President Obama signs tax relief bill with ethanol subsidy

17 December 2010 22:34  [Source: ICIS news]

WASHINGTON (ICIS)--President Barack Obama on Friday signed into law the $858bn (€652bn) tax relief bill that extends for another year federal subsidies and protective tariffs for domestic US ethanol producers.

The Renewable Fuels Association (RFA), a leading US bio-ethanol trade group, quickly welcomed the president’s action, saying that the continuing ethanol subsidy programme and protective tariff would provide market stability and development certainty for bio-fuels.

RFA president Bob Dinneen said that the one-year extension of the subsidy and tariff would “allow for the full maturation of current ethanol technologies while simultaneously accelerating commercialisation of cellulosic and advanced ethanol technologies”.

The tax relief bill singed by Obama chiefly extends for two years lower personal income tax rates that were enacted during the administration of President George W Bush.  But those reduced tax rates would have expired on 31 December if Congress and the president had not acted to extend them.

The bill also included billions of dollars worth of tax incentives and write-offs for a variety of businesses.

The ethanol subsidy and tariff, however, are extended for only one year, which means that the new 112th Congress that convenes in January will revisit the subsidy.  Many in Congress were already seeking to have the subsidy - which costs taxpayers about $6bn annually - reduced or eliminated.

Under the law and the extension, the federal government pays 45 cents/gal to refineries and fuel blenders to mix corn ethanol into the nation’s gasolines. 

The tariff assesses a 54 cents/gal import duty on bio-ethanols made in foreign nations - basically a barrier to sugarcane-based ethanol from Brazil.  Brazilian ethanol makers said earlier on Friday that they would seek a Brazilian government challenge to the US subsidy and tariff before the World Trade Organization (WTO).

The tax relief measure also was welcomed by general business interests and the US plastics sector because of tax credits that many say would likely spur business equipment purchases and other investments in the new year.

William Carteaux, president of the Society of the Plastics Industry (SPI), said the measure signed on Friday by Obama would spur consumer spending and stimulate innovation and development in the plastics industry.

Among other things, the tax relief bill allows businesses a 100% tax credit for new equipment they buy.  It also extends the federal tax credit for research and development (R&D) spending, which had expired at the end of last year.

($1 = €0.76)

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By: Joe Kamalick
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