Tax Credits for Renewable Chemical Producers in the US
To incentivize the production of chemicals made from renewable resources, some states have implemented tax credit programs.
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Iowa (Renewable Chemicals Production Tax Credit Program)
Tax credit — $0.05 per pound of renewable chemical produced
Annual limit — $1 million for startups and $500,000 for established businesses
Applicability — High-value chemicals derived from biomass feedstocks with at least 50% biobased content as measured by ASTM D6866 testing (e.g. high-purity glycerol, oleic acid, lauric acid, methanoic or formic acid, arabonic acid, erythonic acid, glyceric acid, glycolic acid, lactic acid, 3-hydroxypropionate, propionic acid, malonic acid, serine, succinic acid, fumaric acid, malic acid, aspartic acid, 3-hydroxybutyrolactone, acetoin, threonine, itaconic acid, furfural, levulinic acid, glutamic acid, xylonic acid, xylaric acid, xylitol, arabitol, citric acid, aconitic acid, 5-hydroxymethylfurfural, lysine, gluconic acid, glucaric acid, sorbitol, gallic acid, ferulic acid, non-fuel butanol, non-fuel ethanol)
Excluded — Chemicals sold or used for food, feed or fuel
How to apply — Please contact the Iowa Economic Development Authority
Legislation — Senate Study Bill 3001 (enacted April 6, 2016)
Sources:
Iowa Economic Development Authority Renewable Chemicals Production Tax Credit Program 2017 Webinar (PDF)
The Iowa Legislature Senate Study Bill 3001
Kentucky (Renewable Chemical Production Program)
Tax credit — $0.05 per molecular pound of weight of renewable chemicals produced in Kentucky
Annual limit — $10 million (shared with the biodiesel and renewable diesel production tax credits per KRS 141.422)
Applicability — The program applies to building block chemicals with at least 50% biobased content, including cellulosic ethanol, starch ethanol or other ethanol derived from biomass feedstock, fatty acid methyl esters, or butanol. The biobased content percentage should be determined using ASTM D6866 testing standard.
Excluded — Chemicals sold or used for the production of food, feed or fuel.
Note: The program also applies to building block chemicals that can be a food additive as long as it is not primarily consumed as food and is also sold for uses other than food. Additionally, supplements, vitamins, nutraceuticals, and pharmaceuticals are eligible but only to the extent that the molecules do not provide caloric value so as to be considered sustenance as food or feed.
How to apply — Please contact the Kentucky Department of Revenue
Legislation — Renewable Chemical Production Program – 302 KAR 4:010 (effective April 2020)
Sources:
Kentucky House Bill 422 (PDF)
Kentucky Department of Revenue – Renewable Chemical Production Tax Credit
Kentucky General Assembly – 302 KAR 4:010. Renewable Chemical Production Program
Maine (LD 1698)
Tax credit — $0.07 per pound of renewable chemical produced in the State
Higher tax credits are possible ($0.09-$0.12 per pound) for chemicals produced from forest-derived renewable biomass for companies that meet other criteria specified in the legislation.
Applicability — Substances sold or used to produce chemicals, polymers, plastics and formulated products with at least 95% biobased content as determined by ASTM D6866 testing.
Excluded — Substances used for food, feed or fuel, with limited exceptions.
The following chemicals are considered as renewable under LD 1698:
- Cellulosic sugars used to produce aquaculture feed;
- A food additive, supplement, vitamin, nutraceutical or pharmaceutical that does not provide caloric value and is not considered food or feed; and
- Cellulosic ethanol, levulinic acid or similar chemicals when sold for use or for production of fuel additives in blends with gasoline or residential heating oil.
LD 1698 also reinstates the tax credit for commercial production and use of biofuels.
How to apply — Please contact the Maine Department of Economic and Community Development
Legislation — LD 1698 – An Act To Create Jobs and Slow Climate Change by Promoting the Production of Natural Resources Bioproducts (enacted March 18, 2020)
Minnesota (Renewable Chemical Production Incentive)
Tax credit — $0.06 per pound of chemicals produced from cellulosic biomass, $0.03 per pound of chemicals produced from cellulosic sugar, starch, oil or animal fat
Annual limit — payments equal to 99,999,999 pounds of renewable chemicals production
Applicability — For this incentive “biobased”’ means, “a chemical, polymer, monomer, or plastic that is not sold primarily for use as food, feed, or fuel and that has a biobased percentage of at least 51 percent as determined by testing representative samples using American Society for Testing and Materials specification D6866.” New entities seeking eligibility will be required to submit testing starting from April 1, 2023. At least 80 percent of the biomass used must be sourced from Minnesota. Chemicals can be stored with fossil-derived chemicals if testing is done to prove eligible biobased portions.
