In keeping with the season, the topic of federal biomass energy taxes and taxation was discussed at the luncheon. One quickly gets the feeling that it would be very easy to miss a legally available tax incentive without an in-depth analysis of U.S. tax laws.
Some tax incentives can add much to the economic performance of a biomass project.
Yet, one can get so caught up in the morass of biomass energy taxation that major mistakes can be made. One of the original reasons for federal tax incentives was to encourage the commercialization of renewable energy resources by making it easier for them to compete with lower cost, conventional energy supplies. Most of the U.S. incentives are either tax exemptions or tax credits. Since the cost of fermentation ethanol has generally been in the range of three to five times that of gasoline on a volumetric basis, the partial tax exemption makes it possible for gasohol to compete in the open market with conventional motor gasolines. In contrast, a tax credit is exactly that, a direct reduction in the tax that is due on taxable income.