5 Things Farmers Should Know Now 45Z Is A Real Thing

July 08, 2025

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by Margy Eckelkamp (AgWeb) The tax credit unlocks new value in your grain. But the ticket to entry is getting on-farm data ready to share -- After almost three years of talking about what could be spelled out by 45Z, Mitchell Hora says farmers can now get “locked in” to capitalize on the program.

“This 45z deal could be absolutely game changing for my family’s farm, and I think it will be game changing for other family farmers across the country,” Hora says. “It’s going to have a ripple effect that could change global agriculture. So that’s why I’m just so adamant that we have got to get this right, and we’ve got to hit the ground running.”

Hora, an Iowa farmer and founder of Continuum Ag, says there are five things every farmer should know about what the OBBB has laid out. He also says there are unanswered questions.

1. It’s happening.

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What sets 45Z apart from previous biofuels tax provisions is how it measures the grain—the program uses a scorecard to assess every bushel (not acre) with a carbon intensity (CI). Any score under 50 points receives a tax credit to the biofuels producer.

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2. OBBB gave 45Z an extension

The 45Z program now has additional momentum behind it as the OBBB outlined an extension now into 2029.

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3. Only North American feedstocks are eligible.

Imported used cooking oil has become a focus for may who have critiqued previous blend credits as feedstocks from other countries were not limited.

Now, only feedstocks from North American sources can be used as part of this program. This includes corn, soybeans, used cooking oil, beef tallow, and canola.

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4. Current language ignores indirect land use change.

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5. Tax credits are transferrable.

Biofuels producers can take their tax credits and sell them to another buyer if they aren’t going to use them themselves.

Additionally, this makes it easier for farmer-owned co-op ethanol plants to process their taxes.

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Additional considerations and unanswered questions.

Farmer data is key to unlock the potential.

“The overall 45Z impact is ag data is extremely valuable. It’s setting a precedent as to the value for data,” Hora says. “Iin order for the ethanol plant to generate 45Z credit using your low carbon farming practices, they have to prove it in an audit, and likely an audit at every point of aggregation, so that farmer data is really the key to unlock value here.”

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This 45Z program update does effect sustainable aviation fuel—particularly alcohol to jet.

“Under the current version of 45z the alcohol to jet pathway not going to happen at any type of real pace, not at any type of accelerated rate of innovation. The math just doesn’t work out,” Hora says. “You’d be much better off under the current 45Z rules to just sell it as ethanol.”

The Final IRS Guidance Matters

Forthcoming final rules from the IRS will set which of the two calculators will be used: GREET FD-CIC or USDA FD-CIC READ MORE

Related articles

Ag-Powered Fuels: 45Z Clean Fuel Production Credit (American Farm Bureau Federation)
How Section 45Z could change carbon payments: Farmers may soon have more programs that pay them for soil-smart practices. Still, potential 45Z payments to farmers hinge on U.S. Treasury regulations. (Farm Progress)
Section 45Z is here: Act fast, monetize smart (EcoEngineers/Ethanol Producer Magazine)
FEW Podcast Series: Live with the EcoEngineers (Ethanol Producer Magazine)

Excerpt from EcoEngineers/Ethanol Producer Magazine: The tax credit, originally set to expire in 2027, has been extended through 2029. The new law also eliminates indirect land-use change (ILUC) penalties from carbon scoring, which is good news for corn-ethanol, soy-based biodiesel, and other crop-based fuels. For biofuel producers, this means more credit value, more time to claim it, and an open path forward.

Uncertainty Has Faded, and Action is Now Required

While final Internal Revenue Service (IRS) guidance is still pending, the foundation of the program is well defined. Clean fuel producers should no longer be waiting; they can now move forward with critical planning and preparation. The structure of the tax credit is based on carbon intensity (CI) scoring through the 45ZCF-GREET model, third-party validation, and tax credit transferability. The emerging market signals are clear, where credit value will be closely tied to lifecycle emissions data, audit-ready documentation, and proactive engagement with qualified validators, brokers, and advisors.

Facilities that update their CI modeling, verification planning, and documentation preparation now will be in a much stronger position to monetize early 2025 production and secure value. This includes establishing a defensible life-cycle analysis (LCA), aligning internal compliance requirements, and vetting how prevailing wage or apprenticeship requirements may affect credit eligibility. Delaying action could mean missing early monetization opportunities and losing a competitive edge in the low-carbon fuel market. The time for action is now.

Tips to Prepare and Execute

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Monetizing the Section 45Z Credit: Be Ready to Transact

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Think Beyond Section 45Z: Stackable Opportunities

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Policy Engagement and Internal Readiness

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The Bottom Line

Section 45Z is an actionable tax credit with strong bipartisan backing and a favorable runway through 2029. The incentives are meaningful, the framework is coming into focus, and the execution path is much clearer. Clean fuel producers who prepare now by modeling their CI, validating documentation, and aligning stakeholders will be positioned to claim the credit without delay, monetize it efficiently, and outpace the competition.

The opportunity is real. The direction is clear. It’s time to execute. Let’s go! READ MORE

Tags

What You Can Do used cooking oil (UCO) Transportation Fuels Policy tax credits tallow Sustainability soybeans Regulations-Federal North America Mexico market forces life cycle analysis (LCA) Legislation-Federal Jetfuel (Sustainable Aviation Fuel (SAF)) Jetfuel (Sustainable Aviation Fuel (SAF)) IRS (Internal Revenue Service) Iowa ILUC (Indirect/Induced Land Use Change) GREET Greenhouse Gases Regulated Emissions and Energy Use in Transportation Model GHG (Greenhouse Gas Emissions) Intensity Department of Agriculture (USDA) corn/maize Carbon Intensity (CI)/Carbon Footprint Canola/Rapeseed Canada BioRefineries/Renewable Fuel Production Aviation Fuel/Sustainable Aviation Fuel (SAF) animal fat alcohol-to-jet (ATJ)/ethanol-to-jet (ETJ) Agricultural Policy 45Z Clean Fuel Production Tax Credit podcasts

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