Clean Fuels Comments on Treasury Notice of Intent to Propose §45Z Rules

April 10, 2025

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(Clean Fuels Alliance America) Today, Clean Fuels Alliance America submitted comments to the U.S. Treasury on Notice 2025-10, which outlined an intent to propose rules for the §45Z Clean Fuel Production Credit. Clean Fuels urges Treasury to ensure a level playing field for American farmers, by eliminating penalties for speculative indirect effects assigned to U.S. crop feedstocks. Clean Fuels also urges Treasury to adhere to the legislative language indicating that co-processed fuels do not qualify for the credit. Clean Fuels thanks Treasury for moving forward on the 45Z rules, which are consistent with the Administration’s goal to unleash American energy.

“With the § 45Z credit already in effect, the clean fuels industry appreciates clarity on related implementation issues outlined above through either guidance and/or rulemaking,” Clean Fuels writes.

Kurt Kovarik, Clean Fuels’ VP of Federal Affairs, added, “Biofuels are essential to U.S. farm security. The unfinished rules for the Clean Fuel Production Credit are creating intolerable uncertainty for U.S. farmers and biodiesel and renewable diesel producers, putting jobs, economic opportunity, and growth in domestic energy production at risk. Clean Fuels asks that Treasury and Congress level the playing field for farmers and fuel producers, supporting continued growth and innovation in domestic energy production.”

A copy of the comments is available at cleanfuels.org.

ABOUT CLEAN FUELS ALLIANCE AMERICA

Made from an increasingly diverse mix of resources such as recycled cooking oil, soybean oil, and animal fats, the clean fuels industry is a proven, integral part of America’s clean energy future. Clean Fuels Alliance America is the U.S. trade association representing the entire biodiesel, renewable diesel and sustainable aviation fuel supply chain, including producers, feedstock suppliers and fuel distributors. Clean Fuels receives funding from a broad mix of private companies and associations, including the United Soybean Board and state checkoff organizations. READ MORE

Excerpts from public comments: 45ZCF-GREET Clean Fuels continues to support utilizing the Department of Energy (DOE) Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model for lifecycle greenhouse gas emissions when calculating credits under § 45Z.

However, while the statute references section 211(o)(1)(H) of the Clean Air Act as described, this provision was interpreted broadly to include the theory of indirect land use change (ILUC) and other emissions which significantly penalizes U.S. crop and livestock production.2

Section 211(o)(1)(H) of the Clean Air Act states that “lifecycle greenhouse gas emissions” includes “direct emissions and significant indirect emissions such as significant emissions from land use changes.”3 We argue that the indirect effects penalty that has been incorporated into the GREET model is theoretical and does not reflect emissions that will in fact happen in the production of clean fuels. Furthermore, there is no real-world validation process possible to determine whether they will or will not happen as the modeling predicts, let alone be significant to drive inclusion in the calculation of lifecycle greenhouse gases.

As a result, Clean Fuels recommends that the Treasury and IRS eliminate the indirect effects penalty, inclusive of ILUC, on crop-based feedstocks to address scientifically unjustified GHG emissions penalties that significantly lower the credit value for fuels made from agricultural crops such as soybeans and canola. Further, the Treasury and IRS should also eliminate reference to indirect land use change and other indirect emissions in § 45Z’s emissions factors section.

Methodologies

Notice 2025-10 recognizes the CORSIA methodology for SAF certification. However, many SAF producers serve international markets, particularly the European Union, which requires compliance with the International Sustainability and Carbon Certification European Union (ISCC EU) certification standard. Since ISCC EU is widely recognized as more stringent than CORSIA, we ask Treasury to clearly accept ISCC EU and other equivalent certification schemes as a qualifying methodology under § 45Z. We ask that Treasury provide explicit confirmation that certification methodologies meeting or exceeding the rigor of CORSIA satisfies the statutory requirements; this would provide important clarity and certainty for stakeholders.

