Qualified taxpayers may be eligible for the clean fuel production tax credit beginning January 1, 2025, through December 31, 2027, available under the Inflation Reduction Act. The registration deadline for approval is January 1, 2025.
Taxpayers looking to claim the clean fuel production tax credit (PTC) for activity starting on January 1, 2025, should apply for their registration letter by July 15, 2024. In IRS Notice 2024-49, the IRS indicates it intends to process applications submitted before July 15, 2024, and encourages taxpayers to apply as soon as possible to be eligible to earn the credit starting January 1, 2025. Learn more about how to qualify for the PTC and the registration parameters your organization may need to consider.
Registering as a Producer for the Clean Fuel Production Tax Credit
Taxpayers with qualified facilities that produce and sell to unrelated parties—either sustainable aviation fuel (SAF) for aircraft or non-sustainable aviation fuel (non-SAF) for highway vehicles—that emit 50 kilograms or less of carbon dioxide per 1 million BTU, may be eligible for a PTC under Section 45Z of the Internal Revenue Code.
The Section 45Z PTC is a federal income tax credit that may be worth $0.20 per gallon for most transportation fuels or $0.35 per gallon for sustainable aviation fuel, or more, if the IRS determines that the amount of credit may be enhanced by negative emissions factors for the fuel. Taxpayers who meet the specified wage level and apprenticeship program requirements for certain activities may generate up to five times the amount of credit.
Eligible production must occur after December 31, 2024, and before January 1, 2028. Not all non-SAF fuel types are expected to be eligible. Low-greenhouse gas (GHG) fuels are expected to qualify if they meet the emission requirements, such as:
- Biodiesel
- Ethanol
- Diesel
- Butanol
- Dimethyl ether
- Gasoline
- Hydrogen
- Liquified petroleum gas
- Methanol
- Renewable natural gas
Fuels derived from palm fatty acid distillates, petroleum, natural gas, and coal aren’t expected to qualify.
The taxpayer and the clean fuels the taxpayer produces must also meet other requirements to be eligible to claim the Section 45Z credit. A registration letter isn’t a determination by the IRS that the registrant is eligible to claim the 45Z credit.
How to Register for the PTC
The Department of the Treasury and the IRS released Notice 2024-49 on May 31, 2024, to provide taxpayers with guidance on the registration process. More guidance is expected to be released.
To be eligible to claim the Section 45Z credit for production starting January 1, 2025, a taxpayer must receive a signed registration letter from the IRS dated on or before January 1, 2025. Registration applications submitted after July 15 may not receive an approval letter by January 1, 2025.
To register, taxpayers must complete Form 637, Application for Registration (for Certain Excise Tax Activities). The IRS is currently revising Form 637 to incorporate the new activities related to the PTC. While the updates are being made, the IRS has advised taxpayers to write in the applicable activity code using the current version available.
The new activity codes applicable to the credits are “CN” for producers of non-SAF or “CA” for producers of SAF.
We’re Here to Help
To learn more about the PTC and how your organization can leverage this opportunity, contact your Moss Adams professional.
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