Treasury department, IRS issue proposed regulations on 45Z clean fuel production credit

The U.S. Department of the Treasury and the Internal Revenue Service issued Feb. 3 proposed regulations for domestic producers of clean transportation fuel to determine their eligibility for and calculate the clean fuel production credit under the “big, beautiful bill.”  

The new law made important changes to what is often referred to as the 45Z credit. 

The clean fuel production credit provides businesses an income tax credit for clean transportation fuel produced domestically after Dec. 31, 2024, and sold by Dec. 31, 2029.  

To claim the credit, taxpayers must be registered with the IRS using Form 637, Application for Registration (For Certain Excise Tax Activities) at the time of production. 

The proposed regulations provide guidance on the determination of clean fuel production credits, emissions rates and certification and registration requirements.  

They provide further certainty and clarity for taxpayers and address key issues raised by stakeholders. 

What’s new  

The guidance also proposes rules to implement certain changes to the clean fuel production credit.  

The “big, beautiful bill” changed the clean fuel production credit to: 

• Extend the credit to Dec. 31, 2029. 

• Limit feedstocks to those grown or produced in the U.S., Mexico or Canada. 

• Add prohibited foreign-entity restrictions. 

• Broaden sale attribution for fuel sold through related intermediaries. 

• Eliminate the special rate for sustainable aviation fuel (SAF). 

• Add an antiabuse provision to prevent double crediting. 

• Prohibit negative emissions rates except for fuels derived from animal manure. 

• Require feedstock-specific emissions rates for fuels derived from animal manure. 

• Exclude indirect land-use changes from emissions rates. 

Treasury, IRS invite public comments 

The treasury department and IRS are welcoming comments and requests to speak at the public hearing on these proposed regulations.  

Commenters are encouraged to use the Federal e-Rulemaking portal to submit comments (indicate “IRS” and “REG-121244-23”).  

A public hearing has been scheduled as described in the “comments and public hearing” section.  

For more information, see One, Big, Beautiful Bill Provisions on IRS.gov.