The Section 45Z Clean Fuel Production Credit, part of the Inflation Reduction Act of 2022, aims to incentivize domestic clean fuel production, including sustainable aviation fuel (SAF). Set to launch on January 1, 2025, the credit will replace current credits for biomass-based diesel and SAF. To qualify, producers must register with the IRS by the start of 2025, but as of December 4, the IRS has yet to finalize guidance.
While outlets like Reuters and Bloomberg publish conflicting reports about the Biden Administration’s plan to clarify the language before leaving office, administration leadership has yet to show signs of any real progress to suggest this will happen.
As Reuters put it, the Biden administration indicated that it won’t finalize the guidelines for the 45Z Clean Fuel Production Credit before leaving office in January. Bloomberg the same day reported the opposite. One thing these conflicting reports have in common: there is still no clarity for the tax credits on domestic clean fuel production.
If you’re asking yourself why a tax credit that could boost the biofuels industry amid a nationwide push for sustainable energy alternatives wasn’t completed months ago, you’re not alone.
Between the loaded congressional schedule to complete the Farm Bill, render some kind of emergency disaster relief, beat the year-end deadline for the federal government’s debt ceiling; a generalized answer of political disagreements on several vital fronts seems to be no answer at all. But, like it or not, as of now, that’s the only explanation producers get.
Which means, in short, biofuels producers have less than a month to chose between staying with existing credits, or roll the dice and register for a muddy tax credit with no definitive information on eligibility and credit amounts.
Industry leaders like Geoff Cooper, president of the Renewable Fuels Association, remain hopeful for interim guidance. Cooper stated, “While we agree that final regulations for 45Z seem highly unlikely before Jan. 20, we remain hopeful that the administration will at least issue some sort of guidance or safe harbor before Jan. 1.”
Farmers and biofuels producers who have already invested in technologies to lower carbon intensity, face economic risks if the credit remains unfinished.
With rural economies and the biofuels industry on edge, stakeholders continue urging the administration for some kind of timely guidance.
Paul Winters, director of public affairs at the Clean Fuels Alliance America, said, “We spent the entire year urging Treasury to issue guidance by September because the biodiesel and renewable diesel industry is trying to navigate the change from the blender excise tax credit to the producer income tax credit.”
The delay has already caused significant disruption, with some biodiesel producers reducing operations or shutting down plants entirely.
Disclaimer: The Michigan Advanced Biofuels Coalition (MiABC) does not lobby or influence policy in any way. The policy interests of Michigan soybean farmers and biodiesel producers are supported by the Michigan Soybean Association and Clean Fuels Alliance America, respectively.