The Internal Revenue Service issued in late November Notice 2008-110, providing guidance regarding the income and excise tax credits for biodiesel and cellulosic biofuels under sections 40A, 6426 and 6427(e) of the Internal Revenue Code.

Regarding biodiesel, the notice details changes made to the biodiesel and biodiesel mixture tax incentives resulting from the revision of the ASTM D 6751 standard for biodiesel. To claim these incentives, taxpayers must generally obtain from the biodiesel producer a certificate that identifies the product, and the percentage of “biodiesel and agri-biodiesel” contained within the product, according to Stoel Rives LLP. In order to complete the required certificate, the producer must certify, among other things, that the biodiesel meets ASTM D 6751 requirements. Effective Oct. 13, 2008, ASTM revised this standard by adding a cold soak filtration test for biodiesel.

According to the notice issued by the IRS, if a claim relates to the production, sales or use of biodiesel or a biodiesel blend, and the production, sale or use occurs before April 1, 2009, a certification that the biodiesel meets ASTM D 6751 requirements is valid if the biodiesel meets the requirement in effect either before or after the Oct. 13 revision. If the production, sale or use of the biodiesel or biodiesel blend occurs after April 1, a certification that the biodiesel meets ASTM D 6751 is only valid if the biodiesel meets the requirements in effect after the Oct. 13 revision, adding the cold soak filtration test for biodiesel.

Regarding cellulosic biofuels, the Food, Conservation and Energy Act of 2008 created an income tax credit for producers of certain cellulosic biofuels. Under the legislation, cellulosic biofuels are defined as any liquid fuel, other than low-proof alcohol, that is produced from any lignocellulosic or hemicellulosic matter available on a recurring basis, meeting the registration requirements for fuels and fuel additives established by the U.S. EPA under section 211 or the Clean Air Act. The credit can be claimed for qualifying cellulsoic biofuels that are produced and sold after Dec. 31, 2008, and before Jan. 1, 2013. To qualify for the credit, the producer must register with the Secretary of the Treasury.

The notice issued by the IRS provides guidance for registration as a cellulosic biofuels producer, as well. It requires taxpayers to complete IRS Form 637, an application for registration for certain excise tax activities. Taxpayers will be considered registered producers only if the IRS issues a registration letter to the producer. The government entity will register an applicant as a cellulosic biofuels producer after it determines that the applicant is a cellulosic biofuels producer or is likely to become a producer within a reasonable time after being registered. The IRS must also be satisfied with the filing, deposit, payment, reporting and claim history for all federal taxes of the applicant or any related party.

To view a full copy of IRS Notice 2008-110, visit www.irs.gov/pub/irs-drop/n-08-110.pdf.