Congress will return for a lame duck session next week, and it does not appear the biodiesel blender’s tax credit (40A) extension is in the cards. It is also unlikely that the Department of Treasury will release guidance for the Clean Fuel Production Tax Credit (45Z) ahead of the Jan. 1 start date, although some reports indicate it may come before Jan. 20. Meanwhile, Republicans looking at their trifecta control next year have their eyes set on reformulating 45Z.
Paul Winters, Clean Fuels Alliance of America director of public affairs and federal communications, said he believes Congress is adamant that there won’t be any legislation on tax in the remaining lame duck session leaving no way to extend the BTC. He also doesn’t see safe harbor guidance allowing the program to go forward with the current GREET model. “It’s a hidden problem at the moment,” he told CoBank, which is hitting the domestic clean fuels industry more than others.
“I don’t think harm starts showing up in the numbers until the end of the year,” he said, as facilities use up all their feedstocks on hand, but unable to know the price or economic situation going forward. Biodiesel and renewable diesel facilities normally shut down for maintenance in January but may extend longer until more is known on future tax credits. Biodiesel and renewable diesel met 9% of U.S. demand for heavy-duty transportation fuel.
Republicans who were left out of the creation of 45Z in the Inflation Reduction Act are now seeking input on how it could be addressed going forward. Rep. Randy Feenstra, R-Iowa, and other members of the House Ways and Means Committee are seeking insight on the biofuels policy, specifically the impact to rural America.
“Unfortunately, the Biden administration’s refusal to provide timely guidance and its track record of creating unworkable and out of touch standards reflects an ignorance of the biofuels marketplace,” said Rep. Adrian Smith, R-Neb.
If modifications are made to the 45Z tax credit, the Department of Treasury will need to publish new guidance. The solicitation for input asks given the delay in publishing guidance for the current credit, what are the risks and benefits of immediate modifications to the 45Z tax credit? It also asked if 45Z should continue to be the biofuels tax credit after 2027, and what would be the appropriate extension length.
In a statement, Feenstra said the significant change in policy made without Republican input warrants a new look as Congress tackled tax policy early in 2025.
“We need to ensure that farmers have flexibility on the agricultural practices that they implement to qualify for the clean-fuel production tax credit,” he said. The representatives’ input request asked what products or practices are not currently allowed as a climate-smart ag practice when calculating a carbon intensity score and if there are other new and emerging ag products or practices that should be considered for eligibility.