Lawmakers to IRS: Don't Leave Farmers behind in 45Z Rule

Agriculture (USDA)Energy (DOE)Farming/Growing Federal Agency/Executive Branch Federal Regulation Feedstocks Field/Orchard/Plantation Crops/Residues Infrastructure Internal Revenue Service Iowa Marketing/Market Forces and Sales Opinions Policy Sustainability Treasury Department

March 13, 2026

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by Lydia Johnson and Kim Chipman (Agri-Pulse) Regulations for the new 45Z biofuel tax incentive need to account for cover crops, precision fertilizer applications and other regenerative agriculture practices to ensure that farmers fully benefit from the subsidy, farm-state Republican lawmakers say in a letter to the Trump administration. READ MORE

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Farmers Push 45Z Tax Rules as Lawmakers Urge IRS to Recognize Ag Practices (AgroLatam)
Industry Looking for 45Z Answers (Energy.AgWired.com; includes AUDIO)
Letter urges Treasury to ensure final 45Z rules work for farmers (Ethanol Producer Magazine)

Excerpt from AgroLatam: Republican lawmakers urge IRS to ensure regenerative practices qualify under the 45Z biofuel tax credit as planting season approaches.

A group of farm-state Republican lawmakers is urging the Trump administration to ensure that new rules for the 45Z biofuel tax credit properly recognize conservation and regenerative agriculture practices, warning that farmers could otherwise be left out of a key clean-fuel incentive. The request comes as the Internal Revenue Service finalizes regulations for the credit and with the 2026 planting season approaching, raising concerns about whether producers will have clarity in time to benefit.

The 45Z tax incentive, created in the Inflation Reduction Act and later expanded in 2025, is designed to boost domestic renewable fuel production using U.S. crops such as corn and soybeans. Because the credit's value depends on the carbon intensity of the entire production chain, farmers' on-field practices could play a crucial role in determining whether feedstocks qualify for premium payments.

In a letter sent to Treasury Secretary Scott Bessent, Agriculture Secretary Brooke Rollins, and Energy Secretary Chris Wright, lawmakers said the final rule must clearly define the farm practices that can generate low-carbon feedstocks eligible for the incentive. The letter was led by Sen. Joni Ernst of Iowa and Rep. Mariannette Miller-Meeks of Iowa, along with a group of farm-state senators and representatives.

"It is critical the final rule clearly identifies the types of on-farm conservation practices capable of generating lower-carbon feedstocks and ultimately qualifying for a premium under 45Z," the lawmakers wrote. They pointed to several widely used practices that should qualify, including:

No-till and reduced tillage systems
Cover crops
Strip-till methods
Manure application
Precision fertilizer management

Supporters argue these practices reduce greenhouse-gas emissions while improving soil health and yields, making them central to efforts to decarbonize the agricultural supply chain. The 45Z Clean Fuel Production Credit replaces earlier flat tax incentives by linking the value of the subsidy to the carbon intensity score of a fuel's full lifecycle.

Under the system, renewable fuels produced with lower-carbon feedstocks - such as corn grown with regenerative agriculture practices - could qualify for higher tax credits. The policy is intended to strengthen U.S. energy independence, expand markets for farm commodities and support the rural biofuel economy.

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One of the central issues in the rulemaking process is how regulators will measure the carbon intensity of agricultural feedstocks. The U.S. Department of Agriculture is currently developing a feedstock carbon-intensity calculator, which could eventually be integrated into the Energy Department's GREET lifecycle emissions model.

Treasury officials indicated in a recent proposal that the USDA tool may eventually be incorporated into the 45Z rules, but they did not provide a timeline for that integration. Lawmakers say completing that integration quickly is essential.

"Only with this integration can farmers' real-world conservation efforts and regenerative practices be accurately measured and rewarded under 45Z," the letter states. The timing of the rule is critical for farmers planning their cropping strategies for the coming year.

"Planting season is a few short weeks away in many parts of the country, and farmers need clear answers soon to fully take advantage of 45Z," the lawmakers warned. They also cautioned regulators against repeating a requirement used under a previous sustainable aviation fuel tax credit that forced producers to bundle multiple practices together to qualify.

Instead, they argue the new credit should allow farmers flexibility to adopt practices suited to their operations, while avoiding excessive paperwork that could discourage participation. The lawmakers also urged regulators to include several additional provisions in the final guidance, including:

Rapid integration of the USDA feedstock calculator into the GREET model
Separate emissions pathways for renewable natural gas derived from animal manure
A "book-and-claim" system allowing farmers to sell low-carbon data certificates to fuel producers independently from the physical grain they produce. READ MORE

Excerpt from Energy.AgWired.com: The tax credit was the topic of a panel at the recent National Ethanol Conference, moderated by Renewable Fuels Association Policy Counsel and Director, Government Affairs, Jared Mullendore.

With tax filing season coming up, Mullendore says we have to accept the lack of final guidance that answers every possible question that could come up. “Because you’re going to operate with a certain degree of uncertainty in the first few years of a tax credit…You know, we’re going to have to embrace that uncertainty.”

Joining Mullendore on the panel were Rebecca Johnson, Christianson PLLP; Faith Larson, Mickelson & Company; and Marc Nickel with Aon, a British-American professional services firm that offers risk-mitigation products and consulting. Nickel says the proposed rulemaking released by Treasury on February 4 was very helpful. “We’re in a way better place than we were a month ago. We just got some very excellent proposed regs, which cleared up a lot of the issues,” said Nickel. “And those two really biggest issues were, were sales going to be deemed qualified if they were going to blenders, which most ethanol sales do. Very big issue for this industry. And whether the modeling of carbon intensity was also going to be respected. The proposed regs definitively cleared up the qualified sale issue, and now it is off to the races with that. And it gave us some very, very good directional guidance on carbon intensity.”

Listen to interviews with Mullendore and Nickel, as well as the full panel below to learn more about the status of 45Z going into tax time and planting season. READ MORE; includes AUDIO