Could a biodiesel or green-diesel producer claim Virginia's credit after it had already been producing fuel for three years before 2008?

Subject

Historical biodiesel credit was limited to the first three production years

Plain-English summary

Virginia interpreted the fuel-producer credit as available only during the taxpayer's first three years of biodiesel or green-diesel production. A producer that had already operated for three or more years before January 1, 2008 was not eligible when the credit took effect.

A producer that began before 2008 but had not completed its first three production years could claim the credit only for the remaining portion of that original three-year period falling in taxable years beginning on or after January 1, 2008.

The clarification also noted that the enacted bill differed from the introduced version by imposing a maximum production amount rather than a two-million-gallon minimum.

What this means for you

• The historical three-year clock began with actual production, not with the credit's effective date.
• Pre-2008 production used part or all of the eligibility period.
• Producers already beyond three years received no restart.
• Verify whether the credit and its gallon limits exist under current law before relying on this ruling.

Common questions

Could a long-established producer claim the new credit in 2008?

No, if it had already completed three production years.

Could a producer in year two claim anything?

Only the remaining part of its first three-year window occurring in eligible taxable years.

Did the enacted law require at least two million gallons?

No. The ruling said the enacted version instead limited production to no more than two million gallons.

Citations and references

• Va. Code § 58.1-439.12:02.
• 2008 House Bill 139.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 09-21

Original ruling text

February 4, 2009

Dear *:

* has passed your request for clarification regarding Va. Code § 58.1-439.12:02 to me. Specifically, you are inquiring about the language in subsection B, which states, "The taxpayer shall be eligible for the credit during the first three years of production of biodiesel or green diesel fuels."

As you may be aware, Va. Code § 58.1-439.12:02 as enacted is very different from the version that was first introduced during the 2008 General Assembly session. Under the provisions of the introduced version of House Bill 139, a producer had to produce at least two million gallons of biodiesel fuels in order to be eligible for the credit. This was the only restriction placed on the producers. As enacted, however, the bill states that producers may only produce up to two million gallons. In addition, the credit is only available to producers during the first three years of production.

I interpret this language to mean that producers who wish to qualify for the credit are restricted in the number of gallons they may produce and that the credit is only available to them during the first three years of production. Therefore, if, as in your example, a taxpayer has been producing these fuels for three or more years prior to January 1, 2 008, then that taxpayer will not be eligible for the credit. Similarly, a taxpayer who has begun producing prior to January 1, 2008, may only claim the credit for the portion of the first three years of production that takes place in taxable years beginning on and after January 1, 2008.

I hope that you find these comments helpful. If you have any further questions regarding this matter, please do not hesitate to contact me. I can be reached at *.

Sincerely,

Janie E. Bowen

Tax Commissioner