Overview:

The Invest in Illinois Act introduces new energy-related incentives, including a sustainable aviation fuel purchase credit and revisions to the existing Reimagining Electric Vehicles in Illinois Act to include renewable energy manufacturing (in addition to electric vehicle production). The Invest in Illinois Act (the "Invest Act")1 passed both houses of the Illinois General Assembly on January 10, 2023, and was signed into law by Governor Pritzker on February 3, 2023. The purpose of the Invest Act is to provide existing and new businesses and industries in Illinois with access to capital and incentives in order to stimulate economic activity and create new jobs. Sustainable aviation fuel companies have expressed their support for the sustainable aviation fuel purchase credit included in the Invest Act.2

New Sustainable Aviation Fuel Purchase Credit:

The Invest Act creates a new sustainable aviation fuel purchase credit in an amount of $1.50 per gallon of sustainable aviation fuel (the "Sustainable Aviation Fuel Credit"). The Sustainable Aviation Fuel Credit will be effective from June 1, 2023 to January 1, 2033 and will apply to sustainable aviation fuel sold to an air carrier or used by an air carrier in the state of Illinois. The Invest Act incorporates the Sustainable Aviation Fuel Credit into the Use Tax Act3 and Service Use Tax Act.4

Under the Invest Act, "sustainable aviation fuel" means liquid fuel that either:5

  • Meets the criteria of (a) the American Society for Testing and Materials International Standard D7566 or (b) the Fischer Tropsch provisions of American Society for Testing and Materials International Standard D1655, Annex A1;
  • Is not derived from coprocessing an applicable material with a feedstock which is not biomass;
  • Is not derived from palm fatty acid distillates or petroleum; and
  • Has been certified as having a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent.

or:

  • Consists of synthesized hydrocarbons and meets the criteria of (a) the American Society for Testing and Materials International Standard D7566 or (b) the Fischer-Tropsch provisions of American Society for Testing and Materials International Standard D1655, Annex A1;
  • Is derived from biomass resources, waste streams, renewable energy sources, or gaseous carbon oxides (prior to June 1, 2028);
  • Is derived from domestic biomass resources (beginning on June 1, 2028);
  • Is not derived from palm derivatives; and
  • Achieves at least a 50% lifecycle greenhouse gas emissions reduction in comparison with petroleum-based jet fuel.6

On an annual basis, once air carriers in Illinois have collectively purchased aviation fuel containing 10,000,000 gallons of soybean oil feedstock, then no more Sustainable Aviation Fuel Credits may be earned by air carriers on such fuel in that year. This limitation is intended to make sure that the price of renewable diesel does not increase due to increased demand for soybean oil.7

Tax Incentives Become Available for Renewable Energy Equipment Manufacturing:

The Invest Act amends the Reimagining Electric Vehicles in Illinois Act (the "REV") which was enacted in November of 2021 to incentivize electric vehicle manufacturing in Illinois.8 The REV provides tax credits for income tax withholding, training costs, tax exemptions, and investment credits for certain electric vehicle manufacturers and manufacturers of electric vehicle component parts, battery recycling and reuse manufacturers and battery raw materials refining service providers.

The Invest Act revises the REV to make "renewable energy manufacturers" eligible for tax incentives under the REV. In the proposed amendment, "renewable energy manufacturer" is a manufacturer who manufactures products used to produce renewable or nuclear energy, products used for energy conservation, storage or grid efficiency purposes (or component parts of any of the foregoing).

Footnotes

1. The full text of the Invest in Illinois Act is available at: https://www.ilga.gov/legislation/102/SB/10200SB2951lv.htm.

2. https://biomassmagazine.com/articles/19733/illinois-governor-signs-bill-establishing-saf-tax-credit.

3. Available at: https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=579&ChapterID=8.

4. Available at: https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=580&ChapterID=8.

5. Note that the Invest in Illinois Act refers to the criteria set forth in subsections (d) and (e) of Section 40B of the federal Internal Revenue Code of 1986. We have summarized these criteria as of the date hereof.

6. This will be determined by a test that shows:
(a) that the fuel production pathway achieves at least a 50% reduction of the aggregate attributional core lifecycle emissions and the positive induced land use change values under the lifecycle methodology for sustainable aviation fuels adopted by the International Civil Aviation Organization; OR
 (b) that the fuel production pathway achieves at least a 50% reduction of the aggregate attributional core lifecycle greenhouse gas emissions values utilizing the most recent version of Argonne National Laboratory's GREET model.

7. See https://www.argusmedia.com/en/news/2412226-illinois-passes-sustainable-aviation-fuel-tax-credit.

8. https://www.illinois.gov/news/press-release.24143.html.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.