With the passage of the One Big Beautiful Bill Act (OBBBA), the Renewable Fuels Association (RFA) commended the inclusion of several important tax provisions that will strengthen the U.S. ethanol industry’s role in advancing American energy security and innovation.
“Our primary goal from the start of the budget reconciliation process was to advocate for tax policies that would provide certainty, foster growth, and ensure market stability for U.S. ethanol producers. The One Big Beautiful Bill Act, which passed today, achieves this goal,” stated Geoff Cooper, President and CEO of RFA. “We thank the many supporters of renewable fuels in Congress, along with President Trump, for ensuring that American ethanol producers and farmers had a voice and a seat at the table. The extension and modifications to the 45Z clean fuel production credit, reinstatement of the Research and Development immediate expensing provisions, and improvement of the 45Q carbon sequestration and utilization credit will provide a growth-oriented tax policy climate that ethanol producers can count on, improving the role that renewable fuels can play in helping reach our nation’s energy independence goals.”
Specifically, the OBBBA includes the following improvements to the 45Z Clean Fuel tax provision:
-Extends 45Z by two years, to the end of 2029.
-Restricts eligibility for 45Z to fuels made from feedstocks grown in the U.S., Canada, and Mexico.
-Retains full transferability throughout the term of the 45Z credit.
-Harmonizes indirect land use change emissions with actual data and evidence, resulting in zero ILUC penalty for corn ethanol.
Other key ethanol-related provisions in the budget reconciliation package include:
-Retains key enhancements to 45Q previously made in the Inflation Reduction Act and allows other carbon uses like enhanced oil recovery to qualify for equal credit values.
-Reinstates RD/RE immediate expensing provision that expired in 2022 under the Tax Cuts and Jobs Act.
“With the completion of the budget reconciliation process, RFA, alongside Congress and the Trump Administration, can now shift focus to other priorities for U.S. ethanol producers, such as legislation to permit year-round E15, expanding the role of renewable fuels through stronger renewable volume obligations under the Renewable Fuel Standard (RFS), and finding a fair resolution to the increasing number of pending Small Refinery Exemption petitions,” concluded Cooper.
