Revenue Raisers in the Health Care Bill: Elimination of the “Black Liquor” Biomass Tax Credit

After the historic passage of H.R. 3590  and H.R. 4872, many were left wondering where the taxes and fees would  come from. One of the primary revenue raisers is the elimination of the  $1.01 tax credit per gallon on "black liquor" biomass.

Code section 40(b)(6) is amended and excludes unprocessed fuels from the biofuel producer credit. This exclusion  applies if any fuel is more than 4 percent of such is any combination of  water or sediment; or the ash content is more than 1 percent. Each of  these amounts is determined by weight.

This seeks to eliminate “black liquor” biomass. Some  lawmakers saw this as an abuse by certain industries. In the Technical  Explanation of the bill, the Joint Committee on Taxation described this  process as: “The kraft process for making paper produces a byproduct  called black liquor, which has been  used for decades by paper manufacturers as a fuel in the papermaking  process. Black liquor is composed of water, lignin and the  spent chemicals used to break down the wood. The amount of the biomass  in black liquor varies. The portion of the black liquor that is not  consumed as a fuel source for the paper mills is recycled back into the  papermaking process. Black liquor has ash content (mineral and other  inorganic matter) significantly above that of other fuels.”