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Ethanol tax credit set at 45 cents

The Senate's tax bill will include a 45 cent-per-gallon ethanol tax credit for one more year, through the end of 2011, a spokesperson for Senator Chuck Grassley (R-IA) told at Thursday evening.

The tax credit is in the draft of the tax extension bill the Senate is expected to vote on soon, said Beth Pellett Levine.

The law will also reinstate the $1 a gallon biodiesel tax credit, retroactively for 2010 and through 2011, she said.

Grassley's staff held out for the tax credit against strong pressure. A bipartisan coalition of Democrats and Republicans in the Senate earlier called for ending the tax credit, which will cost more than $5 billion this year. Grassley and other supporters of the ethanol industry have argued that the tax credit creates jobs and adds more to the economy than any federal savings if the credit expired.

Even though some senators who support ethanol were willing to go along with a slightly lower subsidy, Grassley wanted to pass all expiring tax credits without making major changes in policy this year.  

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