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.
The new binge of tax breaks is the result of an IRS ruling on June 28, 2010, that allows black liquor to qualify for a different tax credit meant to encourage new cellulosic biofuels for transportation.
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