Section 45Z: The Fuel Credit That Got Longer

How the Credit Computes

Section 45Z pays a producer — not a blender — for clean transportation fuel produced at a qualified US facility and sold through December 31, 2029. The credit is $0.20 per gallon base, $1.00 with prevailing wage and apprenticeship, multiplied by an emissions factor: one minus the fuel’s lifecycle emissions rate over 50 kg CO₂e per mmBtu. A fuel at half the benchmark earns half the rate; at or above the benchmark, nothing.

Emissions rates come from the annually published table built on 45ZCF-GREET, with a provisional emissions rate process for pathways the table misses. Producers must be registered under section 4101 before production — the administrative step that has already cost latecomers a compliance year.

What OBBBA Rewrote

• Two more years — the credit now runs for fuel sold through 2029, extended from 2027.
• North American feedstocks — from 2026, feedstocks must be grown or produced in the US, Mexico or Canada; imported used cooking oil economics change materially.
• Indirect land-use change excluded from the emissions rate — a systematic CI improvement for crop-based fuels.
• Negative rates capped — only animal-manure pathways may register below zero.
• SAF premium removed — sustainable aviation fuel produced from 2026 shares the standard $1.00 cap rather than $1.75.
• FEOC, lightly — specified foreign entities are barred now; the foreign-influenced entity test arrives for tax years beginning after July 2027. No content ratio applies.

Stacking With Fuel Programs

45Z sits under fuels that also earn credits in clean fuel standard markets — California’s LCFS, the BC LCFS, Canada’s CFR for exported volumes, Oregon and Washington — and with the RFS RIN system. The federal credit does not reduce state program value, and the combined stack, not any single program, is what finances new capacity.

Two boundary rules shape the stack. A facility for which a 45Q carbon capture credit is allowed for the year sits outside 45Z — producers adding capture elect whichever credit prices better, while the CI improvement from capture still lifts the fuel programme side either way. And the same CI discipline carries across the border: a Canadian production line can pair a capital clean economy ITC with CFR credits on every litre, the mirror of the 45Z-plus-LCFS stack in the United States.

Monetisation runs through elective pay for applicable entities and section 6418 transfer for everyone else — preserved intact by OBBBA after early drafts threatened it. Proposed regulations published in February 2026 carry the detailed eligibility and registration mechanics; final rules are pending.