26 USC 45Z - Clean fuel production credit

U.S Code last checked for updates: Nov 22, 2024

§ 45Z.

Clean fuel production credit

(a)

Amount of credit

(1)

In general

For purposes of section 38, the clean fuel production credit for any taxable year is an amount equal to the product of—

(A)

the applicable amount per gallon (or gallon equivalent) with respect to any transportation fuel which is—

(i)

produced by the taxpayer at a qualified facility, and

(ii)

sold by the taxpayer in a manner described in paragraph (4) during the taxable year, and

(B)

the emissions factor for such fuel (as determined under subsection (b)).

(2)

Applicable amount

(A)

Base amount

(B)

Alternative amount

(3)

Special rate for sustainable aviation fuel

(A)

In general

In the case of a transportation fuel which is sustainable aviation fuel, paragraph (2) shall be applied—

(i)

in the case of fuel produced at a qualified facility described in paragraph (2)(A), by substituting “35 cents” for “20 cents”, and

(ii)

in the case of fuel produced at a qualified facility described in paragraph (2)(B), by substituting “$1.75” for “$1.00”.

(B)

Sustainable aviation fuel

For purposes of this subparagraph (A),1

 So in original.

the term “sustainable aviation fuel” means liquid fuel, the portion of which is not kerosene, which is sold for use in an aircraft and which—

(i)

meets the requirements of—

(I)

ASTM International Standard D7566, or

(II)

the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1, and

(ii)

is not derived from palm fatty acid distillates or petroleum.

(4)

Sale

For purposes of paragraph (1), the transportation fuel is sold in a manner described in this paragraph if such fuel is sold by the taxpayer to an unrelated person—

(A)

for use by such person in the production of a fuel mixture,

(B)

for use by such person in a trade or business, or

(C)

who sells such fuel at retail to another person and places such fuel in the fuel tank of such other person.

(5)

Rounding

(b)

Emissions factors

(1)

Emissions factor

(A)

Calculation

(i)

In general

The emissions factor of a transportation fuel shall be an amount equal to the quotient of—

(I)

an amount equal to—

(aa)

50 kilograms of CO₂e per mmBTU, minus

(bb)

the emissions rate for such fuel, divided by

(II)

50 kilograms of CO₂e per mmBTU.

(B)

Establishment of emissions rate

(i)

In general

(ii)

Non-aviation fuel

(iii)

Aviation fuel

In the case of any transportation fuel which is a sustainable aviation fuel, the lifecycle greenhouse gas emissions of such fuel shall be determined in accordance with—

(I)

the most recent Carbon Offsetting and Reduction Scheme for International Aviation which has been adopted by the International Civil Aviation Organization with the agreement of the United States, or

(II)

any similar methodology which satisfies the criteria under section 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)), as in effect on the date of enactment of this section.

(C)

Rounding of emissions rate

(i)

In general

(ii)

Exception

(D)

Provisional emissions rate

(2)

Rounding

(c)

Inflation adjustment

(1)

In general

(2)

Inflation adjustment factor

(d)

Definitions

In this section:

(1)

mmBTU

(2)

CO₂e

(3)

Greenhouse gas

(4)

Qualified facility

The term “qualified facility”—

(A)

means a facility used for the production of transportation fuels, and

(B)

does not include any facility for which one of the following credits is allowed under section 38 for the taxable year:

(i)

The credit for production of clean hydrogen under section 45V.

(ii)

The credit determined under section 46 to the extent that such credit is attributable to the energy credit determined under section 48 with respect to any specified clean hydrogen production facility for which an election is made under subsection (a)(15) of such section.

(iii)

The credit for carbon oxide sequestration under section 45Q.

(5)

Transportation fuel

(A)

In general

The term “transportation fuel” means a fuel which—

(i)

is suitable for use as a fuel in a highway vehicle or aircraft,

(ii)

has an emissions rate which is not greater than 50 kilograms of CO₂e per mmBTU, and

(iii)

is not derived from coprocessing an applicable material (or materials derived from an applicable material) with a feedstock which is not biomass.

(B)

Definitions

In this paragraph—

(i)

Applicable material

The term “applicable material” means—

(I)

monoglycerides, diglycerides, and triglycerides,

(II)

free fatty acids, and

(III)

fatty acid esters.

(ii)

Biomass

(e)

Guidance

(f)

Special rules

(1)

Only registered production in the United States taken into account

(A)

In general

No clean fuel production credit shall be determined under subsection (a) with respect to any transportation fuel unless—

(i)

the taxpayer—

(I)

is registered as a producer of clean fuel under section 4101 at the time of production, and

(II)

in the case of any transportation fuel which is a sustainable aviation fuel, provides—

(aa)

certification (in such form and manner as the Secretary shall prescribe) from an unrelated party demonstrating compliance with—

(AA)

any general requirements, supply chain traceability requirements, and information transmission requirements established under the Carbon Offsetting and Reduction Scheme for International Aviation described in subclause (I) of subsection (b)(1)(B)(iii), or

(BB)

in the case of any methodology described in subclause (II) of such subsection, requirements similar to the requirements described in subitem (AA), and

(bb)

such other information with respect to such fuel as the Secretary may require for purposes of carrying out this section, and

(ii)

such fuel is produced in the United States.

(B)

United States

(2)

Production attributable to the taxpayer

(3)

Related persons

(4)

Pass-thru in the case of estates and trusts

(5)

Allocation of credit to patrons of agricultural cooperative

(6)

Prevailing wage requirements

(A)

In general

(B)

Special rule for facilities placed in service before January 1, 2025

For purposes of subparagraph (A), in the case of any qualified facility placed in service before January 1, 2025—

(i)

clause (i) of section 45(b)(7)(A) shall not apply, and

(ii)

clause (ii) of such section shall be applied by substituting “with respect to any taxable year beginning after December 31, 2024, for which the credit is allowed under this section” for “with respect to any taxable year, for any portion of such taxable year which is within the period described in subsection (a)(2)(A)(ii)”.

(7)

Apprenticeship requirements

(g)

Termination

(Added Pub. L. 117–169, title I, § 13704(a), Aug. 16, 2022, 136 Stat. 1997.)

cite as: 26 USC 45Z