House ways and means committee passes ‘big, beautiful bill’ with key changes to 45Z

The U.S. House ways and means committee passed its version May 14 of the “One, Big, Beautiful Bill” to enact President Donald Trump’s agenda.

The bill makes the 2017 Trump tax cuts permanent, which are set to expire at the end of this year, as well as provides additional tax relief for working families and small businesses, and rewards investment and manufacturing in America.

In its version of the bill, the committee provides important changes to the 45Z clean fuel production credit, originally passed under the Inflation Reduction Act of 2022.

Under current law, taxpayers may claim a credit for the production of transportation fuel, including aviation fuel, provided it meets certain greenhouse-gas (GHG) emission standards.

The value of the credit is 20 cents per gallon (cpg) for nonaviation transportation fuel and 35 cpg for sustainable aviation fuel, multiplied by five if the taxpayer meets prevailing wage and apprenticeship requirements.

That amount is then multiplied by an emissions factor.

The credit is set to expire at the end of 2027 under the original law.

Regulations for 45Z were never finalized, let alone proposed, under former President Joe Biden.

His administration, however, did finally offer some substantive guidance just before Biden left office.

The changes to 45Z passed by the House ways and means committee include a provision that the credit is only available to fuel produced from feedstocks produced or grown in the U.S.

Importantly, the provision excludes indirect land-use changes (ILUC) for the purposes of lifecycle-GHG emissions.

Furthermore, the bill passed by the committee extends the credit through Dec. 31, 2031.

It also requires the secretary of the U.S. treasury department to establish distinct emission rates for specific manure feedstocks.

Under current law, if a taxpayer does not have the tax liability to absorb a credit, the 45Z credits are eligible to be transferred to an unrelated taxpayer.

The House ways and means committee is eliminating transferability for fuel produced after Dec. 31, 2027.

The committee is also restricting access to the credit for “certain prohibited foreign entities.”

Specifically, no credit is allowed for taxable years beginning after enactment if the taxpayer is a specified foreign entity, nor is credit allowed for taxable years that begin two years after enactment for a foreign-influenced entity.

“America is one step closer to stopping the looming 22 percent average tax increase facing every American and, instead, rebuilding our economy for the working class,” said Rep. Jason Smith, R-Missouri, who is chairman of the House ways and means committee. “This cornerstone of President Trump’s economic agenda will put the interests and needs of working families and small businesses ahead of Washington, bring jobs and manufacturing back to America, and usher in a new golden era of prosperity. The average family will avoid a $1,700 tax increase and instead have $3,300 more in income, and 6 million jobs will be saved. It’s sad that every single committee Democrat voted for the largest tax hike in American history and against additional tax relief for families, farmers and small businesses. Ways and means Republicans will continue to work closely with President Trump and our House colleagues to get the ‘One, Big, Beautiful Bill’ that delivers on the president’s agenda to his desk as soon as possible.”

Several trade groups representing trucking, freight, soybean, biofuel and fuel-retail industries have been advocating for the inclusion of 40A, the biodiesel blenders tax credit (BTC), in the reconciliation bill.

The $1-per-gallon BTC was first enacted 20 years ago and expired at the end of 2024, with 45Z as its replacement.

The BTC extension is not included in the bill passed by the House ways and means committee.

The budget-reconciliation process is far from over though, and changes to the bill may still be made.

More committee work in the House is needed before a final floor vote.

Meanwhile, the Senate must also pass its version of a reconciliation bill, where a simple majority is needed under the budget-reconciliation process versus a 60-vote majority.

The House and Senate versions must match each other—be “reconciled”—before being sent to the president for signing.

To read a section-by-section version of the bill passed by the House ways and means committee, click here.