IRS: Cellulosic biofuels are eligible for tax credit

By Erin Voegele
Web exclusive posted Dec. 29, 2008, at 10:59 a.m. CST

Qualifying cellulosic biofuels produced and sold between Dec. 31 and Jan. 1, 2013, will be eligible for a tax credit.

The Internal Revenue Service recently issued Notice 2008-110, which provides guidance regarding the income and excise tax credits for biodiesel and cellulosic biofuels under sections 40A, 6426 and 6427(e) of the Internal Revenue Code.

The Food, Conservation and Energy Act of 2008 created an income tax credit for producers of certain cellulosic biofuels. Under the legislation, cellulosic biofuels are defined as any liquid fuel, other than low-proof alcohol, which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, and meets the registration requirements for fuels and fuel additives established by the U.S. EPA under section 211 or the Clean Air Act.

To qualify for the credit, the producer must register with the Secretary of the Treasury.

The notice issued by the IRS, which provides guidance for registration as a cellulosic biofuels producer, requires taxpayers to complete IRS 637, Application for Registration (For Certain Excise Tax Activities). Taxpayers will be registered producers only if the IRS has issued a registration letter to the producer. The IRS will register an applicant as a producer of cellulosic biofuels only if it is deemed that the applicant is a producer of cellulosic biofuels or is likely to become a producer within a reasonable time after being registered, and is satisfied with the filing, deposit, payment, reporting and claim history for all federal taxes of the applicant or any related party.

A full copy of IRS Notice 2009-8-110 is available online at: www.irs.gov/pub/irs-drop/n-08-110.pdf.