Biodiesel Tax Incentives

Here are the facts on the biodiesel federal tax credit:

  • 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).

Example

5,000 gallons of diesel sold as a B20 blend

1,000 gallons of B100 x 24.4 cents = $244 in federal excise tax due

1,000 gallons x $1/gallon credit (virgin soy oil) = $1,000

$1,000 - $244 = $756 refund

ExSTARS (Excise Summary Terminal Activity Reporting System)

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