Special Rules Clean Fuels would also like Treasury to provide clarity around imported feedstocks. Used cooking oil is among the most heavily regulated feedstocks in the world. Under the EPA Renewable Fuel Standard (RFS) Program, separated food waste, commonly referred to as used cooking oil (UCO), has additional recordkeeping requirements, including a stringent chain of custody requirement, third-party verification by an EPA-approved auditor and traceability to the point of origination, typically a restaurant or food manufacturing facility.4 Imported UCO is subject to the same standards as domestic used cooking oil. Additionally, the RFS has significant civil and criminal penalties for anyone found to be violating the law by either importing fraudulent feedstocks or generating RINs on fraudulent feedstocks. Therefore, to ensure the validity of foreign feedstocks, in accordance with Congressional intent, we recommend that Treasury utilize the existing RFS recordkeeping and traceability requirements that apply to the use of used cooking oil.

Climate Smart Agriculture On March 18, 2025, Clean Fuels commended USDA for publishing this interim rule to establish guidelines for quantifying, reporting, and verifying greenhouse gas emissions associated with agricultural production of U.S. biofuel feedstock commodity crops.5 By establishing these technical guidelines, USDA is creating a novel market opportunity for U.S. farmers to distinguish their products and bring additional revenue to rural America. Clean Fuels urges Treasury to adopt these technical guidelines into the final rule on § 45Z.

Non-SAF Transportation Fuel

Treasury and IRS must adhere to the legislative text that states Transportation Fuel is “not derived from coprocessing an applicable material (or materials derived from an applicable material) with a feedstock which is not biomass.” 6 Unlike dedicated biofuel facilities that use renewable fats and oils on a 24/7 basis, co-processing refineries may switch back and forth if the economics change. Therefore, refineries are not reliable customers for farmers, oilseed processors, and renderers who provide renewable fats and oils. Additionally, co-processed fuel does not generate the same benefits – including but not limited to associated jobs, economic opportunities, agricultural markets, and environmental benefits – and should not qualify for policy incentives.

Biodiesel, renewable diesel, and SAF producers invest in stand-alone plants and infrastructure and create jobs. Co-processing biomass at existing petroleum refineries, however, involves relatively little risk, investment, or additional domestic employment. Congress recognized that providing a tax benefit for co-processed fuels would be wasteful, inequitable, and pose a threat to existing biomass-based diesel production and a burgeoning stand-alone clean fuels industry.

Congress disqualified co-processed fuel from tax incentives in § 45Z because it does not stimulate the economy. Additionally, allowing co-processed fuel to qualify for the credit would add significant cost to any § 45Z modifications. We urge Treasury and IRS to strictly adhere to this prohibition in the law, as Congress intended.

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Qualifying Sales

The additional details included in the draft text of the forthcoming proposed regulations have created additional uncertainty for clean fuel producers to claim the § 45Z credit. In particular, the Notice appears to not understand how biodiesel and renewable diesel is sold. It is common within the fuel industry to market and distribute biodiesel and renewable diesel through fuel marketers or distributors. This supply network is critical to the distribution of renewable fuel products across the U.S. and creates stability for the producer.

Notice 2025-10 states that the forthcoming § 45Z proposed regulations would define a qualifying sale for use in a trade or business under § 45Z(a)(4)(B) to mean “use as a fuel in a trade or business within the meaning of section 162”. The proposed language inappropriately narrows the definition specified under section § 45Z(a)(4)(B) and raises the question of who qualifies under § 45Z as "sold for use in a trade or business."

The proposed language is limited and problematic, indicating a misunderstanding of how fuels move through the supply chain. We recommend removing the limitation of “use as a fuel in a trade 5 or business within the meaning of section 162” and expanding these qualifications to include “sale for resale”, which is the most common way to sell fuel within the industry.

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Green methanol is currently not included in the 45ZCF-GREET model and if it were to be included in the model it could be part of the fuel production processes to lower carbon intensity in biodiesel production. READ MORE

Related articles

RFA to Treasury: 45Z Tax Credit Regulation Needs ‘Clarity, Certainty and Stability’ (Renewable Fuels Association)
ACE Urges Swift and Science-Based Implementation of 45Z Clean Fuel Production Credit (American Coalition for Ethanol)
MN Bio-Fuels Comments To The IRS On 45Z Tax Credit (Minnesota Bio-Fuels Association)

Excerpt from Renewable Fuels Association: In detailed comments submitted today (April 10, 2025) to the U.S. Treasury, the Renewable Fuels Association urged the department to clarify and improve several key provisions in its upcoming proposed regulations for the Clean Fuel Production Tax Credit, often referred to as the “45Z credit.” The comments were submitted in response to the Treasury’s January 10 “notice of intent to propose regulations” for 45Z.

