§45H Credit for Production of Low Sulfur Diesel Fuel

Summary

Lets small business refiners get a tax credit of 5 cents for each gallon of low sulfur diesel fuel they make at a facility during the year. The credit for a facility in any year cannot be more than 25 percent of the “qualified costs” paid for that facility, minus any credits already claimed for earlier years. If a refiner’s average daily runs for the year ending December 31, 2002, were more than 155,000 barrels, that 25 percent limit is cut down by multiplying the limit by the ratio of the excess over 155,000 to 50,000 (but not below zero). The law counts only refineries the company owned on April 1, 2003. The law defines some terms: “small business refiner” — a refiner with no more than 1,500 people working in refinery operations on any day in the year and whose average daily runs for the year ending December 31, 2002, did not exceed 205,000 barrels; “qualified costs” — money spent to meet the EPA rules, including building or rebuilding units, tanks, catalysts, power, engineering, interest while building, and site work; “applicable EPA regulations” — the Highway Diesel Fuel Sulfur Control Requirements; “applicable period” — from January 1, 2003, until either one year after the date the refiner must meet the EPA rules or December 31, 2009, whichever comes first; “low sulfur diesel fuel” — diesel with 15 parts per million sulfur or less. A refiner must get certification from the Treasury Secretary, after talking with the EPA, that the qualified costs will meet the EPA rules. The certification request must be filed within 30 months after the first day of the first year the credit is claimed and must include unit capacity and operating information. The government must act on the request within 60 days; if it does not, the refiner can assume approval until told otherwise. The law also lets certain cooperatives split the credit to patrons based on business done, with an irrevocable election for the year, and lets taxpayers choose not to take the credit for a year. If an apportioned credit is later reduced, patrons will not owe more tax but the cooperative’s tax will increase by that amount.