Statements on Introduced Bills and Joint Resolutions - S 1548

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. GRASSLEY (for himself, Mr. BAUCUS, Mr. FRIST, Mr. DASCHLE, Mr. DOMENICI, Mr. BINGAMAN, Mr. INHOFE, Mr. JEFFORDS, Mr. THOMAS, Mr. VOINOVICH, Mr. CONRAD, Mrs. LINCOLN, Mr. COLEMAN, Mr. DORGAN, Mr. BOND, Mr. HARKIN, Mr. DAYTON, Mr. DURBIN, Mr. TALENT, Mr. NELSON of Nebraska, and Mr. BROWNBACK):

S. 1548. A bill to amend the Internal Revenue Code of 1986 to provide incentives for the production of renewable fuels and to simplify the administration of the Highway Trust Fund fuel excise taxes, and for other purposes; to the Committee on Finance.

Mr. GRASSLEY. Mr. President, as Members of the this Senate are well aware, I have worked for many years on the development of renewable fuels in the marketplace. Twenty-five years ago we created an alcohol fuels tax incentive to promote the use of ethanol. Today, I am introducing legislation that will simplify the excise tax collection system for all transportation and renewable fuels.

This legislation reforms the alcohol fuels tax credit and creates a new "Volumetric Ethanol Excise Tax Credit" (VEETC). In addition to streamlining the alcohol fuels tax credit, this legislation creates a new tax credit for biodiesel.

Under the VEETC we accomplish three objectives: First, improve the tax collection system for renewable fuels; second, increase the revenue source for the Highway Trust Fund.

This is because the full amount of user excise taxes levied will be collected and remitted to the Highway Trust Fund (HTF). In simplifying the tax collection system, all user excise taxes levied on both gasoline and ethanol blended fuels would be collected at 18.4 cents per gallon; and all excise taxes levied on diesel and biodiesel blended fuels would be collected at 24.4 cents per gallon.

On average, the proposal would generate more than $2 billion per year in additional HTF revenue, which would improve the ability of the federal government to address the nation's transportation infrastructure needs; and third, we will enhance the delivery of renewable fuels in the marketplace.

The federal government's tax collection system will work in concert with the petroleum industry's and independent terminal's fuel delivery system.

The Grassley/Baucus amendment provides tremendous new flexibility to gasoline refiners, marketers, and ethanol producers.

It eliminates the restrictive blend levels, 5.7 percent, 7.7 percent and 10 percent dictated by the Tax Code to reflect obsolete Clean Air Act requirements, providing significant flexibility to oil companies to blend as much or as little ethanol or biodiesel to meet their octane or volume needs.

It streamlines the tax collection system to avoid the potential for fraud while accelerating the refund mechanism.

It provides new market opportunities for ethanol and biodiesel in off-road uses, E-85 and ETBE, and, of course, it resolves a longstanding issue with regard to the Highway Trust Fund.

The "Volumetric Ethanol Excise Tax Credit Act of 2003" is a forward-thinking piece of legislation that deserves universal support and it will address a number of tax issues that have created roadblocks for the renewable industry for a number of years.

Specifically, the tax amendment will do the following: eliminate the negative impact of the ethanol tax incentive on the Highway Trust Fund; eliminate the waste, fraud and abuse of the excise tax collection system, which means that 18.4¢ per gallon of each gallon of ethanol-blend fuel will be remitted to the U.S. Treasury; streamline the delivery of renewable fuels to petroleum blenders at the terminal rack because fuel mixtures will not be based on the Clean Air Act requirements of 5.7, 7.7 or 10 percent blends—the tax credit is allowed for any blend of ethanol and gasoline; streamline the tax refund system for below the rack blenders to allow a tax refund of 52 cents per gallon on each gallon of ethanol blended with gasoline to be paid within 20 days of blending gasoline with ethanol; Eliminate the need of the alcohol fuels income tax credit that is subject to the alternative minimum tax; any taxpayer eligible for the alcohol fuels tax credit will be able to use the volume ethanol excise tax credit system, which means they will be able to file for a refund for every gallon of ethanol used in the marketplace without regard to the income of the taxpayer or whether the ethanol is used in a taxed fuel or tax exempt fuel.

Create a new tax credit for biodiesel—$1.00 per gallon for biodiesel made from virgin oils derived from agricultural products and animal fats; and $.50 per gallon for biodiesel made from agricultural products and animal fats.

Allow the credit to be claimed in both taxable and nontaxable markets; tax exempt fleet fuel programs; off road diesel markets (died diesel).

Streamline the use of biodiesel at the terminal rack—the tax structure and credit will encourage petroleum blenders to blend biodiesel as far upstream as possible, which under the RFS and Minnesota's 2 percent volume requirement will allow more biodiesel to be used in the marketplace.

Streamline the tax refund system for below the rack blenders to allow a tax refund of the biodiesel tax credit on each gallon of biodiesel blended with diesel, dyed and undyed, to be paid within 20 days of blending.

The alternative minimum tax (AMT) will not be an issue for biodiesel; any taxpayer eligible for the biodiesel tax credit will be able use the volume biodiesel excise tax credit system, which means they will be able to file for a refund for every gallon of biodiesel used in the marketplace regard to the income of the taxpayer or whether the ethanol is used in a taxed fuel or tax exempt fuel.

No affect on the Highway Trust Fund—the biodiesel tax credit will be paid for out of the "General fund" not the "Highway Trust Fund."

Eliminate the E85 AMT issue: any taxpayer eligible for the alcohol fuels tax credit will be able use the volume ethanol excise tax credit system, which means they will be able to file for a refund for every gallon of ethanol used in the marketplace without regard to the income of the taxpayer or whether the ethanol is used in a taxed fuel or tax exempt fuel.

Allow the alcohol fuels tax credit to be claimed in both taxable and nontaxable markets;

Streamline the tax refund system for below the rack blenders to allow a tax refund of the alcohol fuels credit on each gallon of ethanol blended with gasoline to be paid within 20 days of blending.

I feel strongly about the legislation because it eliminates the tax infrastructure, and fuel delivery impediments that have been problematic throughout the history of the renewable duels industry and encourage you to join us in working to enact this legislation during this Congress.