{
  "id": "RL32979",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "RL32979",
  "active": false,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 305995,
      "date": "2005-07-06",
      "retrieved": "2016-04-07T19:39:24.093029",
      "title": "Alcohol Fuels Tax Incentives",
      "summary": "Prior to January 1, 2005, alcohol fuel blenders qualified for a 5.2\u00a2 tax exemption against\nthe excise\ntaxes otherwise due on each gallon of blended mixtures (mixtures of 10% ethanol, and 90%\ngasoline). This exemption, which was scheduled to decline to 5.1\u00a2 on January 1, 2005, reduced\nthe\ngasoline excise tax for \u201cgasohol,\u201d from 18.4\u00a2 to 13.2\u00a2/gallon. The\nreduction was realized at the time\nwhen the gasoline tax was otherwise imposed: typically when the fuel was loaded from the terminal\nonto trucks for distribution. The 5.2\u00a2 exemption could also be claimed later, i.e., when\nblenders\nfiled their income tax return, as a 52\u00a2 excise tax credit per gallon of alcohol used to make a fuel\nmixture (which was also scheduled to decline to 51\u00a2 in tandem with the exemption on January\n1,\n2005). This credit, however, was not as valuable as the exemption because 1) it was taxable as\nincome, 2) was not available instantaneously as the fuel was blended -- blenders had to wait until\ntheir income tax returns were filed to reduce their tax liability by the amount of the credit, and 3) the\ntax credit was not refundable -- it was only available to the extent of tax liability. Because the\nprimary benefits from alcohol fuels were realized through an exemption rather than a tax credit,\nrevenue losses from the exemption (or reduced excise taxes) accrued to the Highway Trust Fund\n(HTF). \n \n The American Jobs Creation Act of 2004 ( P.L. 108-357 ) restructured the basic tax subsidies\nfor alcohol fuels: 1) the blender\u2019s  income  tax credits were eliminated and 2) the\nblender\u2019s excise tax\n exemption  was replaced by an \u201cinstant\u201d excise tax credit of the same amount\n-- 5.1\u00a2/gallon of a\n90:10 mixture, which is also equivalent to 51\u00a2  per gallon of ethanol  in the mixture.\nThese tax\nreforms went into effect on January 1, 2005. As before, the excise tax credit is claimed against the\n18.4\u00a2 per gallon excise tax on gasoline, so that the actual excise tax paid and remitted to the\nTreasury is 13.3\u00a2 -- the tax is reduced by 5.1\u00a2/gallon just as with the exemption. When\nincome tax\neffects are considered, however, the new excise tax credit has a greater economic or subsidy value\nthan the exemption before it because income tax deductions are taken at 18.4\u00a2 rather then\n13.3\u00a2. In\nother words, by labeling the tax reduction as an  excise tax credit  rather than an  excise tax\nexemption ,\nthe tax law treats the blenders as paying the full excise tax of 18.4\u00a2/ gallon rather than\n13.3\u00a2 per\ngallon. At a 25% marginal income tax rate, the additional 5.1\u00a2 deduction is valued at\n1.7\u00a2/gallon\nof a blend or 17\u00a2/gallon of ethanol, which means that the total after-tax subsidy for alcohol fuel\nmixtures is effectively 68\u00a2/gallon of ethanol rather than the nominal rate of 51\u00a2. \n \n By nominally increasing the excise tax on gasohol by 5.1\u00a2/gallon, an extra $1,500 million\nin\nFY2006 is projected to be allocated into the HTF from the general fund, which implies that HTF\nexpenditures, and budget deficits can be expected to be higher than under the exemption. In addition\nto the alcohol fuel mixture excise tax credit there are three other federal tax subsidies that are\navailable for the production and use of alcohol transportation fuels (but are little used).\nComprehensive energy policy legislation  H.R. 6 , as passed by the Senate, includes a\nrenewable fuels standard that would, by 2010, more than double both the use of ethanol and the\nrevenue loss from the new alcohol fuels tax incentives.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": false,
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      "topics": []
    }
  ],
  "topics": [
    "Energy Policy"
  ]
}