of senators including Senate ENR Chairman Jeff Bingaman and Finance Ranking Member Chuck Grassley have all expressed support for extending the underlying policy.  Additionally, the White House remains supportive of extending the current VEETC policy as good faith discussions are currently underway on how best to responsibly reform VEETC and other tax policies relating to renewable fuel production and use. The final look of any tax package is still very much in flux.  It may yet fail to include extensions for key tax credits like VEETC and the incentive for the use of biodiesel – which has been expired for more than a year and has devastated that industry. We remain confident that VEETC will be extended, if for no other reason than to prevent shedding thousands of jobs associated with domestic ethanol production.  A potential tax package would be the most appropriate vehicle to which an extension of VEETC could be attached.  But other potential vehicles may also emerge.  The RFA will continue to work with Congress and the Administration to identify any appropriate vehicle that will ultimately land on the President's desk for his signature.