President George W. Bush signed into law a bill containing the first biodiesel tax incentive. The biodiesel tax incentive and extension of the ethanol tax incentive were included in the American JOBS Creation Act of 2004, H.R. 4520.

Biodiesel fuel is a cleaner-burning alternative to petroleum-based diesel and is made from renewable sources such as soybeans and recycled cooking oils, as well as other natural fats and oils. It works with any diesel engine with few or no modifications. The tax incentive, which is structured as a federal excise tax credit, took effect Jan.1, 2005, and lasts for two years.