45Z Tax Guidance Released     02/03 10:51

   Treasury's 45Z Credit Guidance Brings Clarity, Questions for Biofuels 
Producers

   The U.S. Department of Treasury released proposed guidance on the 45Z Clean 
Fuel Production tax credit and has scheduled a public May 2026 public hearing.

Todd Neeley
DTN Environmental Editor

   LINCOLN, Neb. (DTN) -- The U.S. Department of Treasury is set to publish 
guidance on the 45Z Clean Fuel Production tax credit, including key details and 
rules on how biofuels and other companies can qualify.

   Reaction to the proposal was mixed on Tuesday following posting on the 
Federal Register website.

   Biofuels, agriculture, petroleum, airlines and other industries have been 
waiting for more guidance on the tax credit designed to fuel the development of 
a sustainable aviation fuel industry.

   The Renewable Fuels Association said the 170-page proposal was a good first 
step toward bringing certainty to industries.

   "Today's 45Z proposed rule is a step in the right direction toward providing 
the clarity and certainty that ethanol producers are seeking," said Geoff 
Cooper, RFA president and CEO.

   "We thank the Treasury department and Trump administration for listening to 
the input provided by ethanol producers and other stakeholders. The proposal 
appears to resolve some of previous confusion around what constitutes a 
'qualified sale,' and begins to integrate the important improvements to 45Z 
that resulted from the One Big Beautiful Bill Act, such as removal of indirect 
land use change emissions from the carbon intensity scoring framework."

   However, Cooper said there continues to be unresolved issues including the 
release of a revised version of the 45Z GREET model to be used in calculating 
greenhouse gas emissions for purposes of determining credit values.

   "In addition, questions remain to be resolved around the quantification of 
emissions related to low-carbon feedstock production at the farm level, 
implementation of foreign feedstock prohibitions, and provisions related to the 
use of energy attribute credits," Cooper said.

   PUBLIC HEARING SET

   A public hearing is scheduled for May 28, 2026, with requests to attend the 
hearing due on May 26, 2026, according to the proposal.

   The proposal also calls for integrating a feedstock carbon intensity 
calculator under development by USDA. This will allow for carbon intensity 
adjustments for feedstocks produced using no-till farming, cover crops and 
nutrient management practices.

   So, farmers producing corn and soybeans or other feedstocks with lower 
carbon intensity would benefit from making the crops more valuable to biofuels 
producers seeking higher credits.

   "RFA initially filed detailed comments with Treasury in April 2025, stating 
that the final 45Z regulations must recognize the realities of today's 
biorefining and agriculture sectors and the complexities of our nation's 
transportation fuels marketplace," the RFA said in a news release.

   "At the same time, we said, final regulations must maintain an intuitive and 
manageable approach to registration, reporting, and recordkeeping that creates 
the kind of dependable value that empowers businesses to invest."

   NO FOREIGN FEEDSTOCKS

   According to the proposal, fuels produced after Dec. 31, 2025, must be 
derived exclusively from feedstocks produced or grown in the U.S., Canada and 
Mexico, with no foreign feedstocks allowed. The rules would be in effect for 
fuels production after Dec. 31, 2024, since the credit originally went into 
effect in 2025.

   The proposal is designed to protect U.S. farmers from foreign competition 
for biofuels feedstocks and to secure a domestic market for U.S. corn, soybeans 
and other crops.

   The 45Z credit would require producers to sell fuel to an unrelated person 
in their trade or business and the credit could only be claimed for the year of 
sale.

   Clean Fuels Alliance America said on Tuesday that although the credit has 
been in effect since January 2025, "producers and farmers have struggled to 
capitalize on it with only minimal guidance."

   Kurt Kovarik, vice president of federal affairs for Clean Fuels, said in a 
statement the proposed rule does resolve some uncertainties with 45Z.

   "The delay in rulemaking led to market uncertainty that took a heavy toll on 
our industry, undercutting fuel production and the value added to agriculture," 
Kovarik said.

   "Clean Fuels and its members look forward to working with IRS and treasury 
to finalize rules that support renewed growth for biodiesel and renewable 
diesel producers."

   Fuel retailers were not satisfied with the 45Z credit, as they continue to 
call for biofuels policies that address affordability.

   On Tuesday, SIGMA: America's Leading Fuel Marketers, and the National 
Association of Convenience Stores, said the tax credit was a step in the wrong 
direction.

   "But years of regulatory reviews, public comments, copious stakeholder 
input, and Congressional reevaluation, can't alter the fact that 45Z is a giant 
step backward for American biofuel policy," the groups said in a statement.

   "NACS, NATSO and SIGMA, which represent 90% of retail fuel sales, urge 
Congress and the administration to support simpler biofuel policies that would 
quickly reinvigorate biodiesel consumption and higher ethanol blends while 
enhancing the economy and energy market security."

   David Fialkov, executive vice president of government affairs for the 
groups, said the 45Z would not actually lower fuel prices or benefit biofuels 
or farmers.

   "It is past time for lawmakers and regulators to acknowledge that 45Z is too 
complicated and flawed and it should be replaced with simpler tax incentives 
that lower fuel prices and support American farmers," he said.

   With the expiration of the biodiesel blenders tax credit, biodiesel 
production plummeted while the industry waited for 45Z guidance.

   The groups said the 45Z proposal "underscores the need" to reinstate the 
biodiesel tax credit.

   The 45Z guidance proposal was met with support by the American Soybean 
Association and the National Oilseed Processors Association.

   "Updating federal biofuel policies to prioritize soy-based fuels is a key 
ASA priority, and we applaud treasury for this action which will help build 
domestic markets for U.S. soybeans," said Scott Metzger, ASA president and Ohio 
farmer.

   "While Treasury's work to update tax guidance is critical, ASA strongly 
urges the administration to immediately finalize RFS (Renewable Fuel Standard) 
blending targets that complement the work of Treasury and Congress, by setting 
robust biofuel volumes and implementing new policies that will prioritize the 
utilization of U.S. soybeans in production."

   NOPA President and CEO Devin Mogler said the industry also needs a "strong 
RFS that includes the import RIN (renewable identification numbers) reduction 
mechanism."

   Another key aspect of the 45Z proposal is its removal of the indirect land 
use change penalty on agriculture feedstocks.

   Read more on DTN:

   "Agriculture, Energy Groups Weigh Next Steps on 45Z Clean Fuels Production 
Tax Credit," 
https://www.dtnpf.com/agriculture/web/ag/news/article/2025/01/13/agriculture-ene
rgy-groups-weigh-next

   Todd Neeley can be reached at todd.neeley@dtn.com

   Follow him on social platform X @DTNeeley




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