Section 45Z Clean Fuel Production Credit

DEPARTMENT OF THE TREASURY <SUBAGY>Internal Revenue Service</SUBAGY> <CFR>26 CFR Parts 1 and 48</CFR> <DEPDOC>[REG-121244-23]</DEPDOC> <RIN>RIN 1545-BR30</RIN> <SUBJECT>Section 45Z Clean Fuel Production Credit</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Internal Revenue Service (IRS), Treasury. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking and public hearing. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document contains proposed regulations regarding the clean fuel production credit enacted by the Inflation Reduction Act of 2022 and amended by the One, Big, Beautiful Bill Act (OBBBA). These proposed regulations would provide rules for determining clean fuel production credits, including credit eligibility rules, emissions rates, and certification and registration requirements. In addition, the proposed regulations would amend three sets of final regulations: the elective payment election regulations and the credit transfer election regulations, to clarify language relating to ownership of clean fuel production facilities, and the Federal excise tax registration regulations, to make them clearer and more consistent with the clean fuel production credit registration requirements in these proposed regulations. The proposed regulations would affect domestic producers of clean transportation fuel, taxpayers that may claim a credit for a related producer's fuel, and excise tax registrants. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Written or electronic comments must be received by April 6, 2026. The public hearing is being held on May 28, 2026, at 10 a.m. Eastern Time (ET). Requests to speak and outlines of topics to be discussed at the public hearing must be received by April 6, 2026. If no outlines are received by April 6, 2026, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5 p.m. ET on May 26, 2026. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at <E T="03">https://www.regulations.gov</E> (indicate IRS and REG-121244-23) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the “Comments and Requests for a Public Hearing” section. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to the IRS's public docket. Send paper submissions to: CC:PA:01:PR (REG-121244-23), Room 5503, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. A plain language summary of the proposed regulations will be made available at <E T="03">https://www.regulations.gov.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Concerning the proposed regulations, Jennifer Golden or Danielle Mayfield of the Office of Associate Chief Counsel (Energy, Credits, and Excise Tax) at (202) 317-6855 (not a toll-free number); concerning submissions of comments or the public hearing, Publications and Regulations Section at (202) 317-6901 (not a toll-free number) or by email at <E T="03">publichearings@irs.gov</E> (preferred). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Authority</HD> This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) regarding sections 45Z, 1361, 4101, 6417, and 6418 of the Internal Revenue Code (Code) as they relate to the clean fuel production credit determined under section 45Z (proposed regulations). This document also contains proposed amendments to the Manufacturers and Retailers Excise Tax Regulations (26 CFR part 48) regarding section 4101 as they relate to excise tax registration. The proposed regulations would be issued under the authority granted by sections 45Z, 1361(b)(3)(A), 4101(a)(1) and (c), 4222(c), 6001, 6417(h), 6418(h), and 7805(a) of the Code. Section 45Z contains several delegations of authority to the Secretary of the Treasury or the Secretary's delegate (Secretary). Section 45Z(e) directs the Secretary to issue guidance no later than January 1, 2025, regarding implementation of section 45Z, including calculation of emissions factors of transportation fuel, the emissions rate table described in section 45Z(b)(1)(B)(i), and the determination of clean fuel production credits under section 45Z. Section 45Z(f)(2) further authorizes the Secretary to issue regulations regarding the fuel production attributable to the taxpayer in the case of a facility with multiple owners, and section 45Z(f)(1)(A)(i)(II) authorizes the Secretary to issue guidance on certification and other information with respect to certain transportation fuels. Section 45Z(f)(3) authorizes the Secretary to prescribe additional related person rules for other entities similar to the rule described for corporations that are members of an affiliated group of corporations filing a consolidated return. This includes the authority to prescribe rules for related persons with respect to which the taxpayer has reason to believe will sell fuel to