The big, beautiful bill is a big, beautiful relief for Iowa’s biodiesel industry which has been suffering this year.
“Countries around the world and many of our states are demanding ultra-low carbon fuels,” said Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw. “The Big Beautiful Bill helps pave the way for the investments to produce those fuels – and to produce them from North America feedstocks.”
The biodiesel industry has struggled in 2025 from low Renewable Fuel Standard (RFS) blending levels and uncertainty around implementation of the original 45Z tax credit, leading several Iowa biodiesel plants to idle. The bill extends the §45Z Clean Fuel Production Credit through 2029 and provides for transferability of the credit, in addition to restorating the small biodiesel producer tax credit for 2025 and 2026.
“The revival of the Small Agri-Biodiesel Producer Credit through 2026—and increasing it to 20 cents-per-gallon—is a vital lifeline to small independent producers like those in Iowa. We thank Senator Chuck Grassley (R-IA) for championing the inclusion of that provision,” said Grant Kimberley, executive director of the Iowa Biodiesel Board (IBB).
“The ability for producers to transfer the credit, the appropriate prioritization of North American feedstocks, and the removal of arbitrary indirect land use change penalties all bode well for Iowa’s biodiesel industry and soybean farmers. For producers who have been idled or running at reduced capacity since the start of the year, this is a breath of relief and welcome signal for a bright future.”
Because many changes to the 45Z tax credit become effective in 2026, IBB urged prompt, clear rules and guidance from the U.S. Treasury implementing the tax credit both for 2025 and beyond.
In an unexpected move, the bill lowered the incentive for producing sustainable aviation fuel (SAF) from $1.75 to $1.00 and made technical changes which make it difficult for a SAF producer using ethanol as their feedstock to claim the credit. SAF has the potential to be a 100 billion gallon a year market by 2050.