Biodiesel

Biodiesel: Indiana Laws and Incentives

Alternative Fuel and Special Fuel Definitions

The definition of alternative fuel includes propane. Special fuel is defined as all combustible gases and liquids that are suitable for powering an internal combustion engine or motor or are used exclusively for heating, industrial, or farm purposes. Special fuels include biodiesel, blended biodiesel, and natural gas products, including liquefied and compressed natural gas. (Reference Indiana Code 6-6-2.5-1 and 6-6-2.5-22)

Alternative Fuel and Special Fuel Inventory Tax

Owners of fuel that have title to a fuel storage tank containing propane, biodiesel, blended biodiesel, or natural gas for sale to a motor carrier for highway use in Indiana are subject to an inventory tax. The tax rate is based on the number of gallons of fuel in storage at the close of business on the inventory date, minus the amount of fuel that is below the mouth of the draw pipe. To account for the fuel that will not be pumped, a fuel owner may deduct 200 gallons from the fuel inventory for a fuel storage tank with a capacity of less than 10,000 gallons, and 400 gallons for a fuel storage tank with a capacity of over 10,000 gallons. (Reference Indiana Code 6-6-4.1 and 6-6-2.5-29)

Biodiesel Definition

Biodiesel is defined as a renewable, biodegradable fuel derived from agricultural plant oils or animal fats that meet ASTM specification D6751. Blended biodiesel is a blend of biodiesel with petroleum diesel fuel so that the volume percentage of biodiesel in the blend is at least 2% (B2). (Reference Indiana Code 6-6-2.5-1.5)

Biofuels Blend Use Requirement

Whenever possible, governmental entities and state educational institutions must fuel diesel vehicles with biodiesel blends containing at least 2% biodiesel (B2), gasoline vehicles with mid-level ethanol blends between 20% and 73%, and flexible fuel vehicles with E85. This requirement does not apply if such blends are prohibited under federal regulations or have not been approved by the vehicle manufacturer. Additional exemptions apply. (Reference Indiana Code 5-22-5-8, and 21-31-9-3)

Certified Technology Park Designation

The Indiana Economic Development Corporation (IDEC) may designate an area as a certified technology park if certain criteria are met, including a commitment from at least one business engaged in a high technology activity that creates a significant number of jobs. The establishment of high technology activities and public facilities within a technology park serves a public purpose and benefits the public’s general welfare by encouraging investment, job creation and retention, and economic growth and diversity. High technology activities include advanced vehicles technology, which is any technology that involves electric vehicles, hybrid electric vehicles, or alternative fuel vehicles, or components used in the construction of these vehicles. For more information, see the IEDC Indiana Certified Technology Parks website. (Reference Indiana Code 36-7-32)

Special Fuel License Tax

Certain special fuels sold or used to propel motor vehicles are subject to a license tax. Liquefied natural gas is subject to a tax per diesel gallon equivalent. Compressed natural gas, butane, and propane are subject to a tax per gasoline gallon equivalent. From July 1, 2018, through July 1, 2024, the tax rate will be determined each year based on the special fuel tax index factor. The tax does not apply to nominal biodiesel blends of at least 20% (B20); special fuel used only for a personal, noncommercial use and not for resale; and biodiesel used by a biodiesel producer holding an exemption certificate. Other exemptions apply. For the current tax rate and more information, see the Indiana Miscellaneous Tax Rates website. (Reference Indiana Code 6-6-2.5 and 6-6-1.6)

Special Fuel Motor Carrier Fuel Tax

A person who operates a commercial motor vehicle on any highway in Indiana is subject to a surcharge tax on the consumption of motor fuel. From July 1, 2018, through July 1, 2024, the tax rate will be determined each year based on the special fuel tax index factor. For the current tax rates and more information, see the Indiana Miscellaneous Tax Rates website. (Reference House Bill 1002, 2017, and Indiana Code 6-6-4.1 and 6-6-1.6)

 

Biodiesel: Indiana Incentives

Biodiesel Blend Tax Exemption

Biodiesel blends of at least 20% (B20) that are used for personal, noncommercial use by the individual that produced the biodiesel portion of the fuel are exempt from the special fuel license tax. The maximum number of gallons of fuel for which the exemption may be claimed is based on the percentage volume of biodiesel in each gallon used. For more information, see the Indiana Department of Revenue Fuel Tax Forms website. (Reference Indiana Code 6-6-2.5-1.5, 6-6-2.5-28, and 6-6-2.5-30.5)

Biodiesel Price Preference

A governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to a 10% price preference for the purchase of fuels containing at least 20% biodiesel (B20) by volume or fuels that are primarily ester-derived (other than alcohol) made from biological materials, such as oilseeds and animal fats, for use in operating compression and ignition engines. (Reference Indiana Code 5-22-15-19)

Diesel Vehicle Retrofit and Improvement Grants

The Indiana Department of Environmental Management (IDEM) administers the DieselWise Indiana grant programs to support projects that reduce diesel emissions. The Clean Diesel Across Indiana program provides grants ranging from $10,000 to $75,000 for projects throughout the state. Eligible applicants include private and public entities that operate equipment serving the public, including private bus fleets and sanitation fleets. Eligible projects include replacing or converting a diesel vehicle or vehicle component with one that operates on alternative fuel, as well as installing exhaust retrofit technologies, idle reduction technologies, aerodynamic technologies, and low rolling resistance tires. For more information see the IDEM DieselWise website.

