The U.S. Department of the Treasury and IRS released initial guidance on Jan. 10, 2025, regarding the production tax credit (PTC) for clean fuels under Section 45Z of the Internal Revenue Code, as enacted by the Inflation Reduction Act (IRA). The guidance includes a notice of intent to propose regulations on the Section 45Z credit and a notice providing the annual emissions rate table for Section 45Z, which refers taxpayers to the appropriate methodologies for determining the life cycle greenhouse gas (GHG) emissions of their fuel. The U.S. Department of Energy (DOE) intends to release the 45ZCF-GREET model applicable to Section 45Z in the next several days.
Under Section 45Z, a PTC is available for each gallon or gasoline gallon equivalent of transportation fuel produced after Dec. 31, 2024, and sold before Jan. 1, 2028. The credit amount equals $1 ($1.75 for sustainable aviation fuel) per gallon or gasoline gallon equivalent, subject to change depending on the emissions factor of the fuel.
The credit amount is reduced to one-fifth of the otherwise available amount if prevailing wage and apprenticeship requirements are not satisfied. (See Holland & Knight's previous alert, "A Look at IRA Prevailing Wage and Apprenticeship Requirements Final Regulations Highlights," July 8, 2024.)
The Holland & Knight Energy Tax Team is reviewing this guidance and will provide additional analysis. To receive this forthcoming analysis, please subscribe to our alerts and access the Holland & Knight IRA Tax Resource Library.
