Tax Incentives

Choosing biodiesel from soybeans not only supports our economy and minimizes our impact on the environment but it also comes with a smaller tax bill.

Illinois Biodiesel Tax Incentive

In 2003, Illinois enacted a sales tax incentive for the use of biodiesel blends. Called SB 46, this important legislation continues to support Illinois soybean growers and biodiesel producers alike as it helps expand the market for this cleaner burning, renewable fuel.

Not set to expire until December 31, 2013, the biodiesel tax incentive works in two ways:

• A partial sales tax exemption of 20 percent (off the state's 6.25 percent) is applicable for biodiesel blends of one to 10 percent, also known as B1 to B10.
• An exemption for the state's entire 6.25 percent sales tax is provided for blends of 11 percent or more (B11, B20, B100, etc.)

Due to the financial advantage of selling higher blends of biodiesel, most retail fuel outlets in Illinois sell B11. In turn, these potential savings have contributed to Illinois becoming the country's leading consumer of this alternative fuel.

Federal Biodiesel Blender's Credit

In December of 2010, the Federal Biodiesel Blender's Credit was signed into law, effectively reinstating the previous legislation that expired on December 31, 2009. Retroactive to January 1, 2010, the $1.00 per gallon credit is based on the percentage of biodiesel blended with petroleum diesel. Here's how it works:

1. Each gallon of fuel that is a mix of biodiesel and petroleum ranges from B0 (no biodiesel) to B100 (all biodiesel).
2. For each percentage of biodiesel in the final product, the producer or fuel supplier receives a federal tax credit of one cent per gallon.
3. The tax credits are reported and applied quarterly on IRS Form 720.

By making it more affordable for companies to make and sell biodiesel, it becomes more cost competitive and, therefore, more attractive to retail outlets that can pass the savings on to consumers.

Important Facts to Remember

•  B100 is taxed once it is blended with undyed diesel fuel.
• The blender is liable for the tax that is reported quarterly on Form 720.
• No credit is allowed unless the blender obtains a certification from the producer of B100 (certificate must specify virgin or recycled feedstock).
• All biodiesel producers must have registered with the IRS on Form 637 by July 1, 2005 ($10,000 penalty, plus $1.00/day thereafter).

ExSTARS (Excise Summary Terminal Activity Reporting System)

To help keep track of the sales of motor fuels, the ExSTARS system details the movement of any liquid product through IRS approved terminals.

• The fuel comes in bulk (pipeline or vessel) and leaves in transport loads (rail or truck).
• These new requirements and reporting standards aid in fraud prevention.
• All participants must have a mechanical dye injection system for off-road fuels.
• The IRS then sends a report to each state Department of Revenue.
  

© Illinois Soybean Association | 1605 Commerce Parkway | Bloomington, IL 61704 | P: (309) 663-7692 | F: (309) 663-6981| www.ilsoy.org

The Illinois Soybean Program Operating Board (ISPOB) manages and invests soybean checkoff funds.
Separately, the Illinois Soybean Association (ISA) administers legislation and membership programs.