an unrelated person in a manner described in section 45Z(a)(4). Section 45Z(d)(5)(C) directs the Secretary to issue regulations or other guidance as the Secretary determines necessary to carry out the purposes of section 45Z(d)(5)(A)(iv), which excludes from the definition of “transportation fuel” any fuel produced from a fuel for which a credit under section 45Z is allowable. Section 45Z(b)(1)(B)(ii) authorizes the Secretary to determine, in the case of any transportation fuel that is not a sustainable aviation fuel (SAF), whether a model is a successor model to the Greenhouse gases, Regulated Emissions, and Energy use in Transportation model developed by the Argonne National Laboratory (ANL). Additionally, section 45Z(b)(1)(B)(i) directs the Secretary, subject to section 45Z(b)(1)(B)(ii) through (v), to annually publish a table setting forth the emissions rate for similar types and categories of transportation fuels based on the amount of lifecycle greenhouse gas (GHG) emissions as described in section 211(o)(1)(H) of the Clean Air Act (CAA) (42 U.S.C. 7545(o)(1)(H)), as in effect on August 16, 2022 (CAA-2022) for such fuels, expressed as kilograms of equivalent carbon dioxide (CO <E T="52">2</E> e) per 1,000,000 British thermal units (mmBTU), which a taxpayer must use for purposes of section 45Z. The proposed regulations cite to the CAA-2022 as enacted by section 1501(a)(2) of the Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594, 1067 (2005), amended by section 202(a)(1) of the Energy Independence and Security Act of 2007, Public Law 110-140, 121 Stat. 1492, 1521-22 (2007). Section 45Z(b)(1)(B)(iv) authorizes the Secretary to determine the regulations or methodologies for emissions rate adjustments to exclude any emissions attributed to indirect land use change. Section 45Z(b)(1)(B)(v)(I) requires the Secretary to provide a distinct emissions rate with respect to any transportation fuel derived from animal manure. The emissions rate must be based on the specific animal manure feedstock, which may include dairy manure, swine manure, poultry manure, and any other sources that the Secretary determines to be appropriate. Section 45Z(b)(1)(B)(v)(II) authorizes the Secretary to provide an emissions rate less than zero with respect to any transportation fuel derived from animal manure. Section 1361(b)(3)(A) authorizes the Secretary to prescribe regulations providing exceptions to the subparagraph's treatment of a qualified subchapter S subsidiary (as defined in section 1361(b)(3)(B)) for purposes of the Code. Section 4101(a)(1) authorizes the Secretary to prescribe regulations related to any registration required under section 4101, including the time, form, manner, and terms and conditions of such registration. Section 4101(c) provides that rules similar to the rules of section 4222(c) apply to registration under section 4101. Section 4222(c) authorizes the Secretary to prescribe regulations related to the denial, revocation, or suspension of any registration under section 4222 if the Secretary determines that a registrant has used such registration to avoid the payment of tax or to postpone or interfere with the collection of tax, or that such denial, revocation, or suspension is needed to protect the revenue. Section 6001 authorizes the Secretary to prescribe regulations related to recordkeeping, statements, and special returns. Section 6417(h) directs the Secretary to issue such regulations or other guidance as may be necessary to carry out the purposes of section 6417. Section 6418(h) directs the Secretary to issue such regulations or other guidance as may be necessary to carry out the purposes of section 6418. These regulations would also be issued under the express delegation of authority under section 7805(a) of the Code, which authorizes the Secretary to prescribe all needful rules and regulations for the enforcement of the Code, including all rules and regulations as may be necessary by reason of any alteration of law in relation to Internal Revenue. <HD SOURCE="HD1">Background</HD> <HD SOURCE="HD1">I. Overview</HD> Section 45Z, added to the Code by section 13704 of Public Law 117-169, 136 Stat. 1818, 1997 (August 16, 2022), commonly known as the Inflation Reduction Act (IRA), and amended by section 70521 of Public Law 119-21, 139 Stat. 72, 276 (July 4, 2025), commonly known as the OBBBA, provides an income tax credit (section 45Z credit) for clean transportation fuel produced domestically after December 31, 2024, and sold by December 31, 2029. <E T="03">See</E> section 13704(c) of the IRA; section 70521(d) of the OBBBA; section 45Z(g). The section 45Z credit is a general b ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 352k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━