The biggest piece of the puzzle for the 45Z Clean Fuels Production Credit implementation was left out of the guidance issued last week by U.S. Treasury, leaving farmers still uncertain about what practices they would need to implement this year for the crops to qualify.
The guidance includes both a notice of intent to propose regulations on the section 45Z credit and a notice providing the annual emissions rate table for section 45Z, which refers taxpayers to the appropriate methodologies for determining the lifecycle GHG emissions of their fuel. In conjunction with today’s guidance, the Department of Energy will release the 45ZCF-GREET model for use in determining emissions rates for 45Z in the coming days.
American Coalition for Ethanol (ACE) CEO Brian Jennings said without key details essential for biofuel producers to capitalize on 45Z, including how climate-smart agriculture practices will be incorporated, the job is unfinished.
“Since ag-based feedstocks represent about half of ethanol’s carbon footprint, it is critical to allow farmers and ethanol producers to realize the full value of sustainable farm practices through this tax credit,” said Jennings. “We have strongly urged both Treasury and USDA to update 45Z guidance for ag practice credit values on a routine basis by incorporating the best available science and results from real-world activities, such as the two USDA-Natural Resource Conservation Service (NRCS) Regional Conservation Partnership Programs (RCPPs) currently being led by ACE. These projects are specifically designed to address the perceived need for more empirical data on the GHG benefits of ag practices and help improve the accuracy of the GREET model, and we look forward to the release of the 45ZCF-GREET model for use in determining emissions rates for 45Z in the coming days.”
According to the guidance, Treasury “intends to propose rules for incorporating the emissions benefits from climate-smart agriculture (CSA) practices.”
These options would be available to taxpayers after Treasury and the IRS propose regulations for the section 45Z credit, including rules for CSA, and the 45ZCF-GREET model is updated to enable calculation of the lifecycle greenhouse gas emissions rates for CSA crops, taking into account one or more CSA practices.