—Energy & Tax Policy Update

The U.S. Department of the Treasury and Internal Revenue Service have released proposed regulations (IR-2026-20) to implement the clean fuel production credit—commonly known as the 45Z credit—under the recently enacted One, Big, Beautiful Bill (OBBB). The guidance provides much-needed clarity for domestic producers of clean transportation fuels seeking tax incentives through 2029.

What Is the Clean Fuel Production Credit?

Businesses can claim an income tax credit for clean transportation fuel produced domestically after December 31, 2024, and sold by December 31, 2029. To qualify, producers must be registered with the IRS using Form 637 at the time of production. The proposed regulations detail how to calculate credits, determine emissions rates, and meet certification requirements.

Key Changes Under the OBBB

The new legislation significantly reshapes the credit program:

• Extended timeline: Credit availability now runs through December 31, 2029
• North American feedstock requirement: Only feedstocks grown or produced in the U.S., Mexico, or Canada qualify
• Foreign entity restrictions: New prohibitions on involvement by certain foreign entities
• Broader sale attribution: Rules expanded for fuel sold through related intermediaries
• Sustainable aviation fuel (SAF): Special rate eliminated; SAF now follows standard credit calculations
• Anti-abuse safeguards: New provisions prevent double-crediting of emissions reductions
• Emissions rate limits: Negative emissions rates prohibited—except for fuels derived from animal manure, which receive special treatment with feedstock-specific emissions calculations
• Simplified modeling: Indirect land use change (ILUC) emissions excluded from calculations

Next Steps for Industry Stakeholders

The Treasury Department and IRS are accepting public comments on the proposed regulations. Interested parties can:

• Submit comments via the Federal e-Rulemaking Portal (reference “IRS” and “REG-121244-23”)
• Request to speak at a scheduled public hearing
• Mail paper submissions to the IRS address listed in the release

These regulations represent a pivotal moment for clean fuel producers navigating the evolving landscape of U.S. climate policy. Companies should review the proposed rules carefully and consider submitting feedback to shape the final guidance.

For full details, visit the IRS’s One, Big, Beautiful Bill provisions page on IRS.gov.

Note: This summary is based on IRS Release IR-2026-20 dated February 3, 2026. Always verify current guidance before making business or tax decisions.