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Definition of 'Black Liquor Tax Credit'
A term coined by the forest-products industry to describe an abusive subsidy scheme within the industry. Black liquor is a byproduct of creating wood pulp and is used as fuel. As part of the 2005 transportation and ethanol bill, the U.S. government created a tax credit designed to encourage companies to use biofuels by mixing them with fossil fuels (presumed to be their existing energy source). An extension of the bill in 2007 created a loophole whereby paper companies, who were already using a biofuel (black liquor) did the reverse of what the bill intended, adding diesel to their black liquor, to qualify for tax credits.
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