Legislative Memo

Ken Pokalsky
Vice President of Government Affairs
T 518.465.7511


S.6610-A / A. 9710-A (Part D)



Equalize the tax treatment of corporations and unincorporated businesses with respect to maximum biofuel productions and QETC credits


S.6610-A / A. 9710-A (Part D)


April 1, 2010


The Business Council urges the legislature to amend the Executive Budget proposal to equalize the tax treatment of corporations and unincorporated businesses with respect to the calculation of the maximum allowable biofuel production and Qualified Emerging Technology Company (QETC) tax credits.

The intent of this bill is to close a possible undesirable loophole in the existing law. However, as drafted, it will have the unintended consequence of discouraging the location of additional projects in the State.

The biofuel production credit allows a refundable credit of up to $2.5 million a year for four years per taxpaying entity per site. A corporation filing under Article 9-A of the tax code thus is held to a yearly cap of $2.5 million.

In contrast, some taxpayers who are members of partnerships which have the controlling interest of a biofuel plant and are filing under the Personal Income Tax article have argued that the up to $2.5 million annual credit can be claimed by each taxpayer that is a member of the partnership.

Similar arguments have been made for claims made pursuant to the QETC credits. This credit allows a firm to claim a credit for up to $250,000 a year for qualifying investments and activities
The proposed bill would treat the ownership body, no matter what the structure, as a single tax paying entity and therefore the cap level would apply whether taxpayers file as corporations or partnerships.

However, the bill as drafted, has what we believe to be the unintended consequence of placing a statewide cap on the taxpayer, not on the taxpayer's claim per qualifying site cap as the original bills intended. The credits were designed to encourage further investments and new projects and companies in the state, and allow companies to fund and get credit for new and additional plants and qualifying firms.

The bill should be amended to apply the cap to each qualifying site in the state; not to a taxpayer's total credit allowable no matter the additional investments planned. 

While we support the intent of this proposal, we believe that amendments are necessary to achieve the intended reform and avoid adverse, unintended impacts on biofuel projects.  For these reasons we urge the legislature to amend the Executive Budget proposal and then adopt the revised credit reforms.