Congress urged to consider refund option on SAF tax credit
Nearly 70 aviation firms and organisations have sent a joint letter to Congress urging that any blender’s tax credit for purchasing sustainable aviation fuel (SAF) be refundable. They have pushed for Congress to“ include a meaningful, long-term refundable tax credit that would better incentivise the production and use of SAF as it considers climate-related proposals for the budget reconciliation bill”.
Many of the letter’s signatories, delivered on Friday (August, 27th), wrote to Congress supporting the Sustainable Skies Act. This would establish a $1.50 to $2 per gallon blender’s tax credit for SAF that achieves at least a 50% reduction in carbon emissions compared with Jet-A.
“Refund-ability is a critical element of the incentive because many SAF producers are startups or small companies with limited or no near-term income tax liability, especially in light of the large capital expenditures required to build SAF production facilities,” according to the letter. “As has been well documented in the clean energy industry, producers or blenders without income tax liability would be forced to either carry forward the tax credit for many years or seek tax equity financing from third parties, both of which would significantly diminish the present value – and the ultimate investment signal – of the SAF blender’s tax credit. ”
The letter went on to state that the availability of tax equity financing for the SAF industry is uncertain given the finite size of the tax equity market and its preference historically for projects in more established segments of the clean energy industry.
“[Lastly] refund-ability is broadly consistent with the technology-neutral principles of the Sustainable Skies Act, as it would promote equity among stakeholders by ensuring that all market participants are able to monetise the credit in a similar fashion,” the letter stated.