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The 45Z tax credit, also known as the Clean Fuel Production Credit, is a significant incentive for the domestic production of clean fuels, and possibly a huge opportunity for farmers providing feedstock into this sector as well. This credit, which will be available starting January 1, 2025, aims to support the production of both sustainable aviation fuel (SAF) and non-SAF transportation fuels. However, if you’ve been following along with our Rural Matters columns for long, you know that the implementation of this credit has been and continues to be surrounded by uncertainty.

Current Status and Uncertainty

The Biden administration has been working to finalize guidance for the 45Z tax credit before the end of his term on January 20, 2025. This guidance is crucial for biofuel producers who are transitioning from the blender's tax credit to the new producer tax credit, as well as farmers who are hoping for improvements from the rules put forward for on the current aviation credit for qualification of farm practices.

Industry stakeholders and lawmakers have been urging the administration to provide at least some form of guidance or safe harbor before the end of the year to help producers navigate a credit that’s scheduled to start in a matter of just days. The lack of timely guidance has created significant challenges, and there is a pressing need for clarity to ensure that the industry can continue to grow and innovate.

Congressional Request for Information

In November 2024, the House Ways & Means Committee, led by several Republican members, issued a Request for Information (RFI) from stakeholders on biofuel tax policy. The RFI highlights the committee's intent to re-evaluate the current biofuel tax provisions during the next Congress. The committee is particularly interested in understanding the real-world impacts of these tax credits and how they can be adjusted to better serve the needs of biofuel producers, farmers, grain handlers, and rural communities.

Landus Comments

On behalf of our farmer members, Landus submitted comments in response to the RFI on December 13. We emphasized the importance of fair and equitable rules, particularly in carbon intensity calculations. Our comments suggested several improvements on feedstocks, including the removal of land use penalties for soy oil, increased auditing standards for non-US sourced feedstocks, and reduced tax credit value for finished products from imported feedstocks compared to those made with sustainably sourced US feedstocks.

Landus also highlighted the need for the tax program to recognize the constant evolution of technology and to develop a process for quickly adding new tools to the eligibility list. As you know, we are working on an innovative partnership to commercialize zero-carbon nitrogen (green ammonia) and stressed the importance of integrating various section 45 credits to support the entire supply chain.

Next Steps and Optimism

As the new Congress convenes, it is likely that there will be a re-evaluation of the 45Z tax credit and related tax programs. While there is uncertainty about the exact form these programs will take, there is optimism amongst industry leaders that the 45Z program will continue forward. The feedback gathered from stakeholders, including the detailed comments from Landus, will play a crucial role in shaping the future of these tax credits.