Black Liquor Tax Credit

Dictionary Says

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.

Investopedia Says

Investopedia explains 'Black Liquor Tax Credit'


The paper companies' use of a biofuel/fossil fuel mixture then qualified them for the tax credit, violating the spirit of the bill but not violating the law and allowing them to claim several billion dollars in tax credits. The tax credit distorted global markets by reducing the price of some U.S. paper products and caused Canada to create a similar subsidy to remain competitive with U.S. forest-products companies. The tax credit was scheduled to expire at the end of 2009.

comments powered by Disqus
Hot Definitions
  1. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  2. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  3. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  4. Maritime Law

    A body of laws, conventions and treaties that governs international private business or other matters involving ships, shipping or crimes occurring on open water.
  5. Maritime Law

    A body of laws, conventions and treaties that governs international private business or other matters involving ships, shipping or crimes occurring on open water.
  6. Lending Freeze

    A period of time when banks either do not have excess money to loan or implement strict rules regarding loan qualification so that less lending is approved.
Trading Center