Expanded sustainable aviation fuel tax credit considered

The Revenue Committee heard testimony Jan. 22 on proposed changes to a recently enacted state income tax credit for producers of sustainable aviation fuel.

Under a measure passed by the Legislature last year, a producer or importer of sustainable aviation fuel may claim a nonrefundable income tax credit based on the number of gallons in all sold or used qualified mixtures multiplied by the sum of 75 cents and an applicable supplementary amount.

Lincoln Sen. George Dungan, sponsor of LB8, said Nebraska is “perfectly positioned to fill the market” for sustainable aviation fuel, which is made from biomass and has a smaller carbon footprint than standard jet fuel.

Although last year’s bill is a good start, he said, several changes to the credit are needed to effectively attract industry investment.

“The interest is there,” Dungan said. “We just have to make sure that we do what we can to make this a viable option for them.”

LB8 would make the credit refundable, meaning that the credit amount could exceed a producer’s state income tax liability.

It also would repeal the limit on the number of years in which a producer may claim the credit as well as the $500,000 annual cap on total credits the state Department of Revenue may approve. Finally, the bill would make the credit available beginning in tax year 2028, one year later than under current law.

The department estimates that LB8 would decrease state general fund revenue by $2 million in fiscal year 2028-29.

Dawn Caldwell testified in support of the measure on behalf of Renewable Fuels Nebraska and a group of eight agricultural organizations. She said the proposed changes could make Nebraska a leader in a fast-growing industry.

“Sustainable aviation fuel has been identified as a key solution to reducing the carbon footprint of air travel,” Caldwell said, “and by supporting SAF producers though an enhanced tax credit, LB8 aligns Nebraska with global efforts to decarbonize the aviation industry.”

No one testified in opposition to the bill and the committee took no immediate action on it.