Projo Biz Blog

The Rhode Island Division of Taxation interpreted the old law in such a way that only fuel based entirely on vegetable oil qualified for a state tax break.

But producers generally add at least some petroleum diesel to the mix to be eligible for a federal tax credit. As a result, none of the mixed fuel was eligible for the state tax break.

The new law generally exempts from the 32-cent-a-gallon state motor fuels tax any portion of biodiesel fuel that is made from vegetable oil, said state Sen. Louis P. DiPalma (D-Middletown), who sponsored the Senate version of the measure.

As a result, if 10 percent of a gallon of fuel is made from vegetable oil, the tax break will equal 10 percent of the tax, or 3.2 cents a gallon in this example, he said.

DiPalma said on Monday that he backed the measure because it will serve as an incentive that "helps to move the culture to be more energy independent."

Although the tax break is limited in scope, "Every little bit helps," he said. In addition, he said he supports the use of biodiesel fuel because, "It's really turning waste to energy."

DiPalma also said he favors the tax break because it helps local businesses, including Newport Biodiesel LLC, a biodiesel fuel company in his district.

Myles Standish, managing partner for Newport Biodiesel, said on Monday that the new law will be "a boost for biodiesel product in Rhode Island."

Newport Biodiesel collects waste vegetable oil from restaurants in Rhode Island and Massachusetts and turns it into fuel, which is mainly used for heating in winter and motor fuel in summer.

The new law's immediate impact will be a reduction in cost for biodiesel consumers who employ the fuel in on-road use of their vehicles, Standish said.

"We intend to pass this [tax savings] along to the consumer in order to encourage them to buy the product," he said.

The measure is the result of a series of visits that state senators made to small businesses late in 2008, which included stops at Newport Biodiesel and at T.H. Malloy & Sons Inc. of Cumberland, which buys biodiesel from Newport Biodiesel, uses it in its fleet of vehicles, and also distributes it as a home heating fuel.

During the tour, senators learned of the limitations of the existing tax break, and decided to try to broaden it.

The expanded tax break is the result of identical bills that were approved by theGeneral Assembly.

S 0525aa was passed by the Senate on April 21 and by the House on June 26.

H 5782, sponsored by state Rep. J. Russell Jackson, D-Newport, was passed by the House on June 26 and by the Senate on June 30.

Both bills were transmitted to Carcieri on July 8. He had six days (not counting Sundays) to take action. The tax break took effect on the seventh day, July 16.