South Carolina Biodiesel Laws and Incentives

State Incentives

Biofuels Retail Incentive

Beginning July 1, 2009, a $0.05 incentive payment is available to E85 retailers for each gallon of E85 fuel sold, provided that the E85 fuel is subject to the South Carolina motor fuel tax. Additionally, a $0.25 incentive payment is available to biodiesel retailers for each gallon of pure biodiesel (B100) sold, provided that the resulting blends contain at least 2% biodiesel (B2). These incentives apply only to fuel sold before July 1, 2012. Biodiesel fuel is defined as a fuel for motor vehicle diesel engines comprised of vegetable oils or animal fats and meeting the specifications of American Society of Testing and Materials (ASTM) D 5761. (Reference Senate Bill 243, 2007, and South Carolina Code of Laws 12-63-20)

Biofuels Production Tax Credit

A tax credit is available to qualified ethanol and biodiesel producers for taxable years beginning after 2006 and before 2014. Corn-based ethanol and soy-based biodiesel producers are eligible for a tax credit of $0.20 per gallon of fuel produced. Producers using feedstocks other than corn or soy oil are eligible for $0.30 per gallon tax credit. An eligible production facility must be operating at a production rate of at least 25% of its name plate design capacity, before denaturing, on or before December 31, 2009. The credit is allowed for 60 months beginning with the first month for which the facility is eligible to receive the credit and ending not later than December 31, 2014. The credit may only be claimed if the facility maintains an average production rate of at least 25% of its name plate design capacity for at least six months after the first month for which it is eligible to receive the credit. (Reference Senate Bill 243, 2007, and South Carolina Code of Laws 12-6-3600)

Biofuels Research and Development Tax Credit

For taxable years after 2007 and before 2012, an income tax credit is available for up to 25% of qualified research and development expenditures, which include developing feedstocks and production processes for cellulosic ethanol and algae-derived biodiesel. Cellulosic ethanol is defined as fuel from ligno-cellulosic materials, including wood chips, corn stover, and switchgrass. (Reference Senate Bill 243, 2007, and South Carolina Code of Laws 12-6-3631

Biofuels Distribution Infrastructure Tax Credit

Effective January 1, 2008, taxpayer that constructs, installs, and places into service a qualified commercial facility for distribution or dispensing of renewable fuels in the state is eligible for a tax credit of up to 25% of the construction and installation costs. Eligible property includes pumps, storage tanks, and related equipment used exclusively for distribution, dispensing, and storing renewable fuel. A qualified facility must clearly label the equipment used to store or dispense the fuel as associated with renewable fuel. The credit must be taken in three equal annual installments beginning with the taxable year in which the facility is placed into service. Renewable fuel is defined as ethanol fuel blends of 70% or greater (E70) dispensed at the retail level for use in motor vehicles, and pure ethanol or biodiesel fuel dispensed by a distributor or facility that blends these non-petroleum liquids with gasoline fuel or diesel fuel for use in motor vehicles. (Reference Senate Bill 243, 2007, and South Carolina Code of Laws 12-63-3610)

Biofuels Production Facility Tax Credit

Effective January 1, 2008, a taxpayer that constructs and places into service a commercial facility for the production of renewable fuel is eligible for a tax credit of up to 25% of the cost of constructing or renovating a building and equipping the facility. Production of renewable fuel includes intermediate steps such as milling, crushing, and handling feedstock and the distillation and manufacturing of the final product. The entire credit must be taken in seven equal annual installments beginning with the taxable year in which the facility is placed in service. Renewable fuel is defined as liquid non-petroleum based fuel that can be placed in motor vehicle fuel tanks and used to operate on-road vehicle, including all forms of fuel commonly or commercially known or sold as biodiesel and ethanol. (Reference Senate Bill 243, 2007, and South Carolina Code of Laws 12-63-3610)

State Laws and Regulations

Biodiesel Blend Infrastructure Mandate

No later than January 1, 2008, all state-owned diesel refueling facilities must provide fuel containing at least 5% biodiesel (B5) in all diesel pumps. (Reference Senate Bill 243, 2007, and South Carolina Code of Laws 12-63-30)

Biodiesel Use in School Buses

The South Carolina Department of Education is required to fuel the state school bus fleet with biodiesel when feasible. (Reference House Bill 3161, 2007, and South Carolina Code of Laws 59-67)

Alternative Fuel Use Requirement

Whenever practical and economically feasible, all state agencies operating alternative fuel vehicles are required to use alternative fuels in those vehicles. Private businesses are encouraged to increase the use of alternative fuels in the state. (Reference Executive Order 2001-35)

Alternative Fuel Tax

All fuels, including alternative fuels and alternative fuel blends are exempt from the state sales and use tax. However, all fuels are subject to a state fuels tax. Alternative fuels include liquefied petroleum gas and compressed natural gas. Blended fuels are defined as mixtures composed of gasoline or diesel fuel and another liquid, other than products such as carburetor detergent or oxidation inhibitor, which can be used as a fuel to operate a highway vehicle. (Reference South Carolina Code of Laws 12-28-110 and 12-36-2120)