Legislature considers extending tax credit for Missouri sawdust, wood waste

Legislature considers extending tax credit for Missouri sawdust, wood waste

February 28, 2022 0 By Joe Mueller

Missouri lawmakers could continue to reward the wood industry for finding ways to utilize sawdust and other wood waste to produce additional products by extending a tax credit.

House Bill 1862 extends a tax credit for wood energy producers from June 30, 2020, to June 30, 2028. Wood energy producers can get a $5 tax credit for each ton of processed material.

The legislation resulted from collaboration with the U.S. Environmental Protection Agency in the 1980s to support the conversion of waste wood residue into wood energy products.

“This program has been around forever, but I don’t think many people realize what the forest product industry means to this state,” Rep. Jeff Knight, R-Lebanon and the bill’s sponsor, told the Agriculture Policy Committee during a hearing on Tuesday. “If you live in Lebanon, Missouri, and you make whiskey and bourbon barrels for everyone in the world, you understand what it means. Sawdust is used for pellets for wood energy and we also use the scrap to toast and char those barrels. That’s why this program is so important to me – it directly affects the community of Lebanon.”

Rep. Chris Dinkins, R-Lesterville, told fellow committee members the incentive for producers to continue finding ways to use wood waste was beneficial to constituents in her region.

“Years ago, you would always see these big piles of slabs burning,” Dinkins said. “No matter where you would drive in my surrounding counties, you don’t see that anymore.”

Knight agreed the tax incentive has an environmental impact.

“Landfills are not as full,” Knight said. “Waste had to go someplace and, in my district, they literally carried it and dumped it. Now, it can be made into wood pellets, smoking pellets – anything instead of letting it sit there and rot.”

Rep. Stacy McCreery, D-St. Louis, said she received favorable feedback from her constituents who purchased the pellets to burn for heating.

“Pellets are kind of hard to get, so I would like to see more available,” McCreery said.

The tax credit is capped at $6 million annually and is subject to the legislature’s appropriations process. The legislature appropriated $1 million in credits for the fiscal year 2018 and 2019, but less than $892,000 were redeemed each year. In 2020, $1.5 million in credits were issued, and $1.1 million were redeemed. In 2021, $740,000 in credits were issued and $319,000 redeemed.

McCreery highlighted that the fiscal note showed the program hadn’t reached its limit, and relatively few businesses participated.

“The problem with a lot of tax credit programs is you don’t think about them in forest products,” Knight said. “Everyone always thinks about them in housing and big cities. A lot of people don’t know they’re out there.”

Shannon Cooper, a former state representative who lobbies for the Missouri Forest Products Association, testified in support of the bill and said the industry employs 50,000 people and contributes $10 billion to the state’s economy.

“In many parts of the state, if you’re not a logger you’re probably unemployed,” Cooper said. “If you’re not in this industry, there’s not a lot of other opportunities out there in some places.”

Cooper said Missouri is one of the leading charcoal and wood pellets producers. He said a larger appropriation for tax credits this year would help fund a backlog of applications.

“These byproducts created a lot of jobs for rural Missouri,” Cooper said.

This article was originally posted on Legislature considers extending tax credit for Missouri sawdust, wood waste