§45H Credit for Production of Low Sulfur Diesel Fuel

Summary

You can get a tax credit of 5 cents for each gallon of low sulfur diesel fuel produced at a facility if you are a small business refiner. The credit for a facility in any year cannot be more than 25% of that facility’s qualified costs, minus any credits already claimed for earlier years. If the refiner’s average daily runs for the 1-year ending December 31, 2002 were over 155,000 barrels, the 25% limit is cut down by multiplying 25 by (the amount over 155,000 divided by 50,000). A refiner may also choose not to take the credit for a year. Key definitions and rules: a "small business refiner" has no more than 1,500 refinery workers on any day in the tax year and had average daily runs or retained production for all facilities for the 1-year ending December 31, 2002 of 205,000 barrels or less. "Qualified costs" are money spent during the applicable period to meet the EPA Highway Diesel Fuel Sulfur Control Requirements, like building or rebuilding process units, equipment, engineering, construction interest, and sitework. The "applicable period" runs from January 1, 2003 to the earlier of one year after the compliance date or December 31, 2009. "Low sulfur diesel fuel" means diesel with 15 parts per million sulfur or less. Only refineries the company (or a related person) owned on April 1, 2003 count when measuring average runs. To get the credit, the refiner must get certification from the Secretary (after consulting the EPA) within 30 months after the first day of the first year the credit is claimed for that facility; the application must show unit capacities and operating details and will be decided within 60 days (if no decision is sent, the refiner may assume certification). Cooperatives can elect to split their credit among patrons based on business done; that election is made on a timely return and is final for that year. If an apportioned credit later drops, the patron won’t pay more tax but the cooperative’s tax will increase by that amount.