Soybean growers and crushers on Tuesday applauded long-awaited guidance from the Treasury Department and Internal Revenue Service on the 45Z tax credit, while urging policymakers to complete work on proposed changes to the Renewable Fuel Standard.
The program, created as part of former President Joe Biden’s Inflation Reduction Act, was amended last year in President Donald Trump’s One Big Beautiful Bill Act (OBBB). The guidance proposes rules that would implement certain changes to the clean fuel production credit under the One Big Beautiful Bill Act. The agencies said the OBBB changed the clean fuel production credit to:
- Extend the credit to Dec. 31, 2029;
- Limit feedstocks to those grown or produced in the US, Mexico, or Canada;
- Add prohibited foreign entity restrictions;
- Broaden sale attribution for fuel sold through related intermediaries;
- Eliminate the special rate for sustainable aviation fuel;
- Add an anti-abuse provision to prevent double crediting;
- Prohibit negative emissions rates except for fuels derived from animal manure;
- Require feedstock-specific emissions rates for fuels derived from animal manure; and
- Exclude indirect land use changes from emissions rates.
The elimination of the indirect land-use penalty is seen as one of friendliest, though not unexpected, elements of the proposed rule. Indirect land-use change, or ILUC, is a carbon penalty added to scores for crops like corn and soybean when calculating credits. It’s based on the idea that if, for example, U.S. farmers use their land to grow crops for fuel rather than food, farmers in other parts of the world will clear forest to compensate for lost food production. Eliminating the penalty would effectively lower the carbon-intensity score of soybeans grown for biodiesel or renewable fuel, boosting the tax credit for soy-based biodiesel and renewable diesel by over 30 cents a gallon.
In a joint statement, the American Soybean Association and the National Oilseed Processors Association welcomed the release of the guidance and cheered the exclusion of ILUC from the emissions standards. Removing the ILUC penalty will effectively double the value of the 45Z tax credit for soy-based biofuels and provide eligibility for other feedstocks like canola, they said.
“Updating federal biofuel policies to prioritize soy-based fuels is a key ASA priority, and we applaud Treasury for this action which will help build domestic markets for U.S. soybeans,” said ASA President Scott Metzger.
“While Treasury’s work to update tax guidance is critical, ASA strongly urges the administration to immediately finalize RFS blending targets that complement the work of Treasury and Congress, by setting robust biofuel volumes and implementing new policies that will prioritize the utilization of U.S. soybeans in production,” he said.
The guidance is open to public comment and a public hearing has been set for May 28.