The US Department of the Treasury and the Internal Revenue Service (IRS) have released proposed regulations outlining how domestic fuel producers can qualify for the updated clean fuel production tax credit introduced under the recently enacted One, Big, Beautiful Bill (OBBB).
The guidance marks the first detailed framework for implementing changes to the incentive commonly referred to as the 45Z credit.
The revised program applies to clean transportation fuels produced in the United States after December 31, 2024 and sold before the end of 2029.
Eligible producers must register with the IRS using Form 637 at the time of production in order to claim the credit. Treasury officials said the draft rules are intended to provide greater clarity around emissions accounting, certification processes and registration requirements, following extensive feedback from industry stakeholders.
According to the agencies, the framework aims to reduce uncertainty for project developers while ensuring consistent emissions reporting across different fuel pathways.
Key Policy Shifts Under the New Law
The proposed regulations reflect a series of structural changes introduced by OBBB. Most notably, the legislation extends the credit’s availability through 2029, providing longer-term visibility for low-carbon fuel investments. It also tightens supply chain requirements by limiting eligible feedstocks to those produced in the US, Mexico or Canada.
Additional provisions introduce restrictions tied to prohibited foreign entities and expand how fuel sales through related intermediaries are treated for credit attribution. The law also removes the separate preferential rate previously applied to sustainable aviation fuel, aligning SAF with other qualifying clean fuels under a unified structure.
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To safeguard programme integrity, Treasury has added an anti-abuse mechanism designed to prevent multiple credits being claimed for the same fuel volumes. The framework further disallows negative emissions scores for most fuels, with a narrow exception for pathways derived from animal manure. For those projects, feedstock-specific emissions values will now be required.
Another notable adjustment is the exclusion of indirect land use change impacts from lifecycle emissions calculations, simplifying modelling requirements for producers.
Treasury and the IRS are now inviting public input on the draft rules. Stakeholders can submit written comments through the federal e-rulemaking portal and request to participate in an upcoming public hearing.
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