Federal Fuels Taxes and Tax Credits |
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This section provides a review and update of the handling of Federal fuels taxes and tax credits, focusing primarily on areas for which regulations have changed or the handling of taxes or credits has been updated in AEO2009. Excise Taxes on Highway Fuel The handling of Federal highway fuel taxes remains unchanged from AEO2008. Consistent with current law, gasoline is assumed to be taxed at 18.4 cents per gallon, diesel fuel at 24.4 cents per gallon, and jet fuel at 4.3 cents per gallon. State fuel taxes, calculated as a volume-weighted average for diesel, gasoline, and jet fuels sold, were updated as of July 2008 [6]. Unlike Federal highway taxes, which remain at today’s nominal levels throughout the AEO2009 projection, State fuel taxes are assumed to remain fixed in real terms. Biofuels Tax Credits The only change in the handling of Federal fuels taxes and credits has been in those that pertain to biofuels. Section 15331 of the Food, Conservation, and Energy Act of 2008 reduces the existing ethanol excise tax credit of $0.51 per gallon to $0.45 per gallon in the first year after the year in which U.S. ethanol production and imports exceed 7.5 billion gallons. In the AEO2009 projections, U.S. ethanol production and imports exceed 7.5 billion gallons in 2008, and the tax credit is reduced in 2009. The excise tax credit for ethanol is scheduled to expire at the end of 2010. In addition, Section 15321 of the Act adds an income tax credit for the production of cellulosic biofuels. The cellulosic biofuels represented in NEMS are cellulosic ethanol, BTL diesel, and BTL naphtha. The tax credit is $1.01 per gallon, but for cellulosic ethanol it is reduced by the amount of the excise tax credit available for ethanol blends (assumed to be $0.45 per gallon). The credit will be applied to fuel produced after December 31, 2008, and before January 1, 2013. In EIEA2008, the excise tax credit of $1.00 per gallon for biodiesel, which previously was set to expire at the end of 2008, was extended through December 31, 2009. In addition, the excise tax credit of $0.50 per gallon for biodiesel made from recycled vegetable oils or animal fat is increased to $1.00 per gallon. A representation of renewable diesel—a diesel-like hydrocarbon produced by reaction of vegetable oil or animal fat with hydrogen, also known as “non-ester renewable diesel”—has been added to NEMS for AEO2009. Ethanol Import Tariff Currently, two duties are imposed on imported ethanol. The first is an ad valorem tariff of 2.5 percent. The second, which is a tariff of $0.54 per gallon after the application of the ad valorem tariff, allows for duty-free imports from designated Central American and Caribbean countries up to a limit of 7 percent of domestic production in the preceding year. The $0.54 per gallon tariff, previously set to expire on January 1, 2009, is extended to January 1, 2011, in Section 15333 of the Food, Conservation, and Energy Act of 2008. In AEO2009, the second tariff is assumed to expire on January 1, 2011.
6. Defense Energy Support Center, “Compilation of United States Fuel Taxes, Inspection Fees, and Environmental Taxes and Fees” (July 9, 2008).
Contact: Sean Hill |