KRS 141.417: Alternative jet fuel tax credit -- Definitions for section -- Rates -- Limits --

Administrative regulations -- Reports -- Application and certification.

(1) As used in this section:

(a) "Agriculturally based alternative jet fuel" means an alterna tive jet fuel

produced from agricultural biomass, including crops and agricultural

byproducts derived from agricultural or livestock production, such as corn,

soybeans, wheat, canola, animal fats, and biomass residues from trees, wood,

and grasses;

(b) "Alternative jet fuel" means a liquid fuel that can be used in an aircraft

without the need to modify the aircraft engines or existing fuel distribution

infrastructure, and that:

1. Consists of synthesized hydrocarbons and meets the requirements of:

a. The Am erican Society for Testing and Materials International

Standard D7566; or

b. The American Society for Testing and Materials International

Standard D1655;

2. Is derived from eligible feedstocks;

3. Is not derived from palm fatty acid distillates; and

4. Achieves at least a fifty percent (50%) lifecycle greenhouse gas

emissions reduction in comparison with petroleum -based jet fuel, as

determined by a test that shows the fuel production pathway achieves at

least a fifty percent (50%) reduction of the aggreg ate attributional care

lifecycle by measuring either:

a. Emissions under the lifecycle methodology for alternative jet fuels

adopted by the International Civil Aviation Organization with the

agreement of the United States; or

b. Greenhouse gas emissions va lues utilizing the most recent version

of Argonne National Laboratory's GREET model;

(c) "Alternative jet fuel producer" means an entity in this state that:

1. Produces alternative jet fuel; or

2. Blends SBC with conventional aviation gasoline or jet fuel;

(d) "Eligible feedstock" means any feedstock that qualifies as an eligible

feedstock for purposes of Section 45Z of the Internal Revenue Code;

(e) "Eligible taxpayer" means an alternative jet fuel producer or feedstock

provider that is located in the Commonwealth;

(f) "Feedstock provider" means an entity that manufactures an eligible feedstock,

including SBC, used in the process of making alternative jet fuel; and

(g) "Synthetic blending component" or "SBC" means synthesized hydrocarbons

that meet the requ irements in any one (1) of the annexes of the American

Society for Testing and Materials International Standard D7566, which may

then be used as a component in the manufacture of alternative jet fuel.

(2) (a) There shall be allowed a nonrefundable, nontran sferable alternative jet fuel

credit allowed against the taxes imposed in KRS 141.020 or 141.040 and

141.0401 for alternative jet fuel producers in an amount certified by the

department under this section, with the ordering of the credits as provided in

KRS 141.0205.

(b) For taxable years beginning on or after January 1, 2029, but before January 1,

2035, an eligible taxpayer may claim a credit at a rate of:

1. Fifty cents ($0.50) per gallon to a feedstock provider supplying either

eligible feedstocks or SBC to an alternative jet fuel producer;

2. One dollar and fifty cents ($1.50) per gallon to an alternative jet fuel

producer that processes eligible feedstocks or blends SBC with

conventional jet fuel to produce alternative jet fuel;

3. Two dollars ($2) per gallon to an alternative jet fuel producer that

processes eligible feedstocks or blends SBC with conventional jet fuel to

produce agriculturally based alternative jet fuel; or

4. Two dollars and fifty cents ($2.50) per gallon to an alternative jet fuel

producer that processes eligible feedstocks or blends SBC with

conventional jet fuel to produce an agriculturally based alternative jet

fuel using an eligible feedstock that was produced in the

Commonwealth.

(3) (a) The credit allowed in subsection (2) of thi s section shall not be carried

forward to other taxable years.

(b) The total credit allowed in subsection (2)(b)1. and 2. of this section shall not

exceed two million dollars ($2,000,000) per eligible taxpayer per taxable year.

(c) The credits allowed in s ubsection (2) of this section may stack if the

alternative jet fuel producer is the same as the feedstock provider and shall not

exceed three dollars ($3) per gallon per entity.

(d) The aggregate total credit certified in a calendar year shall not exceed t wenty

million dollars ($20,000,000). If the aggregate total of credits certified

exceeds twenty million dollars ($20,000,000), the department shall apportion

credits pro rata among eligible taxpayers up to the twenty million dollar

($20,000,000) limit.

(4) The department, in conjunction with the Kentucky Department of Agriculture and

the Energy and Environment Cabinet, shall promulgate emergency and ordinary

administrative regulations in accordance with KRS Chapter 13A to adopt:

(a) Forms and procedures nec essary for implementation, calculation, reporting,

and certification of the credit no later than October 1, 2028;

(b) Verification standards and processes to ensure the fuel meets the requirements

to be alternative jet fuel or agriculturally based alternative jet fuel; and

(c) Verification standards and processes to ensure each alternative jet fuel

producer and feedstock provider meets the criteria established in subsection

(1)(c) and (f) of this section.

(5) The department, Kentucky Department of Agricultu re, and Energy and

Environment Cabinet shall report to the Interim Joint Committee on Appropriations

and Revenue when administrative regulations have been promulgated under

subsection (4) of this section, and the credit provided in this section shall not b e

approved prior to the report.

(6) (a) An eligible taxpayer seeking approval for the credit under this section shall:

1. Submit an application to the department, on a form as prescribed by the

department, by January 15, 2030, following the close of the calendar

year, and each January 15 thereafter as long as the credit is available;

and

2. Provide the:

a. Taxpayer's identification number; and

b. Description and amount or volume of alternative jet fuel, eligible

feedstock, or SBC:

i. Produced, including anticipated production amounts, for the

calendar year; or

ii. Blended, including anticipated production amounts, for the

calendar year.

(b) The department shall:

1. Review all applications submitted by eligible taxpayers by February 15,

2030, and each February 15 thereafter as long as the credit is available;

2. Determine the qualifying volumes of alternative jet fuel, eligible

feedstock, or SBC per eligible taxpayer; and

3. Issue a certification by March 1, 2030, and each March 1 thereafter as

long as the credit is available, of the credit amount approved for each

eligible taxpayer.

(7) (a) In order for the General Assembly to evaluate the alternative jet fuel producer

credit, by November 1, 2030, and each November 1 thereafter, as long as the

tax credit is claimed on any tax return filed, the department shall report the

following to the Legislative Research Commission for refer ral to the Interim

Joint Committee on Appropriations and Revenue and the Department of

Agriculture:

1. The number of tax returns, by the tax type of return filed, claiming the

credit for each taxable year;

2. The total amount of credit claimed on returns filed for each taxable year;

3. The total number of gallons claimed per return filed of:

a. Eligible feedstock or SBC provided;

b. Eligible feedstock processed or SBC blended with conventional jet

fuel to produce alternative jet fuel;

c. Agriculturally based alternative jet fuel produced; and

d. Agriculturally based alternative jet fuel produced using an eligible

feedstock that was produced in the Commonwealth;

4. The cumulative number of credits claimed by county, as identified by

the mailing address on the return filed for each taxable year; and

5. a. In the case of taxpayers other than corporations, based on ranges

of adjusted gross income of no larger than five thousand dollars

($5,000), the total amount of credits claimed for each adjusted

gross income range for each taxable year.

b. In the case of corporations, based on ranges of net income of no

larger than fifty thousand dollars ($50,000), the total amount of

credit claimed for each net income range for each taxable year.

(b) The information required t o be reported under this subsection shall not be

considered confidential taxpayer information and shall not be subject to KRS

Chapter 131 or any other provisions of the Kentucky Revised Statutes

prohibiting disclosure or reporting information.