Black Liquor Tax Credit

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.

BREAKING DOWN '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.

RELATED TERMS
  1. Fuel Tax Credit

    A federal subsidy that allows businesses to reduce their taxable ...
  2. American Opportunity Tax Credit

    A tax credit that enabled more student and parents to pay for ...
  3. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  4. Biofuel

    A type of energy derived from renewable plant and animal materials. ...
  5. Business Tax Credits

    A number of federal income tax credits available to businesses ...
  6. Tax Break

    A tax break is a savings on a taxpayer's liability. A tax break ...
Related Articles
  1. Professionals

    Tax Credits

    Tax Credits
  2. Markets

    Debunking Biofuels: Do They Really Raise Food Prices?

    Learn about the two sides of the argument on the effect biofuels have on food prices and about other factors that affect food prices.
  3. Taxes

    Understanding Taxation Of Foreign Investments

    Technically, any gains from foreign investments owned by an American citizen are subject to tax by the company's home country as well as the IRS. However, the Foreign Tax Credit enables you to ...
  4. Economics

    What's a Subsidy?

    A subsidy is a benefit given to an individual, business or institution, typically by the government. Subsidies are given to promote a social good or an economic policy. The government usually ...
  5. Taxes

    How the New Tax Bill Affects Your Taxes

    Highlights of the new fiscal bill for individuals, business owners, investors. Note the December 31, 2015, deadline for Qualified Charitable Distributions.
  6. Taxes

    6 Tax Credits That Anyone Can Claim

    Tax deductions and credits aren't just for big companies. You might be surprised how many tax breaks apply to your return.
  7. Taxes

    What's a Tax Shield?

    A tax shield is a deduction, credit or other means used to reduce the amount of taxes an individual or business owes to the government.
  8. Entrepreneurship

    1 - Big Tax Breaks

    Many think working from home would be easy but this is a misconception. Learn the myths behind telecommuting and running a home-based business.
  9. Investing Basics

    Understanding How Oil Companies Pay Taxes

    Read about how big oil corporations pay taxes, and learn about tax exemptions and the option to defer. Discover the argument about big oil being given tax exemptions
  10. Professionals

    Tax Credits

    Tax Credits
RELATED FAQS
  1. How do government subsidies help an industry?

    Understand how government subsidies can help an industry, on both the consumer and supplier side. Learn the potential drawback ... Read Answer >>
  2. What is the difference between a write-off and a deduction?

    Understand the differences between a tax write-off and a tax deduction. Learn how each one works to reduce income taxes and ... Read Answer >>
  3. How are subsidies justifiable in a free market system?

    Learn some of the arguments in favor of or against providing subsidies in a market economy, including economic and political ... Read Answer >>
  4. What are some examples of failed subsidies?

    Learn about the competing political and economic methods of evaluating government subsidies, and how to distinguish between ... Read Answer >>
  5. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
  6. How do I get a higher limit on my credit cards?

    Understand how credit limits work with major credit card companies and things you can do to get a higher limit on your credit ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center