Special Fuel Tax Exemption

The sale of biodiesel, blended biodiesel, and natural gas used to power an internal combustion engine or motor is exempt from state gross retail tax. (Reference Indiana Code 6-2.5-5-51 and 6-6-2.5-22)

Vehicle Research and Development Grants

The Indiana 21st Century Research and Technology Fund provides grants and loans to support economic development in high technology industry clusters. Incentives are available for qualified alternative fuel technologies and fuel-efficient vehicle development and production. For more information, see the Indiana Venture Development website. (Reference Indiana Code 5-28-16-2)

Biodiesel is a domestically produced, renewable fuel that can be manufactured from new and used vegetable oils, animal fats, and recycled restaurant grease. Biodiesel’s physical properties are similar to those of petroleum diesel, but it is a cleaner-burning alternative. Using biodiesel in place of petroleum diesel significantly reduces emissions of toxic air pollutants.

What is a biodiesel blend?

Biodiesel can be blended and used in many different concentrations, including B100 (pure biodiesel), B20 (20% biodiesel, 80% petroleum diesel), B5 (5% biodiesel, 95% petroleum diesel), and B2 (2% biodiesel, 98% petroleum diesel). B20 is a common biodiesel blend in the United States.

Can I use B20 in my vehicle’s diesel engine?

For vehicles manufactured after 1993, biodiesel can be used in diesel engines and fuel injection equipment with little impact on operating performance.
But if your vehicle is older than that, the engine could be assembled with incompatible elastomers, which can break down with repetitive high-blend biodiesel use.

Most original equipment manufacturers (OEMs) approve blends up to B5 in their vehicles. Some approve blends up to B20, and one manufacturer even approves B100 for use in certain types of its farm equipment. However, some OEMs don’t recommend using biodiesel blends above B5 in on-highway vehicles manufactured in model year 2007 and later. In these vehicles, high levels of fuel may accumulate in the engine lubricant under certain conditions. It’s not known whether those high levels of biodiesel might affect lubricant performance.

Check your OEM’s website or speak with a dealer to determine which biodiesel blend is right for your vehicle. You can also find general and manufacturer-specific information on the National Biodiesel Board website biodiesel.org.

How can I find biodiesel?

Biodiesel is available in all 50 states. According to the U.S. Energy InformationAdministration, annual consumption of biodiesel in the United States totaled 316 million gallons in 2009. As of June 2009, the country had an annual production capacity of more than2.69 billion gallons. According to the Alternative Fuels and Advanced Vehicles Data Center (AFDC) website, there are more than 600 B20 fueling sites across the country. To locate biodiesel stations in your area, use the Alternative Fueling Station Locator at afdc.energy.gov/stations.

Retro and reinstated tax credits for AF/Infrastructure SD

January 2, 2013, President Obama signed Public Law 112-240, the American Taxpayer Relief Act of 2012. The resulting changes are available for review on the Alternative Fuels Data Center (AFDC) Federal Laws and Incentives page afdc.energy.gov/laws/fed_summary. Specifically, the Act:

Retroactively extends several tax credits that had expired on December 31, 2011. The following incentives are now effective through December 31, 2013:

Alternative Fuel Excise Tax Credit:
afdc.energy.gov/laws/law/US/319

Public Law 112-240, Section 412
Alternative Fuel Infrastructure Tax Credit:
afdc.energy.gov/laws/law/US/10513

Public Law 112-240, Section 402
Alternative Fuel Mixture Excise Tax Credit:
afdc.energy.gov/laws/law/US/417

Public Law 112-240, Section 405
Expands the definition of second generation biofuel (previously referred to as cellulosic biofuel) to include biofuel from cultivated algae, cyanobacteria, or lemna, and extends two incentives related to these fuels through December 31, 2013:

Second Generation Biofuel Plant Depreciation Deduction Allowance:
afdc.energy.gov/laws/law/US/413

Public Law 112-240, Section 410
Second Generation Biofuel Producer Tax Credit:
afdc.energy.gov/laws/law/US/10515

Public Law 112-240, Section 404
Extends discretionary funding for the following U.S. Department of Agriculture programs through September 2013:

Advanced Biofuel Production Grants and Loan Guarantees:
afdc.energy.gov/laws/law/US/9172

Advanced Biofuel Production Payments:
afdc.energy.gov/laws/law/US/8503

Ethanol Infrastructure Grants and Loan Guarantees:
afdc.energy.gov/laws/law/US/9172

Fuel Taxes for Fleets and Consumers Forms:
GA-110L Fillable (05-17)
REF-1000 Extended (05-17)