Treasury proposes 45Z rule, biofuels group ask for more clarity

The Treasury Department and the Internal Revenue Service issued the long-awaited proposed regulation for the 45Z Fuel Production Credit and said the proposal will be published in the Federal Register on Wednesday, but key biofuels groups said more work needs to be done.

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. To claim the credit, taxpayers must be registered with the IRS using Form 637, Application for Registration (For Certain Excise Tax Activities) at the time of production.

The proposed regulations provide guidance on the determination of clean fuel production credits, emissions rates, and certification and registration requirements. They provide further certainty and clarity for taxpayers and address key issues raised by stakeholders, the Treasury said.

In a news release, Treasury said, “Today’s guidance also proposes rules to implement certain One Big Beautiful Bill Act 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 U.S., 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.”

Sen. Roger Marshall, R-Kan., said in a news release, “This is a huge win for Kansas farmers and rural America. Clear and workable 45Z guidance means more value for the crops our farmers grow, stronger markets for biofuels, good-paying rural jobs, and more affordable American energy.

“Kansas farmers don’t just feed the world — they fuel it — and today’s guidance gives producers the certainty they need to invest, expand, and keep America at the forefront of clean, homegrown energy,” Marshall added. “Thank you to President Trump, Secretary Bessent, and IRS CEO Frank Bisignano for delivering guidance that puts American farmers, American energy, and American families first.”

Growth Energy CEO Emily Skor said, “The proposed rule provides much-needed clarity around key issues, including how credits will be calculated and who is eligible. However, some key questions still remain unresolved. Before the rule is finalized, we urge regulators to swiftly release an updated 45Z-CF GREET model that appropriately reflects the removal of indirect land use change and includes the use of farm practices to count toward carbon reduction goals.”

Renewable Fuels Association President and CEO Geoff Cooper said, “Today’s 45Z proposed rule is a step in the right direction toward providing the clarity and certainty that ethanol producers are seeking. 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, 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.”

The American Soybean Association and National Oilseed Processors Association applauded the Treasury Department for issuing the guidance, but said the Environmental Protection Agency needs to finalize Renewable Fuel Standards blending targets.

American Soybean Association President Scott Metzger, an Ohio farmer, said, “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. While Treasury’s work to update tax guidance is critical, ASA strongly urges the administration to immediately finalize RFS 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.”

“These policies work hand in hand,” said National Oilseed Processors Association President and CEO Devin Mogler. “Treasury’s updated 45Z guidance is an important step forward, but it must be reinforced by finalizing the RFS as proposed. A strong RFS that includes the import RIN reduction mechanism is critical to putting American farmers and rural manufacturing first and providing the certainty our industry needs to continue to invest and grow so we can crush more soybeans right here in the U.S.”

“Treasury’s proposal is a definite step in the right direction and will allow corn growers to transition into and supply the aviation sector,” said National Corn Growers Association President Jed Bower, an Ohio farmer. “This administration has shown that it understands the importance of biofuels to American farmer’s future; this proposal confirms that.”

Bower said he hopes Treasury “will keep up the momentum by working with other agencies as they update the crucial 45Z-CF GREET model to appropriately account for farmers’ hard work.” He said NCGA will provide comments on the proposal and participate in the public hearing May 28.