Clean Fuels welcomes extensions, improvements to section 45Z tax incentive

Clean Fuels Alliance America welcomed Congress’ improvements to the section 45Z clean fuel production credit included in the “One Big Beautiful Bill” and thanked President Donald Trump for signing them into law.

Clean Fuels said it looks forward to working with the administration and the U.S. treasury department on prompt, clear rules implementing the tax credit for 2025 and beyond.

“Clean Fuels thanks Congress for working overtime to provide certainty for biodiesel and renewable diesel producers—especially small companies—so they can resume production and industry growth,” said Kurt Kovarik, Clean Fuels’ vice president of federal affairs. “Clean Fuels especially thanks Sen. Chuck Grassley, R-Iowa, for securing an enhancement to the small agri-biodiesel producer credit to help small producers as they make the transition to the 45Z clean fuel production credit. While the extension of the 45Z credit with transferability through 2029 provides some immediate stability, our industry continues to urge the treasury department to promptly propose and finalize clear, reliable rules for the credit.”

Enactment of the “One Big Beautiful Bill” immediately extends the availability of the 45Z clean fuel production credit and enables taxpayers to transfer it through 2029, providing forward-looking certainty and enabling small producers to fully access the value of the credit.

It also extends the section 40A small agri-biodiesel producer credit for the remainder of 2025 through 2026 and enhances the value to 20 cents per gallon.

Small biodiesel facilities with production of 60 million gallons per year can access this credit in addition to 45Z and use the same transferability rules as 45Z.

The bill further directs the treasury department to clarify “qualified-sales” rules and allow additional fuel-sales arrangements, one of several technical issues that must be addressed with prompt rules and guidance.

Beginning in 2026, the treasury department will exclude emissions from indirect land-use change (ILUC) when determining the lifecycle greenhouse-gas emissions of a fuel, which will help level the credit value for domestic crop-based fuels and other low carbon-intensity feedstocks.

And the law will restrict the credit to fuels made from feedstocks grown in the United States, Canada or Mexico, giving a further boost to American farmers and agriculture.