South Dakota governor OKs tax break for biodiesel users

| 3/26/2008

South Dakota Gov. Mike Rounds has signed a bill into law to provide a tax break for biodiesel use. However, it might take a few years before the rule is triggered.

The new law, previously SB148, calls for reducing the fuel tax on diesel that contains at least 5 percent biodiesel by 2 cents per gallon. The fuel tax applied to regular gasoline and diesel now is 22 cents per gallon. The bill trims the per-gallon tax on biodiesel to 20 cents.

The per-gallon tax on ethanol already is 20 cents.

House and Senate lawmakers unanimously approved the legislation at the request of the governor. Rounds said he wants to provide the same incentive for ethanol use to truckers and other consumers of diesel. Offering the discounted tax rate for biodiesel will encourage production of the fuel made mostly from soybeans, he said.

Rounds said with diesel costs continuing to rise the tax break also “will help ease the pain at the pump for consumers.” It also will help decrease the state’s dependency on foreign oil, he said.

Tax breaks will not start until biodiesel production capacity in the state reaches 20 million gallons annually. The tax break will end once production has reached about 40 million gallons annually.

The tax break will be funded by transferring $800,000 this year from the state’s Petroleum Release Compensation Fund reserve to the Highway Trust Fund.

To view other legislative activities of interest for South Dakota, click here.

– By Keith Goble, state legislative editor