Senators Introduced Small Biodiesel Producer Tax Credit Bill
The proposed legislation would extend a 20-cent-per-gallon tax credit through 2029 for qualified producers.
Updated on Oct. 7, 2026 in Agriculture
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Senators Chuck Grassley and Amy Klobuchar introduced the Small Agri-Biodiesel Producer Credit Extension Act to extend a tax credit currently set to expire at the end of 2026. This legislation aims to support investments and commodity markets for producers with a capacity of 60 million gallons or less.
Why it matters
The credit is designed to maintain job levels and sustain commodity market demand for farmers and biofuel producers. Extending the incentive helps operators plan for long-term production investments rather than facing an imminent expiration of support.
The bill provides a 20-cent-per-gallon credit on the first 15 million gallons of production for firms with a capacity up to 60 million gallons. Biofuels currently support more than 31,000 jobs in Iowa, a key state for the industry.
The players
Chuck Grassley
United States Senator representing Iowa who frequently focuses on agricultural policy.
Amy Klobuchar
United States Senator representing Minnesota with a record of supporting rural and agricultural economic interests.
The details
The credit supports smaller producers by offering financial relief on the first 15 million gallons of biodiesel produced. To qualify, a producer's total capacity cannot exceed 60 million gallons, effectively targeting medium-sized operations. This structure is intended to anchor regional commodity markets and sustain workforce levels across the agriculture sector.
Timeline
The current tax credit is scheduled to expire at the end of 2026.
The proposed bill would extend the tax credit through 2029.
Market Landscape
The Small Agri-Biodiesel Producer Credit Extension Act seeks to prevent a cliff in federal support for small-scale biofuel operations. This proposed legislation follows a pattern of periodic renewals intended to keep mid-sized, independent producers competitive against larger energy firms.
Producers should account for the potential expiration of the current credit in 2026 if no extension is passed. Owners in this segment should consult with tax counsel to determine how existing production capacities align with current eligibility requirements for the 20-cent-per-gallon credit.
The takeaway
The proposed extension provides a critical signal that lawmakers prioritize maintaining market stability for regional biofuel operators. Producers should track the progress of this legislation as a primary indicator for their 2027 and beyond capital expenditure planning.
Further reading
For more on industry incentives, visit our Agriculture section.
Source note: This article includes information reported by News Dakota.
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Should the federal government extend tax credits to support small-scale biodiesel producers?
