Changes to 45Z Tax Credit May Bring Benefit to Farmers

Smith: Farmers and ranchers recently received some good news when it comes to the sustainable fuel tax credit. Samantha Ayoub, an economist with the American Farm Bureau Federation, offers a quick refresher on the credit, known commonly as 45Z.

Ayoub: 45Z is also known as the Clean Fuel Production Credit. It was created in 2022's Inflation Reduction Act to consolidate some of the tax credits for individual biofuels, like biodiesel and sustainable aviation fuel.

Smith: The recent budget reconciliation package, called the One Big Beautiful Bill, made important changes to the credit that will benefit U.S. growers.

Ayoub: For one, anything that is used as a feedstock for 45Z fuels receiving the credit has to be made from feedstocks produced in the U.S., Mexico or Canada. And it also cannot be applied to companies who are either foreign-owned or, in two years, foreign controlled, so adding to American biofuels capacity. It also takes out indirect land use changes through the emissions scoring that is used to determine what fuels qualify for what level of 45Z tax credit.

Smith: The goal is to increase biofuel capacity in the U.S. but also generate more demand for American agricultural products.

Ayoub: Manure digesters from livestock can all be used as feedstocks, and so, especially when we're seeing years like this with record bumper crop years, the hope is that we determine more demand for American products to hopefully support these large crops that we continue to see.

Smith: Learn more on the Market Intel page at fb.org. Chad Smith, Washington.