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House Approves Tax Extenders Legislation Including Retroactive Reinstatement of Biodiesel and Alternative Fuel Tax Credits


Late December 3rd the House of Representatives approved H.R. 5771, the “Tax Increase Prevention Act of 2014.”  As a package of tax extenders and other technical corrections, the legislation includes a one year retroactive extension of the biodiesel, renewable diesel and alternative fuel tax mixture credits in 26 U.S.C. §§ 6426, 6427 and 40A.  As a retroactive extension, these credits will expire again at the end of this year.  The legislation includes a provision instructing the Internal Revenue Service to issue guidance to taxpayers to make a one-time claim for all credits for 2014.  The legislation as passed does not propose to make any changes to the credits other than their termination dates.  Accordingly, the House does not address the issue currently before the Internal Revenue Service and the Joint Committee on Taxation relating to the income tax treatment of excise tax credits under 26 U.S.C. § 6426.

It is unclear why the extension is such that it expires almost immediately rather than for a longer period but with Republicans controlling Congress next year a one year extension of most credits will afford an opportunity for them to work on amendments and changes to the tax code early next year. 

As the Senate has already approved similar legislation it would be expected that this will pass that chamber when it is taken up, likely later this week or early next week.  It remains to be seen whether the Senate will seek to substitute the House legislation with its own legislation which includes a two year extension of the credit through the end of 2015.  As the House had previously proposed to repeal the credit the one year extension may be viewed as a compromise.

Looking forward to the possibility of the credits being reinstated again in 2015, those taxpayers who are subject to excise taxes under 26 U.S.C. § 4081 may want to consider the impact of taking the credit in a different legal entity as the § 4081 taxpayer.  In other words, such entities could set up a business model that would enable them to claim the credit pursuant to 26 U.S.C. § 6427.

As experienced in prior biodiesel credit extensions, the certificate documentation process is required to perfect the credit.