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Posted on  

February 16, 2004

Senate Passes Highway Bill Including Ethanol/HTF Fix

Bill Generates Additional $2 Billion Per Year for Highway Trust Fund

WASHINGTON, DC – The Renewable Fuels Association (RFA) today applauded the U.S. Senate for including an important ethanol tax modification in the highway reauthorization bill, S. 1072, which passed overwhelmingly last night. The change, supported by numerous transportation and agricultural organizations, reforms the current ethanol tax structure to eliminate any negative impact on the highway trust fund (HTF).

By modifying the method in which federal excise taxes are collected on ethanol-blended fuels, the Volumetric Ethanol Excise Tax Credit (VEETC) would generate more than $2 billion per year in additional HTF revenues while maintaining an important incentive for the use of renewable fuels. VEETC also extends the incentive through 2010.

“The Senate sent a strong signal that sound energy policy and sound highway policy can work to the benefit of both,” said RFA President Bob Dinneen. “By including VEETC, the Senate-passed highway bill will promote ethanol use while generating roughly $2 billion in additional highway funding each year. We urge the House to also include this forward looking reform in their highway bill.”

Restoring 2.5 Cents in Excise Tax to the HTF

Currently, 2.5 cents of the federal excise tax paid on ethanol-blended fuels is retained in the government’s general fund instead of being transferred to the HTF as is the case with all other fuel excise taxes. If enacted, the entire excise tax paid on ethanol-blended gasoline would be transferred to the HTF. This will add approximately $600 million to HTF revenues annually.

Improving the Ethanol Excise Tax Exemption

Currently, ethanol-blended fuel is taxed at a lower rate than regular gasoline (5.2 cents on a 10% blend). If enacted, the existing ethanol excise tax emption would be eliminated, thereby allowing the full federal excise tax of 18.4 cents per gallon of gasoline to be collected and allocated to the HTF. This adds approximately $1.4 billion to HTF revenue annually.

In place of the current exemption, the bill creates a new volumetric ethanol excise tax credit (VEETC) of 52 cents per gallon of ethanol blended. Refiners and gasoline blenders would apply for this credit on the same tax form as before only it would be a credit from general revenues, not the HTF. Based on volume, the VEETC allows much greater refinery flexibility in blending ethanol.

The RFA worked to build support for the VEETC with a broad array of organizations, many of which had previously been concerned with the impact of increasing ethanol use on the HTF. The coalition includes: American Road & Transportation Builders Association, Associated General Contractors of America, National Corn Growers Association, American Association of State Highway and Transportation Officials, American Coalition for Ethanol, American Concrete Pavement Association, American Corn Growers Association, American Concrete Pipe Association, American Farm Bureau Federation, American Council of Engineering Companies, American Soybean Association, American Highway Users Alliance, Clean Fuels Development Coalition, American Society of Civil Engineers, Magellan Midstream Partners, American Traffic Safety Services Association, National Biodiesel Board, Association of Equipment Manufacturers, National Grain Sorghum Producers, Associated Equipment Distributors, National Farmers Organization, International Union of Operating Engineers, National Farmers Union, Laborers' Employers Cooperation and Education Trust, National Sunflower Association, Laborers’ International Union of North America, New Uses Council, National Asphalt Pavement Association, Soybean Producers of America, National Ready Mixed Concrete Association, US Canola Association, National Stone, Sand and Gravel Association, National Utility Contractors Association, Portland Cement Association, and the U.S. Chamber of Commerce.

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For more information, visit the Renewable Fuels Association website at: www.ethanolRFA.org.
 

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