Paper Industry Profits from 'Black Liquor' Tax Credits

"Talk about paper profits.

The paper industry — which in 2009 raked in billions of dollars in federal subsidies originally intended to promote alternative highway fuels — is now using a different biofuel tax credit to cut its tax bills for 2010 and beyond by hundreds of millions of dollars more.

The heart of the issue is the tax treatment of a substance called 'black liquor,' a byproduct of the wood-pulping process at paper mills. The companies have burned black liquor to generate power since the 1930s.

It was not the intent of Congress to reward that behavior, but the industry and its accountants persuaded the Internal Revenue Service to allow black liquor to count as an alternative fuel in 2009. Under that program, the paper industry received more federal money than almost any industry outside the auto sector."

Steve Mufson reports for the Washington Post April 26, 2011.