Missouri Soybean Association seeks update to state biodiesel tax credit

The Missouri Soybean Association is asking state lawmakers to make it easier for the state’s seven biodiesel plants to use the biodiesel production tax credit.

The current tax credit is for 2 cents per gallon of biodiesel blend of between 5 to 10%, and 5 cents per gallon of biodiesel blend of between 10 to 20% sold and dispensed at the service station during the tax year. Having this production tax credit in place makes soybean oil more affordable for biodiesel producers, because of competition from oil refiners to use the feedstock for other fuels, like renewable diesel.

An extension of this biodiesel production tax credit was signed into law last October with a cap at $4 million, but MSA Public Policy Director Casey Wasser tells Brownfield implementing the biodiesel tax credit with a funding cap gets complicated.

“Unfortunately, there will be tax filings throughout the year and thousands of tax returns will be held by the Department of Revenue, they’re going to have to wait until after the filing deadline and then, they’ll have to add those up and if it exceeds the credit, it will have to be apportioned out among the tax filers. It’s a ton of work on an already burdened Department of Revenue and it will be difficult for all the tax filers.”

Wasser says removing the funding cap shouldn’t cost more than an additional $1 million each year, because biodiesel production is already capped in Missouri. He estimates the total cost for removing the cap at $5 million each year and that shouldn’t be a big deal in the time of a budget surplus.

“And the tax credit extension says no new plants constructed after January 1, 2023 can qualify. We’ve put ourselves in a box on what the current structure looks like.”

The policy update could find its way into an omnibus tax bill this session, but Wasser says there’s always a chance for push back from the Ways and Means Committees, because of their consistent stance on tax credits.

“They’re certainly going to have this perception, at first glance, we just passed this bill and you’re already asking us to take the cap off.”

With Missouri being a top biodiesel producer, Wasser says lawmakers should understand the importance of “cleaning up” the tax policy.

He says biodiesel production also adds value to the soybeans grown in the state, giving Missouri’s farmers a better price for the crop they grow. 

“The biodiesel industry specifically has about a 15% price support on the value of soybean oil. In some of those rural communities heavy in soybean production, those are home to biodiesel plants providing hundreds of jobs in added value.”

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