Entities receiving the incentive are eligible for a 20% boost for pounds of chemicals produced from perennial or cover crops.
How to apply — Please contact the Minnesota Department of Agriculture
Legislation — 2022 Minnesota Statute 41A.17 – Renewable Chemical Production Incentive
Sources:
2022 Minnesota Statute 41A.17
MN Department of Agriculture Renewable Chemical Production Incentive Program
Nebraska (Renewable Chemical Production Tax Credit Act)
Tax credit — $0.075 per pound of chemical produced for qualifying eligible chemical businesses
Annual limit — $1.5 million per eligible business.
DED may certify up to $3 million in tax credits per calendar year for 2022 and 2023 and up to $6 million in tax credits per calendar year for 2024 and beyond.
Applicability — Renewable chemicals with a significant biobased content that can be used for products including polymers, plastics, food additives, solvents, intermediate chemicals, or other formulated products with a significant non-fossil carbon content.
Renewable chemical includes:
- Biobased chemicals that can be a food, feed, or fuel additive;
- Supplements, vitamins, nutraceuticals, and pharmaceuticals.
Excluded — Any chemical sold or used as fuel.
LB 1107 also includes a property tax reform that will benefit biofuel plants, among others.
Eligibility – applicants must: (i) produce at least one million pounds of renewable chemicals in Nebraska during the calendar year for which tax credits are sought, (ii) be physically located in Nebraska, (iii) have organized, expanded, or located in Nebraska on or after January 1, 2021, and (iv) be compliant with all agreements entered into under the Act and any other tax credit or programs administered by Nebraska’s Department of Economic Development (DED) or the Nebraska Department of Revenue.
Each agreement will be one year and may be renewed for a second year unless terminated by either party.
Application must include – (i) the number of pounds of Renewable Chemicals produced in Nebraska by the Eligible Business during the calendar year for which tax credits are sought, (ii) the type of Renewable Chemicals produced, (iii) the aggregate sales of all Renewable Chemicals produced by the Eligible Business, (iv) a list of each type and the number of pounds of Biomass Feedstock used by the Eligible Business in the production of Renewable Chemicals in Nebraska, and (v) the number of employees of the Eligible Business that are located in Nebraska.
How to apply — Please contact the Nebraska Department of Economic Development, application form opened March 2022.
Legislation — LB1107 – Adopt the ImagiNE Nebraska Act, Key Employer and Jobs Retention Act, Renewable Chemical Production Tax Credit Act, Customized Job Training Act, Nebraska Transformational Projects Act, and Nebraska Property Tax Incentive Act and change and provide other related provisions.
Sources:
Legislative Bill 1107 (enacted August 20, 2020),
2022 Renewable Chemical Production Tax Credit Act (RCTCA)
Pending Legislations
Illinois (SB1656 – Renewable Chemical Production Tax Credit Program Act)
Status: Session Sine Die as of January 9, 2019
It is similar to Iowa’s tax credit program.Source:
Illinois 100th General Assembly
New Jersey (House Bill 2532 – Renewable Chemicals Act of 2021)
Status: First stage of legislative process (introduced into Congress on April 14, 2021)Source:
HR 2532
Beta Analytic’s Rapid ASTM D6866 Testing
ISO 17025-accredited Beta Analytic has provided rapid, high-quality biobased content ASTM D6866 testing since 2004. The lab is one of the key developers of the ASTM D6866 method. The lab currently has two services – standard (results reported in 7 business days or less) and priority (results in 4 business days).
For inquiries, please email the lab using this form or call (+1) 305-662-7760. We respond to inquiries promptly during business hours (8 AM-5 PM EST, Monday-Friday).
Note: Beta Analytic is not affiliated with any government agencies responsible for these programs. We can advise on ASTM D6866 testing but not on how to apply in these programs or claim tax credits.
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Page last updated: April 2023
This entry was posted on Tuesday, April 7th, 2020 and is filed under Biobased Products, Biobased Regulations, Renewable Carbon .