Julia Chirkova
The Internal Revenue Service (IRS) has released the official 2026 emissions rate table, a crucial component for calculating the Section 45Z Clean Fuel Production Credit. This week’s announcement also includes expanded guidance, offering critical details on the utilization of manure-derived fuels and the integration of regenerative agricultural practices into the credit’s framework. This development marks a significant step in clarifying and implementing a key incentive designed to accelerate the production of low-carbon transportation fuels within the United States.
Evolution of the Clean Fuel Production Credit
The Section 45Z Clean Fuel Production Credit was initially established by the Inflation Reduction Act of 2022 (IRA), a landmark piece of legislation signed into law by President Joe Biden. The IRA’s intent was to replace previous, more narrowly focused renewable fuel incentives with a technology-neutral credit. This approach aims to foster innovation and domestic production of cleaner alternatives to traditional petroleum-based fuels, thereby reducing greenhouse gas emissions from the transportation sector.
However, the legislative landscape for this credit has seen further evolution. The "One Big Beautiful Bill Act," a tax and spending package signed into law by President Donald Trump last year, further extended and revamped the Clean Fuel Production Credit. This bipartisan legislative action underscores a shared commitment across different administrations to incentivize cleaner fuel production.
Under the framework established by President Trump’s tax law, the Clean Fuel Production Credit offers a financial incentive for eligible clean transportation fuels produced domestically and sold within qualified transactions. This includes crucial fuels such as sustainable aviation fuel (SAF) and a range of other low-carbon alternatives. The value of the credit is directly tied to a fuel’s lifecycle greenhouse gas (GHG) emissions rate, with fuels demonstrating lower emissions qualifying for more substantial tax benefits. A key update under this revamped credit mandates the technical modeling of emissions rates using the U.S. Department of Energy’s (DOE) 45ZCF-GREET model, requiring regular updates to reflect the latest scientific understanding and technological advancements.
The tax credit is applicable to a broad spectrum of qualifying transportation fuels, encompassing sustainable aviation fuel, renewable diesel, ethanol, renewable natural gas (RNG), biodiesel, and various other liquid or gaseous fuels. To be eligible, these fuels must meet stringent lifecycle emissions thresholds and be produced and sold within specific statutory parameters. The Section 45Z credit is in effect for fuel produced domestically after December 31, 2024, and sold by December 31, 2029. Producers seeking to claim this credit must be registered with the IRS by submitting Form 637, Application for Registration (For Certain Excise Tax Activities), at the time of fuel production.
Proposed regulations for Section 45Z, released in February of this year, are currently undergoing final review by the IRS and the Treasury Department. These regulations are designed to implement the significant changes to the Clean Fuels Production Credit, particularly clarifying the operation of annual emissions rate tables and specifying which tables and models producers must utilize to determine their fuel’s emissions rate.
New Guidance Focuses on Manure-Derived Fuels and Regenerative Agriculture
The recently issued Notice 2026-53, dated September 8, provides crucial technical modeling language necessary for implementing the "One Big Beautiful Bill Act" (OBBBA)-mandated updates to the emissions modeling for manure-derived fuels. This guidance also elaborates on how producers should incorporate OBBBA changes when using the emissions rate table and approved models. The IRS has indicated that the DOE is actively developing corresponding updates to the 45ZCF-GREET model to reflect these changes.
Furthermore, the proposed Section 45Z regulations had previously signaled that the IRS would issue additional guidance on the integration of U.S. Department of Agriculture (USDA) rules concerning regenerative agricultural practices into the 45ZCF-GREET model. This integration was contingent upon the USDA finalizing its own rules, a process that concluded in June of this year. Notice 2026-53 now offers a safe harbor provision for regenerative agricultural practices, which will be available for clean fuel production in 2025.
The notice also introduces transition rules to assist taxpayers in applying OBBBA changes when an approved methodology has not yet been updated to reflect these new provisions. These rules specifically address feedstocks such as used cooking oil and other relevant materials.
IRS CEO Frank Bisignano emphasized the significance of this guidance in a recent statement: "Today’s guidance helps America’s farmers, ranchers, and fuel producers access growing opportunities in the domestic biofuels market. 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, the latest guidance permits taxpayers to account for qualifying low-carbon agricultural practices that align with the USDA’s technical guidelines and the 45Z-specific Feedstock Carbon Intensity Calculator. Additionally, the guidance offers transition relief for fuel produced in 2025 and 2026, exempting certain requirements related to the development of a nutrient budget prior to nutrient application.
A notable aspect of the guidance is the establishment of distinct emissions rates for transportation fuels derived from specific animal manure feedstocks, as mandated by the OBBBA. The 2026 emissions rate table explicitly includes emissions rates for dairy manure and swine manure. The Treasury Department and IRS have indicated that they anticipate the 45ZCF-GREET model will be updated later in 2026 to incorporate poultry manure and beef manure as primary feedstocks. The guidance also allows for farm-specific prior manure management practices to be considered in certain situations, enabling emissions calculations to more accurately reflect the unique operational conditions of individual farms.
Industry Reactions and Broader Implications
The release of this comprehensive guidance has been met with widespread approval from key industry stakeholders. Patrick Serfass, Executive Director of the American Biogas Council, lauded the new guidance, stating that it provides a clearer pathway for renewable natural gas (RNG) producers to effectively utilize the Section 45Z tax credit.
"The wait is over," Serfass remarked in a statement. "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 further elaborated on the collaborative efforts that led to this outcome: "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."
Emily Skor, CEO of Growth Energy, also commended the new guidance, asserting that "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."
The implications of this guidance extend beyond immediate financial incentives. By providing clearer rules and expanding the scope of eligible feedstocks and practices, the IRS is fostering greater certainty for investors in the clean fuel sector. This, in turn, is expected to accelerate the development and deployment of new production facilities, leading to increased domestic production of biofuels and other low-carbon alternatives. The focus on manure-derived fuels and regenerative agriculture directly supports the agricultural sector, creating new revenue streams for farmers and ranchers while simultaneously promoting more sustainable land management practices. This integrated approach has the potential to significantly contribute to the nation’s climate goals by reducing GHG emissions from the transportation sector and incentivizing environmentally sound agricultural operations. The anticipated updates to the 45ZCF-GREET model, particularly the inclusion of poultry and beef manure, will further broaden the applicability of the credit and encourage wider adoption across diverse agricultural operations. The transition rules provide a crucial buffer for producers navigating the evolving regulatory landscape, ensuring that investments made during this period are not jeopardized by immediate compliance challenges.
