But the story didn’t end there.
Last year, the IRS said that the provision in the 2010 health-care legislation didn’t prevent black liquor produced in 2009 from qualifying as a cellulosic biofuel, so the paper industry got its calculators out again. The cellulosic biofuel tax credit, part of the 2008 farm bill, is worth $1.01 a gallon.
Laura Tyson, an economics professor at the University of California at Berkeley and a member President Barack Obama's Council on Jobs and Competitiveness, discusses Obama's proposal to overhaul the U.S. tax system and narrow the budget deficit. Tyson speaks with Margaret Brennan on Bloomberg Television's ‘’InBusiness.’’ (April 15)
Some companies amended their 2009 earnings, giving back some of the alternative fuel credits in return for the more lucrative cellulosic credits.
What’s more, although the cellulosic biofuel credit is not refundable, it can be applied in future years, slashing tax bills perhaps as late as 2015.
Packaging Corp. of America said that the cellulosic biofuel tax credit added $47.7 million to its profits in 2010 — nearly 20 percent of its net income. In a Securities and Exchange Commission filing, the company said that an additional $102.0 million of the credits would be kept aside to reduce future federal tax payments.
Domtar says its cellulosic credits total $209 million, most of which it intends to claim against future taxes.
Rock-Tenn, another big paper maker, said that the cellulosic biofuel credit would be worth approximately $112 million when the company finishes restating its tax returns.
International Paper said the cellulosic biofuel credit would cut the company’s tax bill by $40 million in 2010, and that there would be additional credits for later years. It said that 64 million gallons of black liquor that were not eligible for the alternative fuel mixture credit would qualify for the cellulosic credit.
International Paper said it is still trying to decide whether to amend its 2009 tax return and convert the $2.1 billion of alternative fuel credits it received into cellulosic biofuel credits. If it does, it could conceivably save much more.
Other paper companies also tacked lucrative new credits on top of earlier ones. Temple Inland received $83 million in cellulosic tax credits in 2010; earlier it had claimed $228 million worth of alternative fuel credits in 2009.
MeadWestvaco said it received $29 million of tax benefits in 2010 from the cellulosic credit, boosting its profits by 12 percent. It had received $375 million in alternative fuel credit benefits in 2009.
Another company that could qualify for the subsidy is Georgia Pacific, whose parent company, Koch Industries, is owned by the conservative Koch brothers. Because the company is private and doesn’t disclose its results, it isn’t clear whether Georgia Pacific claimed the credit.
Many members of Congress are upset about the continuing cost of credits for burning black liquor. But others, such as Sen. Olympia J. Snowe (R-Maine), sought to protect tax credits for the industry in 2009. At the time, the Obama administration was seeking Snowe’s vote for the president’s health-care legislation.
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