Under current law, small ethanol producers are allowed a 10-cents per gallon production income tax credit on up to 15 million gallons of production annually. The credit is capped at $1.5 million per year per producer. The small ethanol producer tax credit provides a much-needed economic boost to this nation's troubled rural economy.

In 2004, the Jumpstart our Business Strength (JOBS) Act, H.R. 4520, improved the incentive by allowing the credit to be passed through to the farmer owners of a cooperative.  The legislation also allows the credit to be offset against the alternative minimum tax (AMT).

The Energy Policy Act of 2005 (H.R. 6), changed the definition of a "small ethanol producer" from 30 million gallons per year to 60 million gallons per year to reflect the changing nature of the industry. It also created a similar tax credit for small producers of agri-biodiesel.

Click here to view a detailed publication on the Small Ethanol Producer Tax Credit prepared by the RFA.