Ethanol Production Investment Tax Credit

Summary

Act 289, enacted in 2000, provides an ethanol investment tax credit (the lesser of $300,000 or 30% invested per each 1 million gallons per year capacity), roughly equal to thirty cents per gallon, subject to minimum investment amounts and facility size thresholds. The maximum tax credit is $4.5 million per facility per year, for facilities over 15 million gallons per year; less for smaller facilities. The facility must produce at least 75% of its nameplate capacity in order to be eligible to receive the tax credit in that year. The tax credit may be taken for up to eight years if the investment in the facility (exclusive of land costs) is less than $50 million; if the total investment in the facility is over $50 million, the credit may be taken for up to 10 years. If the credit exceeds the taxpayer's income tax liability, the excess shall be refunded to the taxpayer (i.e. the taxpayer shall receive a payment). The Act shall apply to taxable years beginning January 1, 2002. The credit shall only be available to the first 40 million gallons of capacity in the state, and the facility must be in production before January 1, 2012. The existing excise tax exemption for the sale of alcohol fuels (Section 237-27.1) is to be repealed on December 31, 2006.