Second Generation Biofuel Producer Tax Credit
NOTE: This incentive originally expired on December 31, 2017, but was retroactively extended through December 31, 2020, by Public Law 116-94.
A second generation biofuel producer that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of up to $1.01 per gallon of second generation biofuel that is: sold and used by the purchaser in the purchaser's trade or business to produce a second generation biofuel mixture; sold and used by the purchaser as a fuel in a trade or business; sold at retail for use as a motor vehicle fuel; used by the producer in a trade or business to produce a second generation biofuel mixture; or used by the producer as a fuel in a trade or business. If the second generation biofuel also qualifies for alcohol fuel tax credits, the credit amount is reduced to $0.46 per gallon for biofuel that is ethanol and $0.41 per gallon if the biofuel is not ethanol. Second generation biofuel is defined as liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable basis or any cultivated algae, cyanobacteria, or lemna. To qualify, fuel must also meet the U.S. Environmental Protection Agency fuel and fuel additive registration requirements. Alcohol with a proof of less than 150, fuel with a water or sediment content of more than 4%, and fuel with an ash content of more than 1% are not considered second generation biofuels. The incentive is allowed as a credit against the producer's income tax liability. Under current law, only qualified fuel produced in the United States for use in the United States may be eligible. For more information about claiming the credit, see IRS Forms 637 and 6478, which are available on the IRS Forms and Publications website. (Reference Public Law 116-94, Public Law 115-123, Public Law 114-113, and 26 U.S. Code 40)
Point of Contact
Excise Tax Branch
U.S. Internal Revenue Service Office of Chief Counsel
Phone: (202) 317-6855