BTC (Biodiesel Blender's Tax Credit)

The Biodiesel Blender's Tax Credit (BTC) was the U.S. federal excise tax credit, codified at 26 USC § 6426(c), that paid blenders $1.00 per gallon for blending biodiesel or renewable diesel into a qualifying transportation fuel mixture. The credit's effect on the biodiesel and renewable diesel value chain across its repeated expiration-and-reinstatement cycles is one of the most documented policy drivers in the RFS-era literature.

Statutory framework

26 USC § 6426(c) authorised the $1.00/gallon credit for biodiesel mixtures and renewable diesel mixtures. The credit was claimed by the blender (typically the obligated-party refiner or a downstream blender) on the federal excise tax return, Form 720. Producers of biodiesel that were not blenders received the equivalent benefit via the small-agri-biodiesel credit at § 40A. The two credits worked together to align producer and blender incentives across the supply chain.

Repeated lapses and reinstatements

The BTC was originally enacted in 2004 and was extended on a year-by- year or two-year basis multiple times across its history. Notable lapse-and-reinstatement cycles include:

• Lapse 1 January 2010 — reinstated retroactively in December 2010
• Lapse 1 January 2012 — reinstated retroactively in January 2013
• Lapse 1 January 2014 — reinstated retroactively in December 2014
• Lapse 1 January 2017 — reinstated retroactively in February 2018
• Lapse 1 January 2018 — reinstated retroactively in December 2019 (covering 2018, 2019, and forward through 31 December 2022)
• Extended through 31 December 2024 by the Inflation Reduction Act of 2022

The credit then expired on 31 December 2024 and was succeeded by the Section 45Z Clean Fuel Production Credit (a producer-side credit; see the dedicated 45Z glossary entry).

Effect on D4 RIN pricing

When the BTC was in force, blenders captured a $1.00/gallon credit that effectively lowered their net cost of biodiesel/renewable diesel. Public weekly volume-weighted average D4 RIN prices on EPA's RIN Trades and Price Information page show documented compressions in the D4 price during BTC-active periods, because blenders had less need to price the RIN as the marginal compliance instrument. Conversely, BTC lapse periods are associated in the public record with widening D4 prices.

Retroactive reinstatement mechanics

The retroactive reinstatement pattern created an unusual cash-flow situation for blenders. During a lapse, blenders accrued a contingent receivable on their balance sheets — the value of the credit they expected to claim if Congress reinstated the credit. When reinstatement happened (typically in December of the lapse year or the following January), the IRS issued procedural guidance allowing blenders to file refund claims for the lapse period. Cash receipts from these refund claims often arrived in the months after reinstatement.

Transition to 45Z

The Inflation Reduction Act of 2022 paired the BTC's final extension with the introduction of the Section 45Z Clean Fuel Production Credit, which took effect 1 January 2025. The transition shifted the federal incentive framework from a blender-side $1.00/gallon credit to a producer-side credit calibrated against the fuel's lifecycle carbon intensity. The OBBBA July 2025 law subsequently extended the 45Z program horizon to 31 December 2029. The BTC is no longer in force.

Industry-data anchor

Industry trade associations and federal data series both tracked the BTC's effects across its history. EIA's Monthly Biodiesel Production Report and Annual Energy Review published gallon-volume data that allow the BTC's effects on production levels to be assembled chronologically. Public CFTC Commitments of Traders data on the soybean-oil futures curve, and CBOT settlement prices, provided the front-end feedstock anchor; combined with EPA D4 RIN aggregates, the three series let analysts trace how the BTC moved through the value chain. Comparing pre-lapse, in-lapse, and post-reinstatement quarters on these series is a routine analytical exercise.

Sources

Statute: 26 USC § 6426(c) (biodiesel mixture credit), 26 USC § 40A (biodiesel and renewable diesel fuels credit), 26 USC § 45Z (clean fuel production credit). Inflation Reduction Act of 2022 (Public Law 117-169). The IRS guidance series on retroactive BTC claims is indexed in IRS Notices 2023-06, 2018-21, and earlier years' parallel notices.