Not Dead Yet: Son of Black Liquor Has Not Been Vanquished, Contrary to News Reports

It’s alive!

Recent media reports about the death of the Son of Black Liquor tax loophole for U.S. paper companies turned out to be greatly exaggerated.

The Washington Post stated Thursday that the transportation bill approved by the Senate the previous day would be paid for partly by ending a tax credit for black liquor, a pulp byproduct.

“At Last, the Final Chapter in the Black Liquor Saga,” Mother Jones trumpeted the same day. Like the Post, it subsequently issued a correction.

The legislation at one time indeed included language that would have made black liquor ineligible for Cellulosic Biofuel Producer Credits (CBPCs, also known as Son of Black Liquor credits), for an estimated savings of $2.8 billion, as Dead Tree Edition reported last month.

But the Senate Finance Committee removed that provision in February after Sen. Mike Crapo, a Republican committee member from Idaho, objected; it was left out of the bill the Senate passed. Idaho is home to Boise Inc. and to several pulp and paper mills. The American Forest & Paper Association had also complained about the proposed “retroactive tax increase.”

One issue is fairness: Some paper companies have already claimed more than $200 million in CBPCs, while others were planning to claim theirs in future years. The fairness argument, however, is a bit like a person demanding $100 because someone else found a $100 bill.

The credits are for using black liquor as a fuel during 2009, but the paper companies didn’t even realize they might qualify for the credits until the IRS issued an odd ruling the next year. They fueled their mills with black liquor not because of any government program but because that’s the most efficient way to run a kraft pulp mill. The credits were found money.

The past week wasn’t completely devoid of legislative activity involving the U.S. paper industry, however. Congress approved and President Obama signed legislation allowing the continuance of trade sanctions against Chinese-made paper.

The sanctions are a response to the various ways the Chinese government has helped some of the country’s paper manufacturers, which American competitors claim creates an unfair competitive advantage.

Silly Chinese! They didn’t think to disguise their subsidies as biofuel incentives.

Related articles:

• Son of Black Liquor Finally Enters the Limelight
• Black Liquor Tax Credits: The Gift That Keeps on Giving To Paper Mills -- and Taking From Taxpayers 
• Subsidized U.S. Mills Fight Back Against Subsidized, Cross-Dressing Coated Papers