S. 3632: Renewable Chemicals Act of 2026

This bill, known as the Renewable Chemicals Act of 2026, aims to incentivize the production of renewable chemicals through tax credits in the United States. Here’s a breakdown of what the bill proposes:

Tax Credits for Production of Renewable Chemicals

• The bill establishes a new tax credit for the production of renewable chemicals.
• This credit is set at 15% of the sales price for each pound of renewable chemical produced or produced by a contract manufacturer on behalf of the taxpayer.
• The sales must be at fair market value, and the credit may be reduced based on the percentage of biobased content in the chemical.
• Renewable chemicals are defined as those that must:
  • Be produced in the U.S. from renewable biomass.
  • Contain at least 95% biobased content.
  • Not be used for food, feed, fuel, or pharmaceuticals.
  • Be labeled as USDA Certified Biobased.
  • Be chemical intermediates.
• The total amount of credits allocated for these renewable chemicals is limited, and the Secretary of the Treasury will establish rules regarding these limitations.

Investment Credits for Renewable Chemical Production Facilities

• The bill also introduces an investment credit for facilities that produce renewable chemicals, set at 30% of the investment in eligible property of such facilities.
• Eligible properties include tangible personal property used in the production process, but exclude buildings or their structural components.
• Facilities must be owned by the taxpayer, placed in service after the bill's enactment, and dedicated primarily to producing renewable chemicals.
• Similar to the production credit, there are limits to the amount of investment credits that can be allocated, with a cap on the total credits available per taxpayer.

Coordination and Limitations

• The bill outlines rules for coordination between the production credit and the investment credit.
• Taxpayers must choose between the production credit or the investment credit for a given facility.
• The total credits allocated under the act are capped at $500 million for the entire program, with a maximum of $25 million for any single taxpayer.

Selection Criteria for Credit Allocation

The Secretary will consider various factors when allocating credits, including:

• Job creation.
• Reduction of reliance on imported materials.
• Innovation in production methods.
• Energy efficiency and greenhouse gas reduction.
• Advancement in sustainable chemistry.
• Commercial viability and market presence of the renewable chemicals.

Administrative Provisions

• The Secretary is tasked with creating the framework for administering these credits, including public disclosure of allocations.
• The Secretary will review allocated credits after six years and may reallocate any unused credits.

Effective Date

The provisions contained in this bill would apply to renewable chemicals produced and facilities that are placed in service after the enactment of this legislation, affecting taxable years that end after the enactment date.

Relevant Companies

• DOW - Dow Inc. is involved in the production of chemicals and materials and could benefit from tax credits for producing renewable chemicals.
• UNVR - Univar Solutions Inc. provides chemicals and could potentially see investment opportunities for renewable chemical production.
• LYB - LyondellBasell Industries produces chemicals and plastics and may pursue renewable chemicals to meet market demand and benefit from tax incentives.