The 45Z tax credit, part of the Inflation Reduction Act, aims to enhance sustainable aviation fuel production in the United States. Chad Smith reports that the current proposal requires several key adjustments.
"45Z is one of the tax credit provisions from the Inflation Reduction Act meant to boost the bottom line of farmers and ranchers while helping the U.S. reduce carbon emissions," said Roger Cryan, chief economist for the American Farm Bureau Federation. He noted that 45Z replaces previous tax credits unfavorable to American producers.
"We're looking forward to the 45Z, which is for renewable fuels generally, and that applies in 2025 through 2027. That is beyond sustainable aviation fuel. It has a lot of potential, especially if we get better standards, better safe harbors in place for that," Cryan stated.
However, Cryan highlighted some issues with the credit revealed when guidance was released. "That guidance in April finally came out, and it was very disappointing. It really forces us to look at what's next and how to do this better."
Cryan also pointed out concerns about foreign feedstocks being used for renewable fuel: "Chinese used cooking oil, Brazilian sugar ethanol, Brazilian second crop corn—those all score well in the UN model for weird land use reasons, and U.S. crops actually have a harder time scoring, not because they aren't sustainable but because of this UN model."
Efforts are ongoing to make the credit more beneficial for U.S. farmers. "USDA did a lot of work supporting these limited safe harbors announced in April. It was late; it was not enough," Cryan remarked. "But the only folks who really made an effort were USDA."
The American Farm Bureau Federation (AFBF) is collaborating with various agricultural groups to push for proper implementation by the IRS. "We've been talking to folks on the Hill to recognize that the intent was to build infrastructure and a supply chain in the U.S. for sustainable fuels, not to be importing a cherry-picked selection of crops from overseas," Cryan added.
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Chad Smith reporting from Washington.
