The Senate Finance Committee has released language on the 45Z tax credit and it is similar in many ways to the House version, but there are a few notable differences.
Senate Bill Similarities
Mitchell Hora, CEO of Continuum Ag says, “They kept the extension to 2031, they kept the reduction of the indirect land use change component, which helps all U .S. biofuels producers.”
Biggest Difference in Transferability of Credits to Get Revenues Down to Farmers
However, at first glance he thinks the Senate language looks more favorable than the House. The biggest difference is the Senate version doesn’t include the House language which terminates transferability after 2027.
Troy Bredenkamp. senior vice president of Government & Public Affairs for the Renewable Fuels Association says,
“So the Senate version includes transferability of the 45Z tax credit now through 2031. That’s certainly one of the big changes for us and one that’s very favorable.”
Hora adds, “It’s incredibly important, especially for some of those farmer owned ethanol plants are smaller producers, folks that transferring meaning re-seller broker out the finalized tax credits, being able to monetize it through those markets.”
And Hora further explains its part of getting revenue down to the farmer. “Likely how this will work is the farmer will get paid a premium for their data, whether directly associated with the crop or indirectly associated with the crop.”
Foreign Feed Stock Treatment
Another variance, the House bill prevented the credit from applying to fuels made with feed stocks outside the U.S., Canada or Mexico, such as Used Cooking Oil (UCO) from China. The Senate version provides a reduced credit.
Bredenkamp says, “This one took a little different approach. It only gives a foreign feed stock an 80% tax credit value. So that’s how they chose to differentiate.”
The American Soybean Association is opposing this provision, as president Caleb Ragland says they prefer to have foreign feed stock excluded from any U.S. biofuels tax credit.
Credit Value for SAF Cut
Also, the credit value for sustainable aviation fuel (SAF) would drop from $1.75 to $1.00, equalizing the value for all eligible fuel types.
Bredenkamp says this will :That will certainly have a cooling effect on SAF and without a doubt, really backing that from $1.75 back to $1.00 is going to have a real negative impact I think in terms of progress made on sustainable aviation fuel.”
Plus, The Senate version extends the 40B credit for SAF to fuels sold between Dec. 31, 2024, and the end of September.
The Senate and House versions will now be conferenced together before heading on to be part of the big beautiful bill.
