US treasury department, IRS issue guidance on new sustainable aviation fuel credit
The U.S. Department of the Treasury and Internal Revenue Service issued a notice Dec. 19 regarding the sustainable aviation fuel (SAF) credit.
This is a new credit created by the Inflation Reduction Act of 2022. It applies to a qualified fuel mixture containing SAF for certain sales or uses in the calendar years 2023 and 2024.
Notice 2023-06 explains the requirements for the fuel to be eligible for the SAF credit, the various methods in which a claimant may claim the credit, and which parties must be registered for the different activities in the process.
The notice also asks for public comments on various aspects of the statute, which will help the treasury department and IRS in developing additional guidance.
The SAF credit is $1.25 for each gallon of sustainable aviation fuel in a qualified mixture.
To qualify for the credit, the SAF must have a minimum reduction of 50 percent in lifecycle greenhouse-gas (GHG) emissions.
Additionally, there is a supplemental credit of 1 cent for each percent that the reduction exceeds 50 percent.
The notice provides a safe harbor for calculating the percentage of lifecycle GHG-emissions reduction.
Finally, the notice explains that a claimant may choose how to claim the SAF credit.
The first is through the excise-tax system.
The second is a general business credit that is nonrefundable and must be included in income.
Notice 2023-06 also clarifies what constitutes SAF and a qualified mixture.