Idaho to eliminate tax deduction for ethanol

By Erin Voegele | May 04, 2009
Web exclusive posted May 15, 2009, at 11:45 a.m. CST

Legislation that would eliminate Idaho's 10 percent (2.5-cent-per-gallon) tax exemption for ethanol and biodiesel blended fuels is currently awaiting Gov. C.L. "Butch" Otter's signature. The legislation, H.338, is one component of Otter's plan to boost funding for roadwork within the state.

In Idaho, gasoline, diesel, and ethanol and biodiesel blended fuels are currently taxed at 25 cents per gallon. Under current law, fuel distributors are allowed deduct 10 percent of that tax when supplying ethanol or biodiesel blended fuels. H.338 will eliminate that deduction.

According to a spokesman for the Idaho State Tax Commission, three ethanol blended fuels are currently offered in the state - E10, E75 and E85. When a fuel distributor imports ethanol blended fuel, supplies ethanol blended fuel, or blends fuel with ethanol, that distributor is able to claim a 10 percent deduction on the taxes owed on that batch. For example, a 10,000 gallon batch of E10 contains 1,000 gallons of ethanol and 9,000 gallons of gasoline. In this case, the fuel distributor would be able to deduct 10 percent of the taxes owed on the 10,000 gallon batch, effectively eliminating the tax owed on the 1,000 gallons of ethanol. For a 10,000 gallon batch of E85, the fuel distributor could still claim the 10 deduction. However, only tax on 1,000 gallons of the 8,500 gallons of ethanol could be deducted.

Once signed, the effective date for the elimination of the tax deduction will be June 1, 2009. Otter is expected to sign the legislation by May 22. The governor's office estimates H.338 will add $16.4 million in new revenue to the state each year in 2010 and 2011.