(WASHINGTON D.C.) — On Tuesday, the Department of the Treasury and the Internal Revenue Service issued proposed regulations for domestic producers of clean transportation fuel to determine their eligibility for and calculate the clean fuel production credit under the One, Big, Beautiful Bill. The new law made important changes to what is often referred to as the 45Z credit.
The clean fuel production credit provides businesses an income tax credit for clean transportation fuel produced domestically after Dec. 31, 2024, and sold by Dec. 31, 2029. To claim the credit, taxpayers must be registered with the IRS using Form 637, Application for Registration (For Certain Excise Tax Activities) PDF at the time of production.
The proposed regulations provide guidance on the determination of clean fuel production credits, emissions rates, and certification and registration requirements. They provide further certainty and clarity for taxpayers and address key issues raised by stakeholders.
Kurt Kovarik, Clean Fuels’ VP of Federal Affairs, stated, “We greatly appreciate Treasury for moving forward with formal rules for the 45Z Clean Fuel Production Credit. The agency responded to many taxpayer concerns and resolved some uncertainties from the guidance issued a year ago. We anticipate this proposal will provide additional market certainty for biodiesel and renewable diesel producers.”
According to Clean Fuels, the proposed rules provide taxpayers with safe harbors and clarify questions on qualified sales, tolling arrangements, and qualifying fuels used in non-transportation applications raised after the January 2025 guidance. The proposal makes no changes to prevailing wage rules in place since June 2024. The proposal includes changes to the 45Z Credit passed by Congress in July 2025, including limits on feedstock eligibility. Additional changes to carbon intensity scores – such as consideration of regenerative agriculture practices – await publication of a new version of the 45ZCF-GREET model.
“The delay in rulemaking led to market uncertainty that took a heavy toll on our industry, undercutting fuel production and the value added to agriculture,” according to Kovarik. “Clean Fuels and its members look forward to working with IRS and Treasury to finalize rules that support renewed growth for biodiesel and renewable diesel producers. The biodiesel, renewable diesel, and SAF industry has proven its ability to meet America’s demand for secure, affordable transportation fuels and to generate jobs and rural economy prosperity.”
The American Soybean Association (ASA) and National Oilseed Processors Association (NOPA) applauded the U.S. Department of the Treasury for releasing updated proposed guidance which implements critical improvements to the 45Z Clean Fuel Production Credit, including changes that support domestic feedstocks like U.S. soybeans, following congressional amendments enacted as part of the One Big Beautiful Bill Act (OBBBA).
“Updating federal biofuel policies to prioritize soy-based fuels is a key ASA priority, and we applaud Treasury for this action which will help build domestic markets for U.S. soybeans,” said Scott Metzger, ASA President and Ohio farmer. “While Treasury’s work to update tax guidance is critical, ASA strongly urges the administration to immediately finalize RFS blending targets that complement the work of Treasury and Congress, by setting robust biofuel volumes and implementing new policies that will prioritize the utilization of U.S. soybeans in production.”
“These policies work hand in hand,” said Devin Mogler, NOPA President and CEO. “Treasury’s updated 45Z guidance is an important step forward, but it must be reinforced by finalizing the RFS as proposed. A strong RFS that includes the import RIN reduction mechanism is critical to putting American farmers and rural manufacturing first and providing the certainty our industry needs to continue to invest and grow so we can crush more soybeans right here in the U.S.”
The Renewable Fuels Association welcomed the Treasury Department’s release of proposed regulations for the Section 45Z Clean Fuel Production Tax Credit, as authorized by the 2022 Inflation Reduction Act and amended by last year’s One Big Beautiful Bill Act.
“Today’s 45Z proposed rule is a step in the right direction toward providing the clarity and certainty that ethanol producers are seeking,” said RFA President and CEO Geoff Cooper. “We thank the Treasury Department and Trump administration for listening to the input provided by ethanol producers and other stakeholders. The proposal appears to resolve some of the previous confusion around what constitutes a ‘qualified sale,’ and begins to integrate the important improvements to 45Z that resulted from the One Big Beautiful Bill Act, such as the removal of indirect land use change emissions from the carbon intensity scoring framework.”
Cooper added that “However, much work remains to be done and many questions still need to be answered. First and foremost, ethanol producers are anxiously awaiting a new, revised version of the 45ZCF-GREET model, which will help shed light and provide clearer direction on several critical issues. In addition, questions remain to be resolved around the quantification of emissions related to low-carbon feedstock production at the farm level, implementation of foreign feedstock prohibitions, and provisions related to the use of energy attribute credits.”
Cooper said RFA looks forward to providing comments on the proposal to the Treasury Department and intends to testify at an upcoming hearing on the rule.
According to Treasury, today’s guidance also proposes rules to implement certain OBBB changes to the clean fuel production credit. OBBB changed the clean fuel production credit to:
- Extend the credit to Dec. 31, 2029;
- Limit feedstocks to those grown or produced in the US, Mexico, or Canada;
- Add prohibited foreign entity restrictions;
- Broaden sale attribution for fuel sold through related intermediaries;
- Eliminate the special rate for sustainable aviation fuel;
- Add an anti-abuse provision to prevent double crediting;
- Prohibit negative emissions rates except for fuels derived from animal manure;
- Require feedstock-specific emissions rates for fuels derived from animal manure; and
- Exclude indirect land use changes from emissions rates.
Treasury and IRS welcome comments and requests to speak at the public hearing on these proposed regulations. Commenters are encouraged to use the Federal e-Rulemaking portal to submit comments (indicate “IRS” and “REG-121244-23”). A public hearing has been scheduled as described in the “Comments and Public Hearing” section. Paper submissions should be sent to: CC:PA:01:PR (REG-121244-23), Room 5503, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
For more information, see One, Big, Beautiful Bill Provisions on IRS.gov.
