Bill Would Repeal Unfair Tax Breaks, Help Cataylst

By Tammy Gray-Searles
   Responding to requests from local lawmakers and constituents, U.S. Representatives Ann Kirkpatrick and Jeff Flake have co-sponsored a bill that would put an early end to Black Liquor Tax Credits.
   The bill was introduced on Friday, June 19. It is unclear how long it might take the bill to either pass or fail. If passed, the black liquor tax credit program would be changed to exclude paper mills immediately.
   The credits were designed to encourage alternative fuels for vehicles, but according to representatives from Cataylst paper mill in Snowflake, they have been misused by certain paper manufacturers to gain an unfair competitive advantage. Since Cataylst’s Snowflake operation is 100-percent recycled, making it ineligible for the tax credits.
   According to information from the Navajo County Board of Supervisors, the Snowflake mill has reduced its work force by about 25-percent, due largely in part to competitors receiving significant black liquor tax credits.
   “In 2007, Congress expanded an alternative fuels mixture tax credit to encourage the use of biomass fuels mixed with traditional fossil fuel. The expansion allowed kraft paper mills, which have used black liquor as an energy source for decades, to add as little as .1 percent of diesel to the product and turn the legitimate tax credit into a corporate subsidy,” a press release from Kirkpatrick’s office explains. “At the time of enactment, Congress believed the expansion would cost $61 million. However, paper companies used tax gimmicks to claim between $6 billion and $10 billion in tax benefits: International Paper alone could receive over $1 billion in 2009. Congresswoman Kirkpatrick’s bill will exclude the use of the wood-processing byproduct “black liquor” from the alternative fuels mixture tax credit, preventing kraft paper mills from exploiting the loophole.
   “In addition to costing taxpayers billions, the credit creates an uneven playing field by placing companies that make recycled paper at a competitive disadvantage, because their process does not produce black liquor. Closing the loophole will save recycled paper mills and keep employees in those mills working.”
   According to Kirkpatrick’s Press Secretary Joe Katz, the bill does not appear to have any retroactive aspects that would prevent kraft paper mills from receiving credits for past use, or to return any of the funds received through the credits. The bill will, however, put a stop to the credits immediately. If the bill is not passed, the credits will end on Oct. 1, since the original legislation included a sunset date.
   “Everyone agrees that the black liquor loophole is unintentional and not in accord with the spirit of the law,” said Kirkpatrick. “We must close this tax loophole now to reestablish a level playing field for the mills, get folks back to work and prevent another billion dollars of taxpayer money from being wasted. Cracking down on fiscal waste is a nonpartisan issue, and I am happy to work with members on both sides of the aisle to save taxpayer money. You do not have to be a Democrat or Republican to want to stop the use of our money to destroy our jobs.”
   Flake noted, “The federal government shouldn’t be picking winners and losers in the economy, and that’s precisely what the black liquor tax credit loophole has done. It has put some paper mills at a disadvantage, has complicated our trade obligations with Canada, and has been an enormous waste of federal money. The black liquor tax credit needs to be repealed immediately.”
   Taylor Vice Mayor Debbie Tuckfield praised the introduction of the bill repealing the credits.
   “The black liquor tax credit threatens the existence of the second largest employer in our area, and will have a huge economic impact on our communities,” she said. “The introduction of this legislation will address the concerns we have about the inequity created by the tax. The exclusion of black liquor will allow Catalyst to continue its operations.”