45Z: Clean Fuel Production Credit

Federal Agency

Sub-Department

Internal Revenue Service (IRS)

Purpose

To provide a tax credit for domestic production of clean transportation fuels, including sustainable aviation fuels. Fuels with less than 50 kilograms of carbon dioxide equivalent per million British thermal units (CO2e per mmBTU) qualify as clean fuels eligible for credits.

Applicant and/or Project Eligibility Requirements

Producers must be registered in the United States to qualify.

Decarbonization Considerations

Fuels with less than 50 kilograms of CO2e per mmBTU qualify as clean fuels.

Equity Considerations

Credit is 5 times the base amount ($1/gallon for non-aviation fuel, $1.75 gallon for aviation fuel, multiplied by the emissions factor) for facilities meeting prevailing wage and registered apprenticeship requirements.

Helpful Tips

Tax-exempt entities can leverage these credits through a new mechanism known as "elective" or "direct" pay. To learn more about how these tax credits work for entities with and without tax liability, check out our Funding Guidance here: https://cityrenewables.org/funding-guidance/understanding-available-incentives/tax-credits-for-renewable-energy/

Other Notes

N/A