ISRI Opposes Black Liquor Tax Incentives

The Institute of Scrap Recycling Industries is calling on Congress to rescind the unintended tax incentives from “black liquor” afforded to paper mills that use virgin materials and create a financial disincentive to paper recycling.
In opposing the tax incentive, ISRI notes that paper companies have been using black liquor as a fuel to run their mills for more than 70 years. Recently, paper companies have tapped into $6.6 billion of tax credits available under the “Alternative Fuels Provision,” part of the 2005 highway bill intended to support the use of alternative fuels for transportation.

In a letter to senators Senator Max Baucus, Chair of the Senate Finance Committee, and Senator Charles Grassley, Ranking Minority Member of the Committee, Robin Wiener, ISRI president, said, “ISRI strongly opposes the black liquor tax incentives unintentionally afforded to virgin paper mills. This issue is of great concern to paper recyclers who have indicated the black liquor tax credit impedes paper recycling by providing paper mills that utilize virgin materials a competitive advantage over mills that utilize recovered fiber in paper production.” 

In support of the position, Wiener noted that RISI, which specializes in forecasts and analysis on the global forest products industry, published trend analyses regarding virgin and recycled containerboard. RISI found that production of virgin containerboard increased as a result of the black liquor tax credit, while at the same time, production of recycled containerboard decreased. “Obviously, this is a very troubling finding from the perspective of paper recyclers.”

Wiener went on to say that a recent legal memorandum, written by the Internal Revenue Service’s office of chief counsel, would exacerbate the situation. The memo estimates that when the credit expires on Dec. 31, 2009, the cellulosic biofuel producer credit, afforded by § 40(b)(6) of the Internal Revenue Code will provide an even more generous black liquor credit estimated at $1.01 per gallon through December 31, 2012. 

Wiener’s letter requests that both of these “egregious tax credits never intended by the Congress” be ended.