CLEAR Skies Act Proposes Tax Credits Up To $1.25/Gallon for Unleaded Aviation Fuel Production from 2026-2030

The CLEAR Skies Act introduces a new federal tax credit aimed squarely at producers of unleaded aviation gasoline. Under the proposed Section 45BB of the Internal Revenue Code, companies could claim a credit for each gallon of qualifying unleaded aviation fuel they produce and sell within the United States. The credit starts at $1.25 per gallon in 2026 and gradually steps down to $1.05 per gallon by 2030, after which the program is set to expire. The core goal is to incentivize the shift away from traditional leaded aviation gas, which is still common in piston-engine aircraft.

Fueling the Transition: How the Credit Works

To qualify for this credit, the aviation gasoline produced must meet several criteria. First, it has to be completely free of tetra-ethyl-lead. Second, it needs to meet specific technical standards outlined in federal regulations (specifically 10 CFR 436.101 and 49 USC 44714) and be certified under existing aviation fuel standards. Production must happen within the U.S., and the fuel must ultimately be transferred into an aircraft fuel tank within the country. Producers looking to claim this credit would also need to register with the IRS under Section 4101. The credit applies to fuel sold after December 31, 2025, and before January 1, 2031.

Checking the Price Tag: The GAO Study

Recognizing that tax credits for producers don't always translate directly into savings for end-users, the bill mandates a study by the Government Accountability Office (GAO). This study is tasked with digging into the real-world price difference between leaded and unleaded aviation gas at the point of sale. It will examine the factors driving any price gap – things like R&D, refining, transport, and storage costs. Crucially, the GAO will assess whether this specific tax credit actually results in lower fuel costs for the pilots and aircraft operators buying the unleaded gas. The study will also track the market share of unleaded aviation fuel and offer recommendations on potentially tweaking the credit to maximize consumer savings. Congress expects this report within a year of the Act's passage.

The Bigger Picture: Cleaner Skies, Tax Code Tweaks

Beyond the core credit and the study, the Act makes necessary adjustments to the tax code. The new credit is added to the list of general business credits under Section 38(b), and producers are formally included in registration requirements (Section 4101(a)(1)). For tax purposes, this qualified unleaded fuel will be classified simply as 'aviation gasoline' (Section 4081(a)(2)(A)(ii)). Essentially, this legislation uses a temporary financial incentive to accelerate the move away from leaded aviation fuel, a known environmental and health concern, while attempting to track whether the financial benefit reaches the folks actually filling up the planes.