Main ethanol tax break would be extended one year and cut by one-fifth in new Senate tax bill

"The major U.S. ethanol incentive would be cut by 20 percent but given one more year of life in a Senate tax bill that also would revive a biodiesel tax credit that died a year ago," reports Charles Abbott of Reuters. The bill offered by Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, is "very unlikely to pass" in a rare Saturday session tomorrow, but would kick off negotiations on many tax issues, the Washington Research Group, a consultancy, told Abbott.

"With ethanol supporters under fire by livestock producers, foodmakers and environmental groups, ethanol leaders say the best chance to extend biofuel supports is to attach them to a must-pass tax bill," Abbott writes. The bill would reduce the 45-cent-per-gallon tax credit — set to expire at the end of teh year — to 36 cents, the level House Democrats have called for, "and it is supported by the Obama administration, which feels it must address calls to reduce federal spending during the next Congress," reports Manu Raju of Politico.

"Baucus also proposed extending for a year the 54-cent-per-gallon tariff on imported ethanol, as well as extending a small ethanol producer’s tax credit through next year at 8 cents per gallon," Raju reports.