The IRS this week provided the 2026 emissions rate table used to calculate the Section 45Z Clean Fuel Production Credit and issued additional guidance on the tax credit, including on the use of manure-derived fuels and regenerative agricultural practices.
The 45Z tax credit was first established by the Inflation Reduction Act of 2022, the tax-and-climate law signed by President Joe Biden in 2022. The legislation replaced prior renewable fuel incentives with a technology‑neutral credit aimed at incentivizing domestic production of lower-carbon alternatives to petroleum‑based fuels.
The Clean Fuel Production Credit was extended and revamped in Republicans’ One Big Beautiful Bill Act, the tax-and-spending bill signed into law by President Donald Trump last year.
Under Trump’s tax law, the Clean Fuel Production Credit provides a tax break for eligible clean transportation fuels produced domestically and sold in a qualified sale, including sustainable aviation fuel and other clean fuels. The credit amount generally depends on a fuel’s lifecycle greenhouse gas emissions rate, with lower-emission fuels qualifying for larger credits. The revamped credit now requires technical modeling updates to the U.S. Department of Energy’s 45ZCF-GREET model used to determine emissions rates.
The tax credit is available for producers of qualifying transportation fuels—including sustainable aviation fuel, renewable diesel, ethanol, renewable natural gas, biodiesel, and other liquid or gaseous fuels—provided the fuel meets strict lifecycle emissions thresholds and is produced and sold within specific statutory parameters.
The Section 45Z credit applies to fuel produced domestically after Dec. 31, 2024, and sold by Dec. 31, 2029. To claim the credit, taxpayers must be registered with the IRS using Form 637, Application for Registration (For Certain Excise Tax Activities), at the time of production.
The Section 45Z proposed regulations, which were issued in February of this year and are under final consideration by the IRS and Treasury Department, would implement the changes to the Clean Fuels Production Credit, including addressing how the annual emissions rate tables work and which table and models a producer should use to determine the emissions rate of a particular fuel.
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Notice 2026-53, issued by the IRS on Sept. 8, provides certain technical modeling language used to implement OBBBA-mandated model updates for manure-derived fuels. The guidance also addresses how producers should account for OBBBA changes when using the emissions rate table and allowed models. The DOE is developing corresponding updates to the 45ZCF-GREET model, the IRS says.
The Section 45Z proposed regulations indicated that the IRS would provide further guidance on how U.S. Department of Agriculture rules on regenerative agricultural practices will be integrated into the 45ZCF-GREET model once the USDA finalized its rules, which occurred this past June. Notice 2026-53 provides a safe harbor that will be available for 2025 clean fuel production.
The notice also provides transition rules for applying changes made by the OBBBA when an allowed methodology has not yet been updated to reflect those changes, including rules addressing used cooking oil and other feedstocks. Among other changes, the law:
- Requires emissions rates to exclude emissions attributable to indirect land use change;
- Limits eligible transportation fuel to fuel derived exclusively from feedstocks produced or grown in the U.S., Mexico, or Canada;
- Prohibits negative emissions rates, except for transportation fuel derived from animal manure; and
- Requires distinct emissions rates for transportation fuels derived from specific animal manure feedstocks.
“Today’s guidance helps America’s farmers, ranchers, and fuel producers access growing opportunities in the domestic biofuels market,” IRS CEO Frank Bisignano said in a statement. “This guidance helps unlock billions of dollars for America’s agricultural producers, provides greater certainty for investment across rural America, strengthens domestic biofuel production, and helps lower fuel costs for American consumers.”
For agricultural feedstocks, this week’s guidance would allow taxpayers to account for qualifying low-carbon agricultural practices consistent with the USDA’s technical guidelines and the 45Z-specific Feedstock Carbon Intensity Calculator. The guidance also provides transition relief for fuel produced in 2025 and 2026 from certain requirements relating to the development of a nutrient budget before nutrients are applied.
In addition, the guidance provides for distinct emissions rates for transportation fuel derived from specific animal manure feedstocks, as required by the OBBBA. The 2026 emissions rate table includes dairy manure and swine manure, and the Treasury Department and IRS say they anticipate that the 45ZCF-GREET model will be updated later in 2026 to include poultry manure and beef manure as primary feedstocks. The guidance also allows farm-specific prior manure management practices to be taken into account in certain circumstances, allowing emissions calculations to better reflect conditions on individual farms.
American Biogas Council Executive Director Patrick Serfass applauded this week’s guidance, saying it provides a clearer path for renewable natural gas producers to use the Section 45Z tax credit.
“The wait is over. Since Congress created 45Z four years ago, the biogas industry has been waiting for the certainty needed to fully put this tax credit to work. Billions of dollars of potential investment have been sidelined in recent years while companies waited to understand how 45Z would apply to their projects. Today’s guidance provides a path to move that investment forward, build new biogas systems and turn more of the organic waste produced in our communities into domestic renewable fuel,” Serfass said in a statement.
“The American Biogas Council and our members have worked with the federal government under two administrations to improve the implementation of 45Z for biogas and RNG, and we appreciate the Trump Administration, Treasury Department, Department of Energy, Department of Agriculture, and IRS for incorporating many of the changes our industry requested.
“Importantly, the new guidance recognizes that RNG produced from different feedstocks can have different carbon intensities, including specific pathways for RNG produced from dairy and swine manure, food waste, and other organic materials. It also allows certain projects to account for farm-specific manure management practices, helping the credit more accurately reflect how individual projects operate.
“We also appreciate the continued progress toward incorporating regenerative agricultural practices into carbon-intensity calculations, and the commitment to completing the guidance on beef and poultry manure feedstocks later this year.
“America produces enormous quantities of manure, food waste and other organic materials every day. Instead of wasting those resources, biogas systems can recycle them into domestic renewable energy while supporting farms, rural communities and American jobs. Today’s action gives our industry an important new tool to build more of those projects.”
Growth Energy CEO Emily Skor also commended the new guidance, saying in a statement, “Farmers and biofuel producers asked and the Trump administration has delivered. The 45Z tax credit is already driving significant investments in rural communities across the U.S., but this guidance is the key to ensuring farmers reap the benefits of the credit.”
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