ASA supports extending the biodiesel tax incentive beyond its scheduled expiration after 2006, and proper implementation of the current tax incentive, including restricting vegetable oils eligible for the $1.00/gallon agri-biodiesel incentive to the list of vegetable oils included in last year’s JOBS legislation. We support a federal Renewable Fuels Standard (RFS), a small agri-biodiesel producer credit, and full funding of the CCC Bioenergy Program at the authorized level of $150 million.

Thanks to the leadership of Senators Chuck Grassley (R-IA) and Blanche Lincoln (D-AR), Congressman Kenny Hulshof (R-MO), and many others, the President signed into law last year legislation containing a biodiesel tax incentive. The incentive is a federal excise tax credit amounting to one penny per percent of biodiesel blended with petroleum diesel. Initial reports suggest that the tax incentive is serving its purpose, as biodiesel demand is growing at a rapid pace.

The biodiesel tax incentive is due to expire on December 31, 2006. As effective as the tax incentive has been in boosting demand for the fuel, biodiesel is still a young industry and will require additional support beyond 2006. Extending the biodiesel tax incentive is a top ASA priority in 2005.

· Congress is working toward a comprehensive energy bill that will include an RFS and tax title. The tax title may be a viable vehicle for an extension of the biodiesel tax incentive. Other possible vehicles include the transportation bill, an "extenders" bill, or stand-alone legislation. In addition to the extension, these bills provide opportunities for ASA to address other issues related to biodiesel feedstocks and imports.

· ASA has submitted comments to the IRS regarding its preparations to implement provisions of the biodiesel tax incentive. Among areas of concern, ASA wants clearer definition of the tracking of the tax incentive for multiple feedstocks, and is seeking clarification on the treatment of kerosene under the provisions of the tax incentive. ASA also wants to make sure that "non-listed" oils, such as palm oil, do not qualify as agri-biodiesel under the provisions of the tax incentive.

· The CCC Bioenergy Program, which encourages new biodiesel production, is a vitally important program for encouraging start-up biodiesel facilities. The 2002 Farm Bill authorizes the CCC Bioenergy Program at $150 million annually. Actual funding has fallen from $150 million in FY-2004 to $100 million in FY-2005, and would decline to $60 million under the President’s FY06 budget.