“If properly implemented, the 45Z tax credit has the potential to advance U.S. energy security, prioritize domestic energy resources, strengthen rural economies, and create a transformative incentive for the adoption of new technologies in the renewable fuels and agriculture sectors,” RFA President and CEO Geoff Cooper wrote to Treasury Secretary Scott Bessent. “The technology-neutral intent of 45Z represents the most economically efficient and environmentally responsible approach to boosting U.S. energy production. However, for the 45Z program to truly drive innovation and value creation in the marketplace, Treasury must move expeditiously to propose, finalize, and promulgate implementing regulations. Clean fuel producers, including RFA’s members, are in desperate need of clarity, certainty, and stability in the regulatory framework supporting the 45Z tax credit.”

Cooper added that RFA believes the final 45Z regulations must recognize the realities of today’s biorefining and agriculture sectors and the complexities of our nation’s transportation fuels marketplace. At the same time, final regulations must maintain an intuitive and manageable approach to registration, reporting, and recordkeeping that creates the kind of dependable value that empowers businesses to invest.

Among RFA’s comments:

Treasury needs to clarify its intentions and definitions around “qualifying sale,” an “unrelated person,” a “member of a consolidated group,” and the applicability of safe harbor provisions.
Treasury’s approach to rounding of emissions factors should be reconsidered.
Treasury should formally integrate climate-smart agriculture (CSA) practices into the 45Z program.
Treasury should modify Prevailing Wage and Apprenticeship (PWA) requirements.
Treasury should expeditiously implement the Provisional Emissions Rate (PER) process and allow a more flexible approach.
The short duration of 45Z, and Treasury’s delay in promulgating rules, is discouraging innovation and investment and undermines the objectives of the program.
The proposed structure for 45Z creates an unintended disincentive for the production of alcohol-to-jet (ATJ) sustainable aviation fuel (SAF).

In response to specific questions from Treasury, RFA commented that the 45ZCF-GREET model offers a far more current and thorough understanding of lifecycle emissions than either CORSIA or the approved pathways under the RFS program. Also, Treasury should include emissions rate pathways for biofuel derived from corn kernel fiber and sorghum kernel fiber and provide the option to segregate those gallons for 45Z credit generation purposes. READ MORE

Excerpt from American Coalition for Ethanol: The American Coalition for Ethanol (ACE) has submitted comments to the U.S. Treasury and Internal Revenue Service (IRS) regarding Notices 2025-10 and 2025-11 on the Section 45Z Clean Fuel Production Credit. ACE comments highlight how the 45Z credit can be leveraged to unlock new markets for farmers and biofuel producers, supporting certainty and economic growth, at a time when they have a lot of money on the line.

“The 45Z credit not only promotes U.S. energy security … but can also create good-paying jobs and unlock new markets for farmers and domestic biofuel producers,” ACE CEO Jennings stated in the comments.

Today, the value of U.S. corn production has fallen, and input costs have risen. ACE’s comments cite National Corn Growers Association data that farmers are forecast to experience their third consecutive year of net profit losses in 2025, projected to lose more than $160 per acre on average.

“Recently, the Farmer First Fuel Incentives Act was introduced in Congress. This bipartisan and bicameral legislation would extend the life of 45Z to December 31, 2034, beyond its current 2027 expiration date, and provide much needed long-term certainty. But we also need the final rules for this critical tax credit,” Jennings said.

“Treasury should rapidly finalize 45Z guidance and include the technical guidelines for biofuel crops and carbon intensity calculator developed by USDA in the final 45Z rules, so ethanol producers and farmers can unlock new market opportunities,” Jennings added.

