OBBB changes reviewed: Over the next few weeks CFO Services will go through the business credits and incentives impacted by the bill.
| Week 1 | Week 2 | Week 3 | Week 4 | Week 5 | Week 6 | Week 7 | Week 8 |
| OBBB Overview | 174 Research Expenses | 48D Semi Incentives | 48E/45Y Clean Energy | 45V Clean Hydrogen | 45Z Clean Fuel Production | 45Q Carbon Capture | 45X and Buy/Sell |
In Brief
The One Big Beautiful Bill Act (OBBB, P.L. 119-21), signed into law on July 4, 2025, brings significant changes to the Section 45Z Clean Fuel Production Credit. The OBBB extends the 45Z credit for two additional years, tightens eligibility requirements, and introduces new restrictions on feedstocks, emissions rates, and foreign entity involvement.
Key Takeaways:
- Extension: The 45Z credit is now available for transportation fuel produced through December 31, 2029 (previously 2027).
- Feedstock Sourcing: Starting in 2026, only fuel produced from feedstocks grown or produced in the US, Mexico, or Canada will qualify.
- Emissions Rates: Negative emissions rates are prohibited for most fuels after 2025, except for certain animal manure feedstocks.
- No Double Credits: Credits cannot be claimed for fuels produced from other fuels that already received a 45Z credit.
- Foreign Entity Restrictions: Credits are denied to specified foreign entities and, after a two-year phase-in, to foreign-influenced entities.
- Transferability: Transfer of credit is still allowed, but not to specified foreign entities.
What is Section 45Z?
Section 45Z provides a production tax credit (PTC) for clean transportation fuels produced in the US and sold to unrelated parties. The credit amount is based on the fuel’s lifecycle greenhouse gas (GHG) emissions, with higher credits for lower-emission fuels. Sustainable aviation fuel (SAF) and non-SAF transportation fuels are both eligible, subject to specific requirements.
Key OBBB Changes to 45Z Clean Fuel Credit
1. Extension of Credit Period
Prior Law: Credit available for fuel produced and sold from 2025 through 2027.
OBBB: Credit period extended through 2029
2. Feedstock Sourcing Requirement
New Rule: For fuel produced after December 31, 2025, only feedstocks grown or produced in the US, Mexico, or Canada are eligible.
Impact: Producers must review and potentially adjust supply chains to ensure compliance.
3. Emissions Rate Adjustments
Negative Emissions: Prohibited for most fuels after 2025, except for animal manure-derived fuels (which may still have negative rates as determined by the IRS).
Indirect Land Use Change: Emissions rates must exclude indirect land use change, providing more certainty for taxpayers.
4. No Double Credits
Restriction: No 45Z credit for fuel produced from another fuel that already received a 45Z credit.
5. Sustainable Aviation Fuel (SAF)
Excise Tax Credit: The Section 6426(k) SAF excise tax credit is terminated after September 30, 2025.
Parity: After 2025, SAF receives the same 45Z credit rate as other transportation fuels.
6. Foreign Entity Restrictions
Specified Foreign Entities: No credit for fuel produced by specified foreign entities after enactment.
Foreign-Influenced Entities: No credit after two years for entities meeting certain foreign ownership or control thresholds.
7. Transferability
Allowed: Credits can be transferred, but not to specified foreign entities.
Key Changes, Deadlines, and Restrictions
| Feature | Prior Law (IRA) | OBBB (as Enacted) |
| Credit Period | 2025–2027 | 2025–2029 |
| Feedstock Sourcing | No restriction | US/Mexico/Canada only (2026+) |
| Negative Emissions Allowed | Yes | No (except animal manure) |
| Transferability | Yes | Yes (not to foreign entities) |
| Foreign Entity Restrictions | None | Yes (phased in) |
IRS Circular 230 Required Notice‐‐IRS regulations require that we inform you that to the extent this communication contains any statement regarding federal taxes, that statement was not written or intended to be used, and it cannot be used, by any person (i) for the purpose of avoiding federal tax penalties that may be imposed on that person, or (ii) to promote, market or recommend to another party any transaction or matter addressed herein.