Section 13704 of the IRA inserts a new section 45Z into the IRC, creating a new Clean Fuel Production Tax Credit for transportation fuel production. The credit is available from December 31, 2024 to December 31, 2027. The fuels contemplated under this Section include both non-aviation and aviation fuels.
The credit is available to taxpayers that produced and sold clean transportation fuel within a given taxable year. To qualify, the clean transportation fuel must:
1) be produced in a qualified facility, which must not include facilities already availing of the tax credits for clean hydrogen, clean hydrogen production facilities, and carbon oxide sequestration in Sections 45V, 48, and 45Q, respectively, of the IRC; and
2) be produced in the U.S.
The base rates of the credit range from $0.20 to to $1 per gallon for clean transportation fuels, with a higher base rate for sustainable aviation fuels, which shall enjoy a base rate ranging from $0.35 to $1.75 per gallon. The higher base rates apply to taxpayers that satisfy wage and apprenticeship requirements.
The rate is computed by multiplying the base rate and the emissions factor of the fuel. The emissions factor is determined by following a formula that requires the use of an emissions rate set by the Treasury Department.
Not later than January 1, 2025, the Treasury Department shall annually issue guidance on the implementation of this Section, including the computation of emissions factors, and also set emissions rates for the various clean transportation fuels.
Eligible Entities:
Current Status:
Section 70521 of the One Big Beautiful Bill Act of 2025 (Public Law 119-21) amends the section 45Z clean fuel production credit (IRA section 13704) by applying domestic production requirements and “prohibited foreign entity” restrictions, prohibiting negative emissions rate calculations, excluding indirect land use emissions from calculations and extending the availability of the credit to December 31, 2029. Section 70521 also increases the agribiodiesel credit to twenty cents per gallon and terminates the sustainable aviation fuel credit by September 30, 2025.
Trump Administration Actions:
- Congress Passes Budget Bill, Rescinding Funds and Repealing IRA Programs and Tax Credits [07/03/2025]
- Senate Parliamentarian Advises Several Provisions in Republicans’ “One Big, Beautiful Bill” Are Not Permissible, Subject to Byrd Rule [06/19/2025]
- Senate Finance Committee Releases Budget Reconciliation Draft Text [06/16/2025]
- OMB Orders Temporary Pause on Financial Assistance Programs, Later Rescinded [01/27/2025]
- OMB Clarifies Scope of the Order to Halt IRA Spending [01/21/2025]
- Trump Issues Executive Order to Halt All IRA Funding Disbursements [01/20/2025]
Implementation Status at End of Biden Administration:
IRS issued a notice for taxpayers seeking to claim section 45Z Clean Fuel Production credits for sustainable transportation fuel, requiring that eligible taxpayers have received a signed letter from the IRS predating January 2025 to receive the credit. Treasury issued guidance on the section 45Z credits as well.
Biden Administration Actions:
- DOE Releases Updated GREET Models for 45V Clean Hydrogen Production & Clean Fuels Production Tax Credits [01/15/2025]
- Treasury Releases Guidance on Clean Fuel Production Credit [01/10/2025]
- Treasury Finalizes Prevailing Wage and Apprenticeship Requirements for a Variety of Tax Incentives [06/18/2024]
- Treasury Provides Guidance on 45Z Clean Fuel Production Credit [05/31/2024]
- Treasury Issues Proposed Rule on Clean Energy Apprenticeship and Prevailing Wage Requirements [08/30/2023]
- Treasury Issues Initial Guidance on Prevailing Wage and Apprenticeship Requirements [11/30/2022]
- Treasury Requests Comments on Clean Hydrogen Production and Clean Fuel Production Credits [11/03/2022]
- Treasury Requests Comments on Prevailing Wage, Apprenticeship, Domestic Content, and Energy Community Requirements [10/05/2022]