Bacillus licheniformis strain TAB7 is a bacterium used as a commercial deodorizing agent for compost in Japan. In this work, its ability to biotransform the following monocyclic phenolic compounds was assessed: ferulate, vanillate, p-coumarate, caffeate, protocatechuate, syringate, vanillin, and cinnamate (a precursor for some phenolic compounds). These compounds are abundant in composting material and are reported to have allelopathic properties. They come from sources such as plant material decomposition or agro-industrial waste. Biotransformation assays were carried out in LB supplemented with 0.2 mg/mL of an individual phenolic compound and incubated for up to 15 days followed by extraction and HPLC analysis. The results showed that TAB7 could biotransform ferulate, caffeate, p-coumarate, vanillate, protocatechuate, and vanillin. It, however, had a poor ability to transform cinnamate and syringate. LC-MS/MS analysis showed that ferulate was transformed into 4-vinylguaiacol as the final product, while caffeate was transformed into 4-ethylcatechol. TAB7 genome analysis suggested that, while TAB7 may not mineralize phenolic compounds, it harbored genes possibly encoding phenolic acid decarboxylase, vanillate decarboxylase, and some protocatechuate degradation pathway enzymes, which are involved in the catabolism of phenolic compounds known to have negative allelopathy on some plants. The results thus suggested that TAB7 can reduce such phenolic compounds in compost.