TAX NEWS - JUNE 2010

US Tax: Senator Jeff Sessions warns of energy stealth tax

Senator Jeff Sessions (R- AL) responded to an inquiry about the article "Corn and corn ethanol prices going higher" in a letter received on June 4, 2010.

Senator Sessions responds,

"Specific to your concerns, Congressman Earl Pomeroy introduced the Renewable Fuels Reinvestment Act (H. R. 4090) on March 25, 2010. Among its provisions, this measure would extend the Volumetric Ethanol Excise Tax Credit (VEETC) for five years, which is currently set to expire on December 10, 2010. H.R. 4090 is currently pending before the House Committee on Ways and Means for review."

The bill is also sponsored by John Shimkus (R-IL).

Senator Sessions continues;

"As part of the effort to shift from corn-based ethanol to cellulosic. The 2008 Farm Bill (PL 110-246) reduced the VEETC tax credit from 51 cents to 45 cents for calendar year 2009 and after. The money saved was used to provide funding for the Cellulosic Biofuel Tax Credit, established in the 2008 Farm Bill."

Senator Session goes on to express his support for all proven alternative energy sources as well as support for research into all other energy sources that are to date not proven.

According to the Renewable Fuels Association. H.R. 4090 will Extend the Volumetric Ethanol Excise Tax Credit (VEETC) of $0.45 per gallon available to oil and gasoline refiners for each gallon of ethanol they blend through December 31, 2015. The VEETC is set to expire at the end of 2010.

Extend the corresponding secondary tariff on ethanol through December 31, 2015. The secondary tariff exists to offset the benefit of the VEETC which is available to all sources of ethanol, regardless of its country of origin. The tariff sunsets at the end of 2010.

Extend the Small Producers Tax Credit until January 1, 2016. This $0.10 per gallon tax credit is available on the first 15 million gallons of ethanol produced by ethanol companies producing no more than 60 million gallons per year. This tax credit expires at the end of 2010.

Extend the Cellulosic Ethanol Producer Tax Credit until January 1, 2016. Currently, cellulosic ethanol is eligible for both the $0.45 per gallon VEETC as well as an addition $0.56 per gallon production tax credit.

This tax credit expires at the end of 2012.

This is basically a stealth tax to support farm, energy, and natural resource lobbying.

The secondary tariff prevents U. S. companies from selling ethanol made outside the United States. As an example, Valero's (Valero is the fifth largest US oil company) plant in Aruba manufactures ethanol that is subject to the secondary tariff.

An examination of the influence of money in HR 4090 indicates agribusiness and energy and natural resources PACs and businesses have an inordinate influence on the authors of H.R. 4090.