Senate passes ‘big, beautiful bill’ with 45Z modifications, key biodiesel provisions

The U.S. Senate passed its version of the budget-reconciliation bill—the “big, beautiful bill”—July 1 in a 51-to-50 vote, with Vice President J.D. Vance casting the tie breaker.

The Iowa Biodiesel Board praised passage of key biofuel tax provisions in the Senate’s legislation, calling it a positive signal to Iowa’s biodiesel producers who have been waiting for clarification of new tax policies.

The bill includes several of the biodiesel industry’s top priorities—most notably, extending the 45Z credit through 2029, extending the key transferability mechanism and reviving the small agri-biodiesel producer credit, a provision championed by Sen. Chuck Grassley, R-Iowa.

“These improvements to the biomass-based diesel tax incentive come at a pivotal moment for the industry, which has seen months of uncertainty, stalled production and investment hesitation,” said IBB Executive Director Grant Kimberley. “Together with EPA’s proposed increase in Renewable Fuel Standard volumes—projecting more than 2 billion additional gallons of biomass-based diesel in 2026—the tax developments point to a significant resurgence in clean-fuel demand. This gives us much-needed certainty for the near future.”

Kimberley extended a special thanks to Grassley for championing an extension of the small agri-biodiesel producer credit through 2026 and increasing it to 20 cents per gallon.

“This is an important win, particularly for independent producers like those in Iowa,” he said. “It will help ensure they are not disadvantaged in the market and have policy certainty right now as the treasury department works to implement Congress’ improvements to 45Z.”

Kimberley noted that the transferability provision will ensure all producers in the market can access and monetize the incentive.

“This provision is vital for biodiesel producers, especially smaller ones without a large tax liability,” Kimberley said. “We’re also encouraged to see domestic production and North American feedstocks appropriately prioritized. This allows American soybean farmers to compete fairly in their own market—something we’ve long fought for—without shutting out the ability to import feedstocks if necessary to meet ambitious goals. … These policy improvements will help get the industry back on track and restore some of the momentum we’ve lost.”

The Missouri Soybean Association also applauded the Senate’s advancement of the bill, which the organization noted includes several priorities supporting soybean farmers, biofuel production and family farms across the country.

“This is a commonsense win for Missouri soybean growers and rural communities,” said Ryan Wilson, Missouri Soybeans’ policy chairman. “Our farmers are investing in sustainable, domestic production. These updates make sure those efforts stay here at home.”

Specific to 45Z, Missouri Soybeans said it particularly appreciated how the bill maintains strict language that limits eligible feedstocks to those grown and produced in North America, excluding products such as Chinese used cooking oil and South American tallow from receiving U.S. taxpayer-funded incentives.

The association also applauded the elimination of indirect land-use change penalties for crop-based feedstocks in models that calculate greenhouse-gas emissions.

Since 2021, the U.S. soybean processing industry has invested more than $6 billion to expand domestic crush capacity and meet rising demand for soy-based biofuels, Missouri Soybeans noted.

“Ensuring that eligible feedstocks are grown and processed in North America protects those investments and strengthens rural economies,” the organization stated. “Missouri ranks among the top soybean-producing states, with biofuels representing a major market for Missouri-grown soybeans. Roughly one-third of the state’s soybean crop is used to produce biodiesel, renewable diesel and other soy-based fuels, making the integrity of federal policies like 45Z vital to farm profitability and energy security.”

Not all biofuel trade associations are pleased with the Senate’s version of the bill and its modifications to 45Z.

Michael McAdams, president of the Advanced Biofuels Association, said he is disappointed that the Senate’s version would restrict the use of foreign feedstocks under 45Z and reduce the overall value of the credit for sustainable aviation fuel (SAF) from a premium of up to $1.75 per gallon to $1 per gallon, achieving parity with on-road biofuels.

“That makes it all the more important for the EPA to get the implementation of the Renewable Fuel Standard right,” McAdams said. “While the agency’s recently released renewable volume obligation (RVO) proposal calls for a 50 percent reduction in RIN value for fuels made with foreign feedstocks, economic analysis shows this would impose significant costs on U.S. biorefineries, raise fuel prices for millions of Americans, and benefit only a narrow set of stakeholders. We are concerned that the current proposal exceeds the EPA’s statutory authority under the RFS and urge the agency to revise it accordingly.”

The House passed its version of the “big, beautiful bill” May 22.

Differences between the two versions, an overview of which is provided here, must be reconciled before the bill can be sent to President Donald Trump for his signature by the July 4 target date.