An ethanol blender that is registered with the Internal Revenue Service (IRS) may be eligible for a tax incentive in the amount of $0.45 per gallon of pure ethanol (minimum 190 proof) blended with gasoline. Only entities that have produced and sold or used the qualified mixture as a fuel in their trade or business are eligible for the tax credit. The incentive must first be taken as a credit against the blender's fuel tax liability; any excess over this tax liability may be claimed as a direct payment from the IRS. This tax credit expired December 31, 2011. For more information, see IRS Publication 510 and IRS Forms 637, 720, 4136, 6478, and 8849, which are available via the IRS website. (Reference Public Law 111-312, Section 708; and 26 U.S. Code 6426)
Source: http://www.afdc.energy.gov/afdc/laws/law/US/399
Now does this mean flat corn demand, a reduction or an increase? Given the critical mass and competitive advantages achieved by the industry after 30 years of subsidies (which include a flourishing DDGs sub-sector), one would be surprised if the industry ran into losses at this point, but much will depend on corn prices this year and resilience in global ethanol markets. There are early indications - coming from drought-hit South American corn producers - that prices may well return to USD 7-8/bu, depending on Chinese purchases and possible changes in recent US livestock trends.
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