Among key recommendations in ACE’s comments:

Support for the 45ZCF-GREET Model: ACE strongly supports the use of the most current 45ZCF-GREET model to determine emissions reductions from clean fuels, and recommends Treasury consistently update the model to reflect the best available science.
Integration of USDA Guidelines and Carbon Intensity Calculator: ACE called on Treasury to fully adopt USDA’s Feedstock Carbon Intensity Calculator (FD-CIC) and technical guidelines for biofuel feedstocks into 45Z. These tools, grounded in real-world data—like the ACE-led Regional Conservation Partnership Program projects—enable accurate lifecycle emissions assessments and allow farmers to “stack” conservation practices for enhanced benefits.

“While we support the 45ZCF-GREET model for both non-aviation and aviation fuel in 45Z, the modeling is incomplete until and unless Treasury and the IRS fully incorporate the USDA technical guidelines for biofuel crops used as feedstocks and their FD-CIC tool into the final regulations,” Jennings stated.

ACE’s comments to Treasury can be accessed here, and ACE’s comments to USDA on its technical guidelines and FD-CIC can be accessed here. READ MORE

Excerpt from Minnesota Bio-Fuels Association:

Earlier today, the Minnesota Bio-Fuels Association (MN Bio-Fuels) submitted comments to the Internal Revenue Service (IRS) on the 45Z clean fuel production tax credits.

In the comments, MN Bio-Fuels executive director, Brian Werner, said the 45Z tax credits repesent a significant opportunity to enhance domestic energy while adding additional value and revenue streams for farmers and biofuel producers in Minnesota.

"The Section 45Z Clean Fuel Production Credit represents a significant opportunity to bolster efforts by Minnesota's biofuel producers to grow and manufacture renewable fuels," he said.

In his comments, Werner highlighted five areas in the 45Z tax credit regulations that need to be addressed along with recommendations.

1. Ensuring Fair and Practical Compliance with Prevailing Wage and Apprenticeship Requirements

"The ethanol production facilities in Minnesota are located in rural areas that often lack access to union labor and specialized trade workers. Safe harbor provisions, good faith exemptions, and an efficient error correction process would ensure compliance without discouraging investment."

2. Clarifying Qualifying Sales To Maintain Market Efficiency

"The final rule should confirm that sales of fuel through intermediaries—such as marketers, traders, distributors, and blenders—remain eligible for the credit. Furthermore, the “unrelated parties” requirement should not disqualify fuel sold through marketing companies where partial ownership by the fuel producer exists."

3. Supporting a Transparent and Efficient Provisional Emisssions Rate Process

"Ethanol producers should be allowed to submit emissions data reflecting the full lifecycle of production, including emissions-reducing agricultural practices. Additionally, the approval process for Provisional Emissions Rate petitions must be timely and predictable to encourage investment."

4. Integration of On-Farm Practices and Book-and-Claim Accounting

"The Treasury Department should incorporate the climate-smart agricultural (CSA) guidelines and FD-CIC (USDA Feedstock Carbon Intenstity Calculator) module released by the United States Department of Agriculture in January 2025. However, requirements for physical tracking or mass balancing of CSA feedstocks would create supply chain inefficiencies. Adopting book-and-claim accounting for CSA feedstock would allow ethanol producers to incentivize low-carbon farming practices while maintaining flexibility in sourcing grain."

5. Administrave Challenges and Credit Accessibility

"The rule should include safe harbor protections that clarify that fuel producers utilizing the 45ZCF-GREET model in good faith will be protected from penalties due to inadvertent errors in emissions calculations. Lastly, the 45Z credit should align with the baseline calculation in the Renewable Fuel Standard (RFS) for determining “gallon equivalents” for non-liquid fuels (i.e., using ethanol as the baseline instead of gasoline), which would simplify implementation and promote consistency across federal programs."

Read his full comments below:

On behalf of the Minnesota Bio-Fuels Association, I appreciate the opportunity to provide public comments to the IRS Office of Associate Chief Counsel (Passthroughs & Special Industries) on the notice of intent to propose regulations on Section 45Z Clean Fuel Production Credit (Notice 2025-10; January 10, 2025).

