President Donald Trump on July 4 signed the “One Big Beautiful Bill Act.” The budget reconciliation package extends and updates the 45Z clean fuel production tax credit and revives a tax credit benefiting small biodiesel producers but repeals several other bioenergy-related tax incentives.&nbsp;The bill, H.R. 1, has undergone numerous changes since it was first introduced in May, including those related to the extension and administration of 45Z.&nbsp;The original 45Z tax credit, as established by the Inflation Reduction Act of 2022, provided a tax credit for the production and sale of low-emission transformation fuels. The credit started at 20 cents per gallon for non-aviation fuels and 35 cents per gallon for sustainable aviation fuel (SAF). For facilities that satisfy the prevailing wage and apprenticeship requirements, the value of the tax credit was up to $1 per gallon for non-aviation fuels and $1.75 per gallon for SAF. Under the IRA, the 45Z credit was available for 2025, 2026 and 2027.&nbsp;The version of H.R. 1 originally passed by the U.S. House of Representatives on May 22 aimed to extend the 45Z credit for four additional years, through the end of 2031. The initial draft bill released by the Senate Finance Committee on June 16 also included a four-year extension. The Senate bill, however, was later amended to include only a two-year extension, through the end of 2029. The legislation signed by Trump enacts that two-year extension. The 45Z credit is now in place through the end of 2029.The enacted version of H.R. 1 substantially changes the value of the 45Z credit by eliminating the “special rate” of the credit currently available for SAF. &nbsp;The change essentially caps the value of the credit at $1 per gallon for all eligible fuels, including SAF.&nbsp;H.R. 1 also limits 45Z eligibility to fuels derived from feedstocks produced or grown in the U.S., Mexico or Canada. The Senate had previously proposed to place no geographical limits on feedstock eligibility but would have reduced the value of the credit by 20% for non-U.S. feedstocks. The language on feedstock eligibility was updated prior to Senate passage of the bill.&nbsp;Other changes to the 45Z credit implemented by H.R. 1 include provisions that specify that the emissions rate for eligible transportation fuel under 45Z may not be less than zero; eliminate indirect land use change (ILUC) from being used to calculate the lifecycle greenhouse gas (GHG) emissions of eligible fuel; direct the U.S. Treasury Department to establish distinct emissions rates for specific manure feedstocks, including dairy manure, swine manure and poultry manure; and restrict access to the credit for certain prohibited foreign entities. H.R. 1 retains full transferability of the 45Z credit.&nbsp;H.R. 1 also includes provisions to support small-scale biodiesel producers by updating and extending the Small Agri-Biodiesel Producer Tax Credit. That credit, which expired at the end of 2024, provided a 10-cent-per-gallon credit on the first 15 million gallons of agri-biodiesel produced annually by small producers, defined to include facilities with a capacity of less than 60 MMgy. H.R. 1 extends the Small Agri-Biodiesel Producer Tax Credit through the end of 2026 and boosts the value to 20 cents per gallon. Language included in the bill specifies that the Small Agri-Biodiesel Producer Tax Credit can be stacked with the 45Z credit, allowing eligible producers to simultaneously claim both credits for each gallon of eligible fuel.&nbsp;The legislation provides additional support for biofuel producers by extending mandatory funding under the USDA’s Bioenergy Program for Advanced Biofuels through fiscal year 2031. That program provides payments to eligible producers to expand the production of advanced biofuels.H.R. 1 leaves the &nbsp;45Q credit for carbon sequestration largely intact, but repeal various other bioenergy-related tax credits, including the alternative fuel vehicle refueling property credit, which supports retail availability of E85, B20, and renewable natural gas (RNG); the clean hydrogen production tax credit; and the energy efficient home improvement credit, which, in part, supports the installation of residential wood heating appliances.&nbsp;Also related to biofuels, H.R. 1 rescinds unobligated funding allocated to the U.S. EPA by the IRA to support certain functions related to the Renewable Fuel Standard. The impacted funding includes &nbsp;$5 million allocated to the EPA to support the development and establishment of tests and protocols regarding the environment and public health effects of a fuel or fuel additive; perform internal and extramural data collection and analyses to regularly update applicable regulations, guidance, and procedures for determining lifecycle GHG emission of a fuel; and review, analyze and evaluate the impacts of all transportation fuels, including fuel lifecycle implications, on the general public and on low-income and disadvantaged communities and&nbsp;$10 million to the EPA to fund “new grants to industry and other related activities…to support investments in advanced biofuels.”&nbsp;Clean Fuels Alliance America welcomed the extension of the 45Z and Amall Agri-Biodiesel Producer tax credits. “Clean Fuels thanks Congress for working overtime to provide certainty for biodiesel and renewable diesel producers – especially small companies – so they can resume production and industry growth. Clean Fuels especially thanks Sen. Chuck Grassley (R-IA) for securing an enhancement to the Small Agri-Biodiesel Producer Credit to help small producers as they make the transition to the §45Z Clean Fuel Production Credit," said Kurt Kovarik, Clean Fuels' vice president of federal affairs. "While the extension of the&nbsp;§45Z credit with transferability through 2029 provides some immediate stability, our industry continues to urge Treasury to promptly propose and finalize clear, reliable rules for the credit.”The Iowa Biodiesel Board applauded revival of the Small Agri-Biodiesel Producer Credit. &nbsp;“We commend President Trump for recognizing the critical role biodiesel can play in building next-generation energy infrastructure and driving a new industrial revolution rooted in American innovation,” said Grant Kimberley, executive director of the IBB. “ This extension sends a clear signal of stability to the marketplace and reinforces our nation’s commitment to strengthening domestic energy capacity.