Overview
Title
To amend the Internal Revenue Code of 1986 to prohibit the use of foreign feedstocks for purposes of the clean fuel production credit, and for other purposes.
ELI5 AI
H. R. 2867 wants to make sure that only American plants and materials are used to make clean fuels in the U.S., and it extends a special money-saving credit for companies making these fuels until the end of 2034.
Summary AI
H. R. 2867, also known as the "Farmer First Fuel Incentives Act," aims to change the Internal Revenue Code of 1986 by prohibiting the use of foreign feedstocks when claiming the clean fuel production credit. This means that only feedstock produced or grown in the United States can be used for this tax credit. The bill also excludes emissions from indirect land use changes when calculating lifecycle greenhouse gas emissions and extends the clean fuel production credit from December 31, 2027, to December 31, 2034. Additionally, it modifies the rounding factor for the emissions calculations used in the credit, making it more precise.
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AnalysisAI
The proposed legislation, titled "Farmer First Fuel Incentives Act," seeks to amend the Internal Revenue Code of 1986 to make specific changes regarding clean fuel production. This bill is notable for its emphasis on using domestic resources and modifying certain environmental considerations. Here’s an overview with a focus on key aspects and potential implications.
General Summary of the Bill
The bill includes amendments to the Internal Revenue Code focused on clean fuel production, with the goal of promoting domestic agriculture and adjusting emissions calculations. The legislation is divided into several sections:
Prohibition on Foreign Feedstocks: It restricts the clean fuel production credit to fuels derived only from feedstocks produced or grown in the United States. This amendment would take effect for transportation fuel sold after December 31, 2024.
Determination of Emissions Rate: It excludes emissions from indirect land use changes in calculating lifecycle greenhouse gas emissions for clean fuel. This provision would apply to taxable years beginning after December 31, 2025.
Extension of Clean Fuel Production Credit: This extends the eligibility date for the clean fuel production credit from 2027 to 2034, thereby prolonging its availability to producers.
Rounding of Emissions Factor: Changes the precision in calculating the clean fuel production credit emissions factor from "0.1" to "0.01," affecting fuel produced after December 31, 2024.
Summary of Significant Issues
Several significant issues arise from the provisions within the bill:
Trade and Economic Implications: The prohibition of foreign feedstocks could lead to international trade issues and possibly retaliation from other countries.
Supply Chain Adjustment: There is a concern that domestic producers might not have enough time to adjust their supply chains by the end of 2024, potentially leading to supply shortages or increased costs.
Ambiguity in Language: Key terms like "produced or grown in the United States" lack precise definitions, possibly leading to enforcement challenges.
Environmental and Methodological Concerns: The methodology for excluding emissions from indirect land use changes may lack transparency and accountability, raising concerns about effectively addressing environmental impacts.
Economic Justification: The extension of the clean fuel production credit lacks detailed justification in terms of expected outcomes or financial impacts, which could raise questions about fiscal responsibility.
Impact on the Public Broadly
The bill's focus on domestic feedstocks aims to boost American agriculture and potentially create more local jobs in the agricultural and fuel production sectors. However, by limiting feedstock sources, the bill might increase fuel prices due to reduced supply options, affecting consumers financially.
The rounding adjustment in emissions calculations might influence the amount of credit producers can claim, leading to financial implications for both small and large fuel producers.
Impact on Specific Stakeholders
Domestic Farmers and Producers: The bill is likely to be beneficial, as it creates a captive market for their feedstocks by excluding foreign competitors. This could increase demand for U.S.-grown feedstocks and potentially lead to higher prices and profitability.
Fuel Producers and Suppliers: Those reliant on imported feedstocks might face operational hurdles and increased costs, which could lead to conflicts between maintaining profitability and complying with the new guidelines.
Environmental Groups and Policymakers: The exclusion of indirect land use emissions might provoke debate about the bill’s effectiveness in genuinely minimizing overall greenhouse gas emissions. The methodology for this calculation lacks specified clarity and may be seen as undermining efforts to address environmental changes comprehensively.
International Trade Partners: There could be tensions due to new trade limitations imposed by the prohibition of foreign feedstocks, potentially affecting broader geopolitical and economic relations.
In summary, while the bill has the potential to enhance domestic fuel production and support local agriculture, its success and broader acceptance largely depend on addressing the ambiguities and logistical challenges highlighted.
Issues
The prohibition on the use of foreign feedstocks for clean fuel production (Section 2) might lead to potential trade issues or retaliation from foreign countries. This could have significant political and economic repercussions.
Section 2's restriction on foreign feedstocks could increase feedstock costs by limiting supply options to those produced in the U.S., potentially raising fuel prices. This can have direct financial impacts for consumers and producers.
The lack of a clear definition of what constitutes 'produced or grown in the United States' in Section 2 may cause ambiguity in enforcement or compliance, leading to potential legal challenges.
The effective date for the prohibition of foreign feedstocks (Section 2) is after December 31, 2024, which might not allow enough time for producers to adjust their supply chains, impacting operational planning.
Section 3 includes a clause on the exclusion of indirect land use change emissions from lifecycle greenhouse gas emissions, which is ambiguous about how adjustments are made. This could lead to accountability and transparency concerns, especially regarding environmental impacts.
The amendment in Section 4 to extend the clean fuel production credit expiration date to 2034 lacks justification in terms of financial impact or outcomes. This omission might raise questions about fiscal responsibility and the necessity of such an extension.
Section 3 raises concerns with its effective date (after December 31, 2025) regarding the urgency of addressing greenhouse gas emissions, given the current climate change context.
Section 4 does not provide criteria for receiving the clean fuel production credit, making it difficult to assess who benefits and whether it could unfairly favor certain groups.
The bill does not address whether there is domestic capacity to produce the necessary feedstocks to meet fuel demands (Section 2), raising concerns about sustainability and economic feasibility.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
This section gives the official name for the Act, which can be referred to as the “Farmer First Fuel Incentives Act.”
2. Prohibition on foreign feedstocks for clean fuel production credit Read Opens in new tab
Summary AI
The section amends the Internal Revenue Code to prohibit clean fuel production credits for fuels derived from foreign feedstocks, requiring instead that the feedstocks be produced or grown in the United States. This change will apply to transportation fuel sold after December 31, 2024.
3. Determination of emissions rate Read Opens in new tab
Summary AI
The bill amends the Internal Revenue Code to exclude emissions from indirect land use changes when calculating lifecycle greenhouse gas emissions. This change will apply to emissions rates for taxable years starting after December 31, 2025.
4. Extension of clean fuel production credit Read Opens in new tab
Summary AI
The amendment to Section 45Z(g) of the Internal Revenue Code changes the expiration date for the clean fuel production credit, extending it from December 31, 2027, to December 31, 2034.
5. Rounding of clean fuel production credit emissions factor Read Opens in new tab
Summary AI
The bill section changes the way the clean fuel production credit emissions factor is calculated under the Internal Revenue Code, reducing the precision from "0.1" to "0.01". These changes will start affecting transportation fuel produced after December 31, 2024.