DISCLAIMER:
This page is for informational use only and does not replace the use of a qualified tax professional.
If you choose to make use of any of this information, you do so at your own risk. We strongly urge you
to consult with a qualified tax professional before taking advantage of any tax incentives or credits to
ensure you properly qualify.
Biodiesel is an environmentally friendly replacement for petro-diesel fuel in diesel powered equipment.
Biodiesel also is a fuel that can be produced domestically from locally grown sources. Because of these reasons
and several others, several government entites, including the US Federal Government,
have created tax incentives and tax credits to promote the production and use of Biodiesel.
Our goal with this page is to give you an overview of what incentives are available, what they specifically
offer, and how they work.
INCENTIVE: Alternative Fuel Refueling Infrastructure Tax Credit
This tax credit is available to be taken on equipment purchased either for business or personal use for the intent of
fueling vehicles with Biodiesel in blends of 20% or higher.
Qualifications:
Qualified alternative fuel vehicle refueling property is any property (other than a
building or its structural components) used to store or dispense an alternative fuel
(such as Biodiesel in blends of at least B20) into the fuel tank of a motor vehicle propelled by the fuel,
but only if the storage or dispensing is at the point where the fuel is delivered into that tank.
What It Offers:
For Business/Investment Use:
- Up To $50,000 Or 50% Of The Value Of The Refueling Property Per Location
- Only available after Tax Code Section 179 has been fully utilized towards equipment value
For Personal Home Use:
- Up To $2,000 Or 50% Of The Value Of The Refueling Property
How It Works:
The taxpayer completes and submits IRS Tax Form 8911
with their federal income taxes.
More Details
Details from US Department of Energy on this tax incentive.
Additional Details
INCENTIVE: Volumetic 'Blender' Tax Credit
This tax credit is best used when BLENDING Biodiesel with other fuels. If you're producing or selling B99, you can
get money back from the government daily, weekly, monthly, or as frequent as you'd like.
If you're selling or using B100, you can only claim this credit at the end of the year and it can only be used
to offset other taxes (ie. federal income tax, federal excise road tax).
What It Offers:
$1.00/Gallon Tax Refund Or Tax Credit
This credit is available for Biodiesel used for on or off-road use that is produced from either new fats & oils
or used fats & oils. You can get this credit back as quickly as daily or wait until the end of the year and declare
it against your income taxes or any federal excise road tax you may have paid.
Qualifications:
Fuel Requirements
A sample of the Biodiesel will need to be tested against the ASTM standard for Biodiesel known as
ASTM D6705-08.
In the past this could be done by the producer, but recently the IRS has contracted with ASTM labs
to perform this test for them. The IRS will come to your facility, pull a sample of your Biodiesel
and send it off to be tested. If it passes, then they'll continue.
Proof Of Biodiesel Production Capability
The IRS may also arrange a time to come to your location to ensure you're actually producing Biodiesel (and not just trying to defraud
the government of their money). This is usually pretty painless and includes you giving the IRS agent a tour of your facility.
How It Works:
1. Those desiring to take advantage of this credit must apply to the IRS using IRS Form 637.
- Register with activity letter AB (agri-biodiesel) and NB (biodiesel that doesn't fit the
agri-biodiesel definition). The credit is the same for both ($1/gal), but this will allow you to
take credits against either kind of feedstock.
- Approval can take a while, but once officially registered, you can begin claiming the credits.
2. Once registered, you must submit IRS Form 720 - Quarterly Federal Excise Tax Return
on a quarterly basis.
3. You may also submit one of the following forms
IRS Form 8849 - Claim For Refund Of Excise Taxes
- This form allows you to get a refund before the end of each quarter.
IRS Form 8864 - Biodiesel And Renewable Diesel Fuels Credit
- This form is used to get a $1.00/gal tax credit for Biodiesel.
- May involve a visit from an IRS agent to verify you're actually making Biodiesel.
- May also involve having the fuel tested to ensure it meets the
ASTM Biodiesel Standard
IRS Form 4136 - Credit For Federal Tax Paid On Fuels
- We recommend going over this one VERY CAREFULLY to fully understand it.
- This form is used to claim a tax credit for any excise taxes paid on Biodiesel
throughout the tax year being filed for.
- The Biodiesel must have been blended with diesel fuel in some mixture.
- The Biodiesel must meet the ASTM D6751 Standard
- The Biodiesel must be purchased from a producer
that's registered with the EPA to sell Biodiesel.
- A Certificate for Biodiesel must be attached (the seller/producer will have a copy).
- A Statement of Biodiesel Reseller may be required (ask your tax professional).
- The Biodiesel was used as a fuel or was sold as a fuel.
- We recommend going over this one VERY CAREFULLY to fully understand it.
More Details
Details from US Department of Energy on the B100 portion of this tax incentive.
Details from US Department of Energy on the Blending portion of this tax incentive.
In the past there were several other Federal tax incentives, but many have expired.
For more detailed information on Federal Tax Incentives, we recommend visiting
the National Biodiesel Boards Tax Incentive Page available on their
website.
Additional Links:
US Department Of Energy
Small Agri-Biodiesel Producer Tax Credit
Biodiesel Income Tax Credit
Biodiesel Mixture Excise Tax Credit
Alternative Fuel Infrastructure Tax Credit
Federal Alternative Fuel Incentives
State Level Alternative Fuel Incentives
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