Senator Rod Grams of Minnesota has introduced legislation that would amend the existing small ethanol producer tax credit and make farmer-owned cooperatives eligible for the credit. Currently, the tax credit provides an income tax credit of 10 cents per gallon for up to 15 million gallons of annual production by a small ethanol producer, defined as having a production capacity of less than 30 million gallons per year.

The tax code "has led to an unfortunate situation in Minnesota, Iowa and in other areas where farmer-owned cooperatives have been unable to access the credit due to the way in which the original legislation was drafted," Grams said. "The original legislation certainly envisioned these small, farmer-owned cooperatives as being eligible for the tax credit, but the intricacies of the tax code have made it impossible for them to do so."

"My legislation would simply provide a technical correction to ensure farmer-owned cooperatives are included in the definition of who can benefit from the small ethanol producer tax credit," Grams said. The legislation, S. 2884, would also expand the definition of a small producer to 60 million gallons of annual capacity. The bill, currently co-sponsored by Sen. Orrin Hatch of Utah, is pending before the Senate Finance Committee.