Rep. Beth Van Duyne, R-Texas, on Jan. 16 introduced a bill that aims to repeal the Section 45Z clean fuel production credit. The tax credit, established by the Inflation Reduction Act, supports the production of various low-carbon transportation fuels.
The technology-neutral credit is available for numerous biobased and renewable fuels, including sustainable aviation fuel (SAF), renewable diesel, ethanol, renewable natural gas (RNG) and biodiesel, provided they meet lifecycle greenhouse gas (GHG) reduction requirements. To qualify for the credit, fuels must be produced in the U.S. and emit not more than 50 kilograms of carbon dioxide equivalent (CO2e) per million British thermal units (mmBTU), as calculated by the U.S. Department of Energy’s GREET model. The lower the carbon intensity (CI) of the fuel, the higher the tax credit the producer can claim.
The credit is currently in place for 2025-2027. For facilities that meet prevailing wage and apprenticeship requirements, the value of the credit is up to $1 per gallon for non-aviation fuel and up to $1.75 per gallon for SAF. The base credit for facilities that do not meet prevailing wage and apprenticeship requirements is 20 cents per gallon and 35 cents per gallon, respectively.
The U.S. Department of Treasury and Internal Revenue Service on Jan. 10 released initial guidance on the 45Z clean fuels production credit, including a notice of intent to propose regulations and a notice providing the annual emission rate table for the credit. That guidance aimed to provide clarity on which entities and fuels are eligible for the credit and how taxpayers determine lifecycle emissions. Specifically, the guidance outlines Treasury and the IRS’ intent to define key concepts and provide certain rules in future rulemaking. A final rulemaking has not yet been proposed.
The bill introduced by Van Duyne on Jan. 16, H.R. 549, would repeal the 45Z tax credit in its entirety, effective Dec. 31, 2024. Following its introduction, the bill was referred to the House Committee and Ways and Means. To date, no other lawmakers have cosponsored the legislation.
Author: Erin Voegele, Ethanol Producer Magazine
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