45Z Tax Credit: Guidance Issued, Immediate Action Needed

On May 31, 2024, guidance was issued by the Internal Revenue Service (IRS) and US Treasury (Treasury) regarding registration requirements related to the Clean Fuels Production Tax Credit (45Z).

The IRS has stated any registrations received after July 15, 2024 could be delayed, there is no guarantee registrations received before July 15, 2024 will be approved by January 1, 2025 but it does appear that is the intent.

Immediate Action Needed for Eligible Producers

• Anyone intending to claim the 45Z tax credit must have an approved registration letter from the IRS before they can generate 45Z tax credits.

• Only gallons produced and sold after you receive the registration approval will be considered for 45Z eligibility. As a reminder gallons produced and sold after December 31, 2024 could be eligible, however you must be registered and approved.

 How