Thursday, March 18, 2004
By Reuters

WASHINGTON — The House's tax-writing committee agreed Wednesday to extend a tax subsidy for corn-based ethanol through 2010 to encourage the use of the alternative fuel.

The Ways and Means Committee legislation, approved on a voice vote, would give ethanol an additional three years of tax credit beyond the amount called for in a pending Senate highway bill. An effort to make the tax break permanent failed.

Ethanol is popular in the Midwest as a way to boost farmers' incomes and to bolster U.S. fuel independence.

At present, the ethanol tax break is worth 5.2 cents on a gallon of gasoline that is 10 percent ethanol. Under the proposal, the tax break would be proportional to the amount of ethanol used in a gallon of motor fuel.

House Transportation Committee Chairman Don Young, an Alaska Republican, said the measure would help improve highways and create jobs. The bill would allow the ethanol subsidy to be paid for out of general Treasury revenues rather than the highway trust fund, thus freeing up money for highways.

The Renewable Fuels Association praised this first House action on what is known as the volumetric ethanol excise tax credit. Last year, House Ways and Means Committee Chairman Bill Thomas, a California Republican, had objected to including the change in the way ethanol is taxed in a major energy bill.

The measures also includes various provisions designed to combat tax evasion related to transportation and fuel.

Committee approval of the ethanol tax break was expected to boost chances of congressional action on an unrelated bill important to U.S. companies now facing European sanctions on their exports.

That legislation would repeal the U.S. manufacturing tax break ruled illegal by the World Trade Organization, and which resulted in the imposition of tariffs by the European Union on March 1.

Thomas said the corporate tax legislation could be brought before the full House before April 5.

The Senate is to debate its version next week.