The 45Z Clean Fuel Production tax credit was first enacted in 2022 under a Democratic-led Congress. The same year it took effect, 2025, a Republican-led Congress extended 45Z through 2029. In fact, 45Z is the only provision from the Democrats’ 2022 bill Republicans saved, demonstrating both parties strongly support the low-carbon, performance-based tax credit.
After a prolonged period of implementation delays, the last pieces of the 45Z puzzle are finally coming together.
In June, the U.S. Department of Agriculture published the feedstock carbon intensity calculator (FD-CIC) to calculate the value of low carbon farming practices, and, guidelines for quantifying, reporting, and verifying those low carbon farming practices. The guidelines call for field level carbon scoring instead of a whole farm. This should benefit farmers who implement high-performing practices some acres, without being averaged down by other fields. USDA will require farmers to use a Nutrient Management Use (NUE) approach for fertilizer. Rather than checking boxes for specific practices, farmers must input their actual nitrogen applied and actual/expected yield, and the FD-CIC calculates NUE and associated emissions.
Also in June, the U.S. Energy Department (DoE) updated the 45ZCF-GREET model to ensure more accurate and real-world carbon accounting by removing indirect land use change (ILUC) penalties from carbon scores.
Then in September, DoE and the IRS completed two remaining significant pieces of the 45Z puzzle related to farming practices.
DoE released an updated 45ZCF-GREET model which now includes USDA’s FD-CIC module to quantify the benefits of low-carbon farming practices. To be clear about how this works: farmers still need to run the USDA FD-CIC for each field and sign a Biofuel Feedstock Report accompanying their low-carbon bushels. What is new is the plant now has a defined place in 45ZCF-GREET to enter the scores for the verified bushels so they count toward their overall CI and the 45Z credit.
At the same time, Treasury and IRS issued Notice 2026-53 which allows fuel produced in 2025 and 2026 to use the newest version of the 45ZCF FD-CIC to quantify low-carbon bushels, and waives the pre-planting nutrient budget requirement for those two years (safe harbor). Chain of custody and third-party verification still apply, however, and every nutrient application still has to be substantiated. The safe harbor makes 2025 and 2026 bushels claimable, but only where documentation exists. For the 2027 crop, farmers will need to have prospective nitrogen budgets in place this fall and winter.
The puzzle is nearly complete. In November we expect Treasury will incorporate the USDA guidelines for quantifying, reporting and verifying low-carbon farming practices and the DoE GREET model into their final rule.
Building up to this moment, ACE has been working to solve for the 45Z documentation and verification requirements for farming practices. Please reach out to me directly to learn more about how we can help your plant navigate the opportunities and challenges with monetizing farming practices under 45Z.