§45H Credit for production of low sulfur diesel fuel

Summary

Pays a tax credit of 5 cents for each gallon of low sulfur diesel fuel made at a small business refiner’s facility during the tax year. The yearly credit for a facility cannot be more than 25% of the “qualified costs” for that facility, minus any credits already allowed for earlier years. If a refiner’s average daily runs for the year ending December 31, 2002 were more than 155,000 barrels, the 25% limit is reduced by a fraction based on how much the runs exceed 155,000 (using 50,000 barrels as the divisor), but it cannot go below zero. A “small business refiner” is one with no more than 1,500 people working in refinery operations on any day of the year and with average daily runs or retained production for all its facilities for the year ending December 31, 2002 of 205,000 barrels or less. “Qualified costs” are costs paid during the allowed period to meet the EPA’s Highway Diesel Fuel Sulfur Control rules, like building or reworking process units, equipment, engineering, interest during construction, and site work. The allowed period runs from January 1, 2003 until either one year after the facility’s required compliance date or December 31, 2009, whichever comes first. “Low sulfur diesel fuel” means fuel with 15 parts per million sulfur or less. Only refineries the company owned on April 1, 2003 count when calculating average runs. The refiner must get certification from the Secretary (after consulting the EPA) within 30 months after the first taxable year the credit is claimed for the facility. The application must show unit capacities and operating details. The Secretary must act within 60 days; if not, the refiner can assume certification. Tax adjustments tied to the credit can be assessed for a 3-year window tied to that review period. Cooperatives may elect to pass their credit to patrons based on business done; that election is made on the timely tax return and cannot be changed for that year. A taxpayer can choose not to use the credit for a year; if so, no credit is allowed for that year.