Biodiesel tax credit proposal to boost production

Summary#

Ohio HB 1036, “Authorize tax credit for biodiesel, renewable diesel production,” would add a new producer tax credit and amend the tax-credit ordering rules in the Revised Code. Its stated goal is to authorize a nonrefundable credit for producing biodiesel and renewable diesel in Ohio.

  • Biodiesel and renewable diesel producers could apply to the director of development for a credit based on gallons produced at a terminal in Ohio during the previous calendar year.
  • The credit would be 75 cents per gallon for specified fuels made from eligible feedstock at the producer’s eligible feedstock-producing facility; 50 cents for other fuels made from eligible feedstock; and 25 cents for other biodiesel or renewable diesel.
  • Eligible feedstock is soybean oil, distillers corn oil, or animal fats. The bill sets a $10 million annual cap and requires credits to be apportioned if approved applications exceed the cap.
  • The credit could reduce Ohio personal income tax or commercial activity tax (CAT), but the same certificate could not be used for both. A qualifying producer could apply once each year, from January 1 through January 20.
  • The bill is introduced, not law. It does not require anyone to produce or use these fuels.

What it means for you#

  • Fuel producers: A qualifying producer could apply for a credit certificate. The director must issue it by March 1 if the applicant qualifies. If applications exceed the cap, each approved credit would be reduced proportionately.
  • Owners of pass-through businesses: For the personal income tax credit, an investor could claim their proportionate or distributive share of a certified credit.
  • Other taxpayers and the public: The bill does not directly change fuel taxes, require fuel purchases, or create a new public service. Tax credits claimed would reduce tax revenue.
  • People and businesses involved in producing fuel: The bill does not create a right to a credit for every gallon produced. The fuel, feedstock, production location, application, and available annual cap all matter.

Money#

The bill caps tax credits at $10 million per fiscal year; no estimate of actual credits claimed or net public cost is provided.

  • The credit is nonrefundable: it can reduce eligible tax owed, but the bill does not provide a cash refund for an unused amount.
  • The director of development would administer applications and certificates. The bill gives no estimate of administrative costs or staffing.
  • No application fee or direct appropriation is stated.

What is unclear#

  • The bill does not state when it would take effect, and its passage is uncertain.
  • The director would set the application form and manner, but the bill does not specify review steps, appeals, or how production and eligible gallons would be verified beyond requiring supporting information.
  • The bill does not say how the annual cap would be assigned to a fiscal year when applications are made after the production year.
  • The bill does not explain how the credit would interact with other incentives or programs.
  • The bill text is supplied without the current Revised Code sections, so the existing law and the full extent of changes to the tax-credit ordering rules could not be checked.

Case for#

  • A possible argument for the bill is that it would offer producers a direct tax incentive tied to fuel production in Ohio.
  • The higher rate for agricultural-based fuel made at the producer’s eligible feedstock-producing facility could reward using eligible feedstock produced at the same facility.
  • The $10 million cap limits the total credits available in a fiscal year.

Case against#

  • The bill does not explain how the director would verify production, feedstock sources, or eligible gallons, leaving important program details to later administration.
  • Because the credit is nonrefundable, producers may not benefit fully if they do not owe enough eligible Ohio tax.
  • If applications exceed the cap, each approved credit would be reduced; applicants would not know from the bill how much they would receive until credits are apportioned.
  • The bill provides no estimate of public revenue lost or administrative cost.