“The revival of the Small Agri-Biodiesel Producer Credit through 2026—and increasing it to 20 cents-per-gallon—is a vital lifeline to small independent producers like those in Iowa. We thank Senator Chuck Grassley (R-IA) for championing the inclusion of that provision,” he added.“The ability for producers to transfer the credit, the appropriate prioritization of North American feedstocks, and the removal of arbitrary indirect land use change penalties all bode well for Iowa’s biodiesel industry and soybean farmers,” Kimberley continued. For producers who have been idled or running at reduced capacity since the start of the year, this is a breath of relief and welcome signal for a bright future.”Ethanol producer POET thanked Trump for securing the 45Z extension. “President Trump continues to reassert his support for American farmers and energy independence,” said Joshua Shields, POET’s senior vice president of corporate affairs. “With this extension signed into law, 45Z is now best positioned to transform U.S. agriculture, providing new markets for farmers and furthering biofuel energy dominance. POET thanks both President Trump and our biofuel champions in Congress for their hard-fought efforts to get this provision across the finish line.”The American Biogas Council applauded the biogas provisions of H.R. 1. “The Act contains several helpful provisions for the biogas sector, acknowledging the enormous potential of recycling decomposable waste – from farms, food systems, and wastewater treatment plants – to produce reliable American-made energy that both generates electricity and fuels the transportation sector,” said Patrick Serfass, executive director of the ABC.“With the preservation of key incentives, including continued support for clean fuel production and power generation credits, this bill helps provide certainty for developers to plan, invest, and grow,” Serfass continued. “We are particularly encouraged by provisions that ensure American producers using U.S. and North American feedstocks can compete on a level playing field, while also maintaining appropriate values for manure-based biogas.The Renewable Fuels Association said H.R. 1 will enhance the role of the U.S. ethanol industry in contributing to American energy security and innovation. “From the very beginning of the budget reconciliation process, our goal was to advocate for the inclusion of tax policies that provide certainty, growth opportunities, and market stability for U.S. ethanol producers. The One Big Beautiful Bill Act passed today accomplishes that objective. We thank the many renewable fuel supporters in Congress and President Trump for ensuring American ethanol producers and farmers had a voice and seat at the table in this process,” said Geoff Cooper, RFA president and CEO. “The extension and modifications to the 45Z clean fuel production credit, reinstatement of the Research and Development immediate expensing provisions, and improvement of the 45Q carbon sequestration and utilization credit will provide a growth-oriented tax policy climate that ethanol producers can count on, improving the role that renewable fuels can play in helping reach our nation’s energy independence goals.”The American Coalition for Ethanol praised H.R. 1’s 45Z provisions. “We’re grateful to our Congressional champions for their steadfast leadership to support and strengthen the 45Z credit, which is remarkable considering the fact most other IRA-era tax credits were limited or phased-out in the final package.,” said Brian Jennings, CEO of ACE. “While there were other improvements we had hoped to achieve in the final 45Z language, restoring transferability of the credit, removing indirect land use change (ILUC) penalties, and restricting feedstock eligibility to USMCA countries will strengthen the credit from its original version.”“In terms of the credit term, we preferred the House language which would have extended 45Z through 2031, and we also urged Congress to specifically allow low-carbon farming practices to be monetized through 45Z with the feedstock calculator and guidelines USDA has released, but nevertheless ACE remains committed to working with federal agencies to implement the credit in ways that reward on-farm conservation practices and accelerate the use of homegrown, low-carbon biofuels,” Jennings continued.&nbsp;The RNG Coalition indicated the 45Z extension is vital to the sustained growth of renewable natural gas (RNG) in the U.S. “The credit&nbsp;will play a critical role&nbsp;in directing&nbsp;investment toward low-carbon fuels,&nbsp;based on lifecycle emissions performance,” said Geoff Dietz, senior director of federal government affairs at the RNG Coalition. “We look forward to working with&nbsp;the Department of&nbsp;Treasury&nbsp;on&nbsp;the implementation of&nbsp;several key Section 45Z&nbsp;provisions and&nbsp;would strongly encourage the agency to initiate that process soon. Clear, pragmatic, and expedient&nbsp;regulation&nbsp;will be critical to ensure that Section 45Z reflects the Congressional intent&nbsp;to&nbsp;accelerate&nbsp;sustainable&nbsp;development, deployment, and utilization of renewable gas. RNG is a vital tool to mitigate greenhouse gas emissions, bolster&nbsp;energy security, reliability and affordability, and provide key benefits to diverse American communities — from farm communities in South Dakota to Staten Island in New York City where the first RNG project was sited over forty years ago."Growth Energy also applauded the 45Z extension. “The president wants to go big on American energy dominance, and this legislation delivers,” said Emily Skor, CEO of Growth Energy. “An extension of 45Z will unlock billions of dollars in new investments across rural America supporting strong, stable markets for America’s farmers and positioning American biofuel producers to compete in global fuel markets. We applaud our champions in the House and Senate, who fought hard to ensure that U.S. biofuel producers are positioned to deliver more clean energy, hold down fuel costs, and restore industrial might across the heartland.”&nbsp;

2025-07-08 - Trump signs bill enacting 2-year extension of 45Z credit (4 publications)

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President Trump on July 4 signed the “One Big Beautiful Bill Act.” The legislation extends and updates the 45Z credit and revives a tax credit benefiting small biodiesel producers but repeals several other bioenergy-related tax incentives. 

Trump signs bill enacting 2-year extension of 45Z credit

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