TaxNewsFlash-United States

November 4, 2009
No. 2009-494

PRINTABLE VERSION

Legislative Update: Proposal for Second Generation Biofuel Producer Tax Credit Added to House Health Care Reform Bill

The Joint Committee on Taxation on Saturday, November 7, issued a description of a change to the second generation biofuel producer credit proposal that is part of the health care reform bill (discussed below). The revised provision would exclude from the definition of “cellulosic biofuel” any fuels that (1) are more than 4% (determined by weight) water and sediment in any combination, or (2) have an ash content of more than 1% (determined by weight). The provision would be effective for fuel sold or used after the date of enactment. For an electronic version of the JCT description and the related revenue estimate: JCX-52-09 and JCX-53-09 (revenue estimate)

A pending manager’s amendment to the House health care reform bill, the Affordable Health Care for America Act (H.R. 3962), would amend the existing cellulosic biofuel producer income tax credit. The provision is estimated to raise $24 billion over 10 years.

The bill would:

Base the amount of the second generation biofuel producer credit on the BTU content of the biofuel being produced
Expand the definition of feedstocks eligible for the credit to include cultivated algae, cyanobacteria, and lemna
Exclude "unprocessed fuels" from credit eligibility
Limit "liquid fuels" to fuels that are liquid at room temperature after extraction of all water from the fuel

The amendments would apply to fuels sold or used after the date of enactment.

For an electronic version of the manager’s amendment (linking directly to the biofuel producer tax credit proposal): Manager’s Amendment

KPMG Observation

It appears that the effect of these changes would be to preclude the paper manufacturing by-product commonly known as “black liquor” from credit eligibility.

The Joint Committee on Taxation today released a revenue estimate of the provisions in the House health care reform bill, as amended and including the second generation biofuel producer tax credit proposal. For an electronic version of the JCT revenue estimate: JCX-46-09

What’s Next?

The House is expected to begin consideration of health care reform legislation later this week.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in TaxNewsFlash-United States is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to US-KPMGWNT@kpmg.com. For more information, contact KPMG’s Federal Tax Legislative and Regulatory Services Group at + 1 202.533.4366, 2001 M Street NW, Washington, DC 20036-3310.

To unsubscribe from TaxNewsFlash-United States, reply to US-KPMGWNT@kpmg.com and type ‘TaxNewsFlash Unsubscribe' in the subject line, then click on the SEND button.

Privacy | Legal