The One Big Beautiful Bill Act has extended Section 45Z Clean Fuel Production Credit through December 31, 2029. Originally enacted under the Inflation Reduction Act of 2022, the 45Z tax credit is designed to incentivize domestic clean fuel production by rewarding lower lifecycle greenhouse gas emissions.
The program takes effect beginning with the 2025 tax year, meaning farmers and producers working with 2024 grain can begin preparing now. Unlike previous biofuel tax incentives, 45Z calculates eligibility based on the carbon intensity (CI) per bushel, not per acre. A CI score under 50 qualifies biofuel producers for the tax credit, with lower scores translating to greater value.
Key Highlights of the 45Z Tax Credit:
- Timeline: Applies to clean transportation fuels produced and sold between January 1, 2025, through December 31, 2029.
- Eligibility: Fuels must be produced and sold within the U.S. or its territories and meet lifecycle greenhouse gas emissions thresholds. Producers must also be registered with the IRS.
- North American Feedstocks Only: Eligible inputs include corn, soybeans, used cooking oil, canola, and beef tallow — provided they originate from North American sources. Imported feedstocks are excluded under this program.
- Credit Value: The credit is calculated based on a base rate and an emissions factor determined by the fuel’s CI score using the 45ZCF-GREET model. Enhanced credits are available if prevailing wage and apprenticeship standards are met.
- Tax Credit Transferability: Credits can be sold, allowing flexibility for producers who may not use them directly. This also supports easier tax processing for farmer-owned cooperative ethanol plants.
The 45Z program is expected to provide long-term financial benefits to biofuel producers while offering new income opportunities for farmers who can demonstrate low carbon intensity in their grain. Preparing on-farm data now is key to maximizing potential value once the program takes effect. Producers are encouraged to consult with a tax professional or monitor updates through trusted partners for the latest implementation details.
For more on eligibility and calculation methods, watch Continuum Ag’s comprehensive 45Z video briefing.