The US Department of Treasury and Internal Revenue Service (IRS) has released proposed regulations for the 45Z clean fuel production tax credit. Image source: Pixabay
The US Department of Treasury and Internal Revenue Service (IRS) has released proposed regulations for the 45Z clean fuel production tax credit. Image source: Pixabay

The US Department of Treasury and Internal Revenue Service (IRS) released proposed regulations for the 45Z clean fuel production tax credit, as updated by the One Big Beautiful Bill (OBBB) in mid-2025, Biodiesel Magazine wrote.

Following the release of the proposed regulations on 3 February, a public comment period was scheduled to open for 60 days with a public hearing scheduled to be held on 28 May, the report said.

The proposed regulations were designed to allow domestic producers of clean transportation fuel to determine their eligibility for, and calculate, the value of the 45Z credit in line with changes made with the OBBB, Biodiesel Magazine wrote on 3 February.

To do this, the proposal provided guidance on clean fuel production credits, emissions rates, and certification and registration requirements, the report said.

According to the IRS, 45Z currently provides businesses with an income tax credit for clean fuel produced domestically after 31 December 2024 and sold by 31 December 2029.

The proposed regulations specified that to qualify for the 45Z credit, taxpayers would have to produce a transportation fuel that met the requirements for sustainability, emissions rate, co-processing and prevention of double crediting; produce the fuel at a qualifying facility in the USA, including in any US territories; be registered as a producer of clean fuel under section 4101 at the time of production; and sell the fuel to an unrelated person in a qualified sale during the taxable year.

To qualify for 45Z, transportation fuel produced after 31 December 2025 would have to be exclusively derived from a feedstock produced or grown in the USA, Mexico or Canada.

For fuel produced on or before 31 December 2025, the credit started at 20¢/gallon for non-aviation fuels and 35¢/gallon for sustainable aviation fuel (SAF).

The IRS is seeking stakeholder input on possible approaches regarding feedstock tracking, to ensure only fuels derived from feedstocks produced or grown in the USA, Canada and Mexico qualify for the 45Z credit, according to the report.