National Farmers Union Welcomes Release of 45Z Tax Credit Guidance

WASHINGTON - The U.S. Department of the Treasury today released long-awaited guidance on the implementation of the 45Z Clean Fuels Production tax credit. As part of the Inflation Reduction Act (IRA), this tax credit incentivizes the production of low-carbon fuels such as biodiesel, renewable diesel and sustainable aviation fuel based on its carbon reduction levels. The 45Z tax credit can significantly benefit farmers while advancing efforts to lower greenhouse gas emissions.

"Today's guidance on the 45Z tax credit is the right step forward in bolstering renewable fuel production and providing new market opportunities for family farmers and ranchers," said National Farmers Union (NFU) president Rob Larew. "While this guidance reflects meaningful progress, much remains to be accomplished. We hope this process will be finalized quickly to ensure the tax credit delivers optimal benefits for farmers and rural communities."

This guidance takes a necessary step toward unlocking the potential of clean fuel production to reduce carbon emissions and support climate-smart agricultural practices. By restricting the eligibility of imported used cooking oil (UCO) for the tax credit, it prioritizes domestic resources and American farmers. It also incentivizes individual climate-smart agriculture practices, giving farmers greater flexibility and ease in implementing strategies tailored to their operations. Last summer, NFU and other organizations advocated for these exact provisions in a letter to Treasury Secretary Janet Yellen and U.S. Office of Management and Budget Director Shalanda Young.

Realizing the full potential of the 45Z tax credit will require additional progress, including updates to the Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model and enhanced climate-smart agricultural practices. These steps are crucial for maximizing the program's benefits for American agriculture and clean energy development.