Biodiesel Tax Credits

Summary

Indiana offers a production tax credit of $1 per gallon for each gallon of pure biodiesel (B-100) produced in the state after December 31, 2003. The total amount of production credits for pure biodiesel may not exceed $1 million for all taxpayers and all taxable years. Indiana also offers a production tax credit of $0.02 per gallon for each gallon of "blended biodiesel" (defined as B-2 or higher) produced in the state after December 31, 2003. The total amount of production credits for blended biodiesel may not exceed $1 million for all taxpayers and all taxable years. Both of these credits will be reduced by any credit or subsidy that producers are entitled to receive from the federal government for the production of biodiesel. In addition, operators of service stations that sell biodiesel are entitled to a credit of $0.01 per gallon for each gallon of blended biodiesel sold. This credit must be computed separately for each service station. The total amount of credits for the sale of blended biodiesel may not exceed $1 million for all taxpayers and all taxable years. A "pass through entity"--defined as (1) a corporation that is exempt from the state’s adjusted gross income tax, (2) a partnership, (3) a limited liability company, or (4) a limited liability partnership--may also benefit from these credits. If a pass through entity is entitled to a credit but does not have tax liability in Indiana, a shareholder, partner, or member of the pass through entity is entitled to a credit equal to the tax credit determined for the pass through entity for the taxable year multiplied by the percentage of the pass through entity’s distributed income to which the shareholder, partner or member is entitled. If the amount of a credit exceeds a taxpayer’s state tax liability for that taxable year, the taxpayer may carry over the excess to the following taxable years.