Saturday, August 24, 2013

Burning Manure to Create Money and Getting Paid To Do It

Every year, we are reminded just how complex the United States tax code is and how the system is designed to benefit both the wealthy and the nation's corporations, both of which can afford to hire tax accountants and lawyers to gain the maximum benefit from the current system.  As it stands now, the Internal Revenue Code or U.S. Code Title 26 has 11 subtitles each of which contains between 22 and 1873 sections for a total of 9834 sections.  Each section, in turn, contains subsections, paragraphs and clauses.  In total, to print the entire code, you would use up 73,954 pages of 8 1/2 by 11 inch paper and, sadly enough, the IRC has a life of its own, growing massively over the past three decades as shown here:

To put the 74,000 pages into something that is relatable, a 500 sheet ream of 20 pound paper is 2 inches thick.  The stack of paper that would be required to print the current tax code would stand 296 inches  or 24 feet 8 inches tall.

Between 1984 and 2010, the tax code grew by an average of 2670 pages annually.  Note that the tax code grew by "only" 346 pages between 2012 and 2013.  Looks like there are some advantages to having the laziest group of lawmakers in Washington in decades.  At least they are accomplishing something by doing nothing!

With all of that in mind and the odds that something weird is going to show up in those, let's look at Section 45 - Electricity produced from certain renewable resources, etc.  According to this Section, the renewable electricity production tax credit for a given year is equal to:

1.5 cents times the kilowatt hours of electricity produced

Under Subsection 3 Open-loop biomass, you can use the following materials to create electricity and get a tax credit:

any agricultural livestock waste nutrients.”

Under law, the following are considered "agricultural livestock waste nutrients:

In general, the term “agricultural livestock waste nutrients” means agricultural livestock manure and litter, including wood shavings, straw, rice hulls, and other bedding material for the disposition of manure.”

Yet further still, here is the IRS definition of "agricultural livestock:

"The term “agricultural livestock” includes bovine, swine, poultry, and sheep."

Basically, the government will pay you to burn sh!t.  Unfortunately, it doesn't say anything about burning all of the bullish!t that comes out of Washington because, apparently, that would be too simple and it would likely be impossible to keep up with the volume produced.

In case you are considering this as a business idea, note that the tax credit applies only during the first 10 years of the life of the facility and that the electricity created must be sold to an unrelated person (i.e. you can't sell it to yourself).

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