The Department of the Treasury and the Internal Revenue Service today issued proposed regulations for domestic producers of clean transportation fuel to determine their eligibility for and calculate the clean fuel production credit, often referred to as the 45Z credit, as modified under the One, Big, Beautiful Bill. The clean fuel production credit provides businesses an income tax credit for clean transportation fuel produced domestically after Dec. 31, 2024, and sold by Dec. 31, 2029.
Today’s guidance also proposes rules to implement certain OBBB changes to the clean fuel production credit. OBBB changed the clean fuel production credit to:
Extend the credit to Dec. 31, 2029;
Limit feedstocks to those grown or produced in the US, Mexico, or Canada;
Add prohibited foreign entity restrictions;
Broaden sale attribution for fuel sold through related intermediaries;
Eliminate the special rate for sustainable aviation fuel;
Add an anti-abuse provision to prevent double crediting;
Prohibit negative emissions rates except for fuels derived from animal manure;
Require feedstock-specific emissions rates for fuels derived from animal manure; and
Exclude indirect land use changes from emissions rates.
Renewable Fuels Association President and CEO Geoff Cooper says the proposed rule is a step in the right direction. “The proposal appears to resolve some of the 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 the removal of indirect land use change emissions from the carbon intensity scoring framework.
“However, much work remains to be done and many questions still need to be answered. First and foremost, ethanol producers are anxiously awaiting a new, revised version of the 45ZCF-GREET model, which will help shed light and provide clearer direction on several critical issues. 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 RFA looks forward to providing comments on the proposal to the Treasury Department and intends to testify at an upcoming hearing on the rule.
American Coalition for Ethanol (ACE) CEO Brian Jennings would like to see additional clarity on how ethanol producers can monetize low-carbon farming practices through the tax credit.
“We urge Treasury to continue working closely with the U.S. Department of Agriculture and the Department of Energy to develop and finalize the tools necessary to achieve full monetization of farming practices, such as USDA’s Feedstock Carbon Intensity Calculator (FD-CIC) and DOE’s 45ZCF-GREET model,” said Jennings. “Last year, USDA asked ACE to help peer-review and beta-test the FD-CIC, and we submitted reams of data and feedback on the tool. We are encouraged Treasury expects the 45ZCF FD-CIC to undergo periodic updates, including incorporation of new data gathered from real-world activities such as the USDA Regional Conservation Partnership Program (RCPP) activity being led by ACE. This work is specifically designed to address the perceived need for more empirical data on the low-carbon benefits of farming practices to help improve the accuracy of modeling tools. We are hopeful the FD-CIC and 45ZCF-GREET model will reflect the feedback we provided and are finalized soon.”
Written or electronic comments will be accepted for the next 60 days and a public hearing has been scheduled for May 28.











