Erin Schilling (Bloomberg): Biofuel Groups Push IRS for New Model to Calculate Tax Credit:
Biofuel and farm groups are asking the Treasury Department and IRS to update the model companies use to calculate whether they qualify for the clean fuel production tax credit.
Agency lawyers are listening to proposals by more than 70 groups for modifying the Section 45Z tax credit proposed rules released in Februaryover a three-day hearing. The credit aims to encourage biofuels produced with low greenhouse gas emissions, a rare break created by Democrats and expandedin the GOP’s 2025 tax law. Treasury and IRS will finalize the rules after considering all the comments.
The number of commenters shows the challenges Treasury and the IRS have in creating rules to spur practices that lower greenhouse gas emissions, reflect industry practices, and appease the powerful farm lobby. Biofuels are typically produced with corn or soybeans, though they can also be created using animal manure or used cooking oil.
The Renewable Fuels Association, Amp Americas, the Coalition for Renewable Natural Gas, and others asked agency lawyers during the Wednesday hearing to update an Energy Department framework for companies to calculate the greenhouse gas emissions produced by their biofuels.
The Energy Department released a model for the tax credit in early 2025, before the GOP tax law loosened some rules around how to calculate emissions. For example, the original tax break required taxpayers to consider indirect land use change, or additional emissions created when land used to grow crops for biofuels triggers more land needed for food production elsewhere. The tax law removed that requirement.
“Delays are creating tremendous uncertainty and investment risk in the marketplace,” Geoff Cooper, president and CEO of the ethanol trade group Renewable Fuels Association, said.
The National Sorghum Producers and the National Grain and Feed Association aimed to make sure that the Energy Department’s emissions calculation considers sustainable farming techniques, such as cover cropping and using less fertilizer, as the IRS said it intended to do in its proposed rules on the credit.
The National Sorghum Producers consultant John Duff said the program was going in the right direction to help farmers benefit from the credit, but details of the modeling framework will be key to whether it succeeds.
IRS lawyers are contending with a wide swath of complaints from different industries over the proposed tax credit rules.
The Heritage Foundation, a conservative think tank, said the proposed rules don’t have strong enough guardrails and could result in producers buying clean energy in one region while continuing to operate with fossil fuels.
NATSO and SIGMA, which represent convenience stores and truck stops, said biofuel producers should be required to show the value of their tax credit when they sell their fuel.
Eric Sievers, secretary at ethanol fuel refinery Aztalan Bio LLC, said producers don’t know the value of the credit quickly enough to pass that information onto buyers.
