The "Farmer First Fuel Incentives Act" incentivizes the use of American-grown feedstocks for clean fuel production, extends the clean fuel production credit, and refines emissions rate calculations.
Roger Marshall
Senator
KS
The "Farmer First Fuel Incentives Act" modifies the clean fuel production credit to require that qualifying fuels are derived from feedstocks grown in the U.S. and extends the credit through 2034. It also changes how emissions rates are determined by excluding indirect land use changes and refines the emissions factor for the credit. These changes aim to incentivize the use of domestically produced agricultural products for clean fuel production.
Farmer First Fuel Act Mandates US-Grown Ingredients for Tax Credits, Extends Program to 2034
This bill, the 'Farmer First Fuel Incentives Act,' tweaks the rules for a major tax credit aimed at cleaner transportation fuels, known as the Section 45Z Clean Fuel Production Credit. The core changes involve where the raw materials, or 'feedstocks,' must come from, how pollution is measured, and how long the credit lasts.
Keeping it Local: The 'Made in the USA' Fuel Rule
Starting for fuel sold after December 31, 2024, Section 2 of the bill adds a significant requirement: to qualify for the tax credit, the feedstocks used to make the fuel must be grown or produced within the United States. Feedstocks are the basic raw materials – think corn for ethanol or soybeans for biodiesel. This change, amending Section 45Z(f)(1)(A) of the tax code, directly benefits American farmers and agricultural producers by creating a protected market for their goods within the clean fuel sector. However, fuel producers who currently rely on imported feedstocks will need to find domestic sources to continue claiming the credit.
Recalculating Carbon: A Shift in Emissions Accounting
Section 3 changes how the government calculates the lifecycle greenhouse gas emissions for these fuels, which determines the size of the tax credit. Specifically, it mandates excluding emissions from 'indirect land use change' (ILUC) starting for tax years after December 31, 2025. ILUC refers to emissions that happen indirectly when, for example, land like forests or grasslands is converted to grow crops for fuel, potentially releasing stored carbon. By removing ILUC from the calculation (amending Section 45Z(b)(1)(B)), some fuels might appear cleaner on paper, potentially qualifying for larger tax credits. This requires the Treasury Secretary to work with the EPA and USDA on the exact methods but raises questions about whether the emissions score will fully reflect the fuel's total environmental footprint.
More Time on the Clock: Extending the Clean Fuel Bonus
The bill gives the clean fuel industry a longer runway. Section 4 extends the entire Section 45Z tax credit program, pushing the expiration date out seven years from December 31, 2027, to December 31, 2034 (amending Section 45Z(g)). This provides significant long-term certainty for businesses investing in producing fuels like sustainable aviation fuel or renewable diesel, encouraging continued development and production.
Fine-Tuning the Numbers
Finally, Section 5 makes a technical adjustment to how the emissions factor for the credit is calculated, effective for fuel produced after December 31, 2024. It requires rounding the factor to the nearest 0.01 instead of the current 0.1 (amending Section 45Z(b)(2)). This allows for more precise calculations, potentially resulting in slightly different credit amounts for producers, especially those whose fuels have emissions levels close to the rounding thresholds. It's a small detail, but it means the credit can more accurately reflect smaller differences in fuel cleanliness.