The Internal Revenue Service issued detailed guidance on the Section 45Z Clean Fuels Production Tax Credit, which provides tax credits for eligible clean transportation fuels produced domestically, the agency said Sept. 8.
The credit, modified by the Working Families Tax Cuts law, depends on a fuel's lifecycle greenhouse gas emissions rate, with lower-emission fuels qualifying for larger credits. The new Notice 2026-53 provides 2026 emissions rate tables and addresses how producers should calculate credits for various fuel types.
The guidance allows agricultural producers to account for qualifying low-carbon agricultural practices and farm-specific manure management practices in emissions calculations. It also sets distinct emissions rates for transportation fuels derived from specific animal manure feedstocks, including dairy and swine manure. The 2026 emissions rate table includes dairy and swine manure, with the Treasury and IRS expecting updates later in 2026 to include poultry and beef manure.
"This guidance helps unlock billions of dollars for America's agricultural producers, provides greater certainty for investment across rural America, strengthens domestic biofuel production, and helps lower fuel costs for American consumers," IRS Chief Executive Officer Frank J. Bisignano said.
The credit requires emissions rates to exclude indirect land use change impacts and limits eligible transportation fuel to fuel derived exclusively from feedstocks produced or grown in the United States, Mexico or Canada. Negative emissions rates are prohibited, except for transportation fuel derived from animal manure.