Sustainable aviation fuel and clean fuel production tax credits hold promise for benefiting farmers while reducing America's carbon emissions. However, certain provisions may prevent many U.S. farmers from reaping these benefits.
Four agricultural organizations—the National Farmers Union, American Farm Bureau Federation, American Soybean Association, and National Corn Growers Association—have addressed these concerns in a letter to Treasury Secretary Janet Yellen and U.S. Office of Management and Budget Director Shalanda Young. They urge the officials to ensure that the Clean Fuel Production Credit (45Z) is accessible to U.S. farmers.
The letter states: “As farmers, we are growing the feedstocks necessary for clean fuel production, such as corn, soybeans and other biomass. The 45Z tax credit has the potential to be a game-changer for our industry, offering a valuable incentive for the production and use of biofuels that will lower carbon emissions. However, without clear domestic feedstock requirements, the benefits of this policy are at risk of being diverted from American farmers.”
Currently, there is no mandate that feedstocks be grown domestically. This allows foreign producers to take advantage of the clean fuel production credit, which contradicts efforts to support U.S. agriculture and rural communities and could result in market distortions.
Furthermore, climate-smart agriculture practices bundled with cumbersome reporting requirements in sustainable aviation fuel guidance could exclude many farmers from benefitting from the SAF credit. “The implementation of no-till farming, cover cropping and enhanced efficiency fertilizers requires significant upfront investments in both time and resources,” according to the groups' letter. “Without a greater incentive, many farmers may simply be unable to implement these bundled practices based on economic limitations alone.” They also noted that even if geographic conditions allow compliance with climate-smart agriculture requirements, complex reporting requirements could deter participation by sophisticated farming businesses.
The groups suggest additional compliance options that would enable farmers to meet CSA requirements without violating IRS regulations.
For further information on these tax credits from an American Farm Bureau Federation Market Intel report, click here.
