ACE responds to Ways and Means Committee on 45Z tax credit questions

The American Coalition for Ethanol (ACE) has submitted its responses to the Supply Chains and Rural America tax teams of the House Ways and Means Committee regarding the 45Z Clean Fuel Production Tax Credit. This feedback on the biofuel tax provision comes as the U.S. Department of Agriculture readies to issue technical guidelines for climate-smart agriculture crops used for biofuel feedstocks, and the Biden U.S. Treasury department anticipates issuing preliminary 45Z guidance before the transition to the new administration.

“The 45Z Clean Fuel Production Tax Credit has the potential to be transformative, incentivizing investments in cleaner technologies and sustainable practices that directly benefit America’s farmers, biofuel producers and the environment,” said Brian Jennings ACE CEO. “ACE is committed to ensuring this policy delivers maximum value for our ethanol producer members and looks forward to remaining actively engaged in its implementation under the current administration and the next.”

Below are key points from ACE CEO Brian Jennings’ responses to the tax committee’s questions.

ACE strongly supports extending the 45Z tax credit beyond its current sunset in 2027. The three-year lifespan is insufficient for biofuel producers and farmers to fully realize the benefits of adopting new technologies and climate-smart agricultural practices. ACE recommends a total lifespan of 7 to 10 years to provide the certainty necessary for long-term investment and innovation.

While the current statutory language provides sufficient latitude for Treasury to develop guidance, ACE highlights potential risks from delays or misaligned guidance, as seen in the 40B SAF Tax Credit. For example, the “all-or-none” bundling requirement for agricultural practices was impractical and undervalued individual ag practice contributions to carbon intensity (CI) reductions. ACE advocates for regular updates to 45Z guidance based on the best available science and empirical data from the ACE-led Regional Conservation Partnership Program (RCPP) projects.

Treasury and USDA must allow individual and stacked agricultural practices to qualify toward emission rates for 45Z credits, avoiding restrictive bundling approaches. Leveraging the GREET model — the global gold standard for GHG quantification — and incorporating data from ACE’s real-world RCPP initiatives will ensure accurate CI scoring and greater farmer participation. ACE’s RCPP projects, spanning 10 states and involving nearly 100,000 acres of farmland, provide critical data to validate the GHG benefits of practices such as reduced tillage, nutrient management and cover crops. Guidance should reward individual climate-smart practices, maintain flexible verification methods and be updated regularly based on the best-available science and modeling.

ACE urges Treasury and USDA to routinely update eligibility criteria to reflect advancements in agricultural technologies and practices. Empowering farmers with open-source tools for verification and compliance will enable broader participation and equitable access to tax credit benefits.

Reliance on outdated economic modeling could undermine the integrity of CI scoring and disadvantage U.S. biofuels in global markets.