Good News on Ethanol Tax Provisions

At last there is some good news from Congress related to transportation funding. On October 11, 2004, the Senate approved a corporate tax reform bill that contains the ethanol provisions that Ohio has been seeking. The language in the bill appears to be the exact fix Ohio has wanted.

It not only addresses the 2.5-cent diversion issue (to the general fund), but, the language would also capture the 5.2-cent per gallon tax break and place those revenues in the Highway Trust Fund (HTF). The American Jobs Creation Act (H.R. 4520) includes provisions that would ensure the Highway Trust Fund is fully compensated for ethanol motor fuel sales. The legislation eliminates the current 5.2 cents per gallon ethanol motor fuels tax incentive and replaces it with a federal general fund tax credit. As such, the HTF would no longer bear the financial costs of federal policy to promote the use of ethanol motor fuels. In addition, the tax bill would permanently redirect the revenue stream from 2.5 cents per gallon of the ethanol motor fuel excise from the federal general fund to the HTF.

According to the latest Congressional Budget Office projection, these two modifications would increase HTF revenues by $18.9 billion over the next six years-- over $3 billion per year. This is potentially a large increase in Federal funding for Ohio. A year ago ODOT said they expected that the ethanol provisions could bring $160 million additional to Ohio each year.