The Minnesota Bio-Fuels Association is the largest non-profit renewable fuel trade association in the state of Minnesota, representing nine ethanol facilities that collectively produced nearly 800 million gallons of renewable fuel and, along with the entire statewide ethanol industry, contributed $2.1 billion to Minnesota’s economy in 2024.

The Section 45Z Clean Fuel Production Credit represents a significant opportunity to bolster efforts by Minnesota’s biofuel producers to grow and manufacture renewable fuels. Specifically, this credit offers the promise of enhancing domestic energy while adding additional value and revenue streams for farmers and biofuel producers in rural areas for growing energy efficient crops and producing crop-derived biofuels.

1. Ensuring Fair and Practical Compliance with Prevailing Wage and Apprenticeship Requirements

We recognize the importance of prevailing wage and apprenticeship (PWA) requirements, but caution about the challenges associated with them in rural areas. The ethanol production facilities in Minnesota are located in rural areas that often lack access to union labor and specialized trade workers. Safe harbor provisions, good faith exemptions, and an efficient error correction process would ensure compliance without discouraging investment.

2. Clarifying Qualifying Sales to Maintain Market Efficiency

The inclusion of the terms “use as a fuel” in the proposed definition of “qualifying sales” raises concerns regarding the sale of 45Z-eligible fuel through marketers, resellers, and distributors, which is the standard industry practice. Restricting credit eligibility only to direct sales to end users would disrupt the supply chain and undermine the program’s effectiveness. The final rule should confirm that sales of fuel through intermediaries—such as marketers, traders, distributors, and blenders—remain eligible for the credit. Furthermore, the “unrelated parties” requirement should not disqualify fuel sold through marketing companies where partial ownership by the fuel producer exists.

3. Supporting a Transparent and Efficient Provisional Emissions Rate Process

The Provisional Emissions Rate (PER) process is essential for recognizing the benefits of new technologies and feedstocks. Ethanol producers should be allowed to submit emissions data reflecting the full lifecycle of production, including emissions-reducing agricultural practices. Additionally, the approval process for PER petitions must be timely and predictable to encourage investment. Establishing a clear review timeline or a “shot clock” mechanism would ensure prompt consideration.

4. Integration of On-Farm Practices and Book-and-Claim Accounting

Incorporating sustainable agricultural (CSA) practices into determinations of 45Z emissions rates is a major opportunity for reducing carbon intensity. The Treasury Department should incorporate the CSA guidelines and FD-CIC module released by the United States Department of Agriculture (USDA) in January 2025. However, requirements for physical tracking or mass balancing of CSA feedstocks would create supply chain inefficiencies. Adopting book-and-claim accounting for CSA feedstock would allow ethanol producers to incentivize low-carbon farming practices while maintaining flexibility in sourcing grain. This system would also ensure a rational grain market and prevent unnecessary economic burdens on both farmers and fuel producers.

5. Administrative Challenges and Credit Accessibility

In general, registration processes should be streamlined to avoid unnecessary burdens for ethanol producers that already comply with extensive verification and other requirements to federal agencies like the Environmental Protection Agency.

The rule should include safe harbor protections that clarify that fuel producers utilizing the 45ZCF-GREET model in good faith will be protected from penalties due to inadvertent errors in emissions calculations.

Lastly, the 45Z credit should align with the baseline calculation in the Renewable Fuel Standard (RFS) for determining “gallon equivalents” for non-liquid fuels (i.e., using ethanol as the baseline instead of gasoline), which would simplify implementation and promote consistency across federal programs.

6. Conclusion

The 45Z credit must be implemented in a flexible manner that does not lead to distortions in grain flows, disincentivize CSA practice adoption, or prevent innovation in clean fuel technologies. If implemented correctly, the 45Z credit has the potential to provide long-term certainty for farmers and biofuel producers, as well as investment into the economy.

We urge the IRS to ensure clear, flexible, and practical regulations that maintain the integrity of the credit while facilitating broad participation.

Thank you for the opportunity to comment on this important issue. As a member of the Renewable Fuels Association, we also wish to endorse and support their written comments, as submitted.

Sincerely,

Brian Werner READ MORE