As we look to a New Year and fresh perspective in the biofuels industry, we are closely monitoring news that Congress will specifically allow USDA to make payments to biofuel producers. While no specific language is provided on how the USDA will determine these payments, the recently signed stimulus package includes $11.2 billion in relief to be distributed by USDA, giving incoming Secretary of Agriculture nominee Tom Vilsack discretion to provide funding to biofuel producers.
Specifically, the stimulus package states that the Secretary “may make payments to producer of advanced biofuels, biomass-based diesel, cellulosic biofuel, conventional biofuel or renewable fuels with market losses due to COVID-19.”
We at KCoe Isom will be monitoring this legislation closely to provide guidance on funds as released by USDA. Meanwhile, other portions of the Stimulus Package will also bring relief to biofuels plants and refinery related businesses across the U.S. Here are a few highlights:
- Paycheck Protection Program (PPP), second round: Congress is allowing expenses used for PPP forgiveness to be tax deductible. A business is eligible for the second round of PPP if they have fewer than 300 employees and can show a 25% reduction in gross receipts in a 2020 quarter compared to same quarter in 2019.
- Payroll Tax Deferral: this deferral is extended for 2021, have until January 1, 2022 to pay deferred employment taxes.
- Employee Retention Tax Credit (ERTC): Another change that will be significant to biofuels are the modifications made to the ERTC. This is a credit reported on payroll tax for qualified wages paid by eligible businesses. For 2020, an eligible business is one that either had operations partially or fully suspended, or saw revenues decrease by at least 50% for a quarter in 2020 compared to the same quarter in 2019.
- Family First Coronavirus Response Act (FFCRA) extended through March 2021, credits for paid sick and family leave.
- Energy Efficient Commercial Building Deduction – accelerated deduction for energy efficiency improvements to buildings.
- New Market Tax Credits are extended through 2025, with unused carryforwards to 2030.
In addition, the stimulus package offers various credit extensions, such as:
- Extension of carbon oxide sequestration credits (45Q)
- Electricity produced from renewable sources
- Second generation biofuels credit
- Waste energy recovery credits
Lastly, a temporary allowance of full deduction for business meals – 100% deduction, vs 50%, for business meals during 2021 and 2022 – is part of the new stimulus package.
The new stimulus package is a boost to biofuels plants, but it is complex to understand how to maximize those benefits. Please make sure to work with a qualified advisor to fully maximize the stimulus support for your specific business needs.
