Tax incentives have played a critical role in the development of the ethanol industry in the United States. The primary federal tax incentive for the ethanol industry is the Volumetric Ethanol Excise Tax Credit (VEETC). Created by the American Jobs Creation Act of 2004, the VEETC provides blenders and marketers of fuel with a federal tax credit of 45 cents on each gallon of ethanol blended with gasoline. The VEETC enhances the cost competitiveness of ethanol with gasoline and provides gasoline marketers and blenders an economic incentive to blend ethanol with their gasoline. As such, the VEETC (and the ethanol tax credits that preceded it) has been a major factor behind the spectacular increase in ethanol production and demand over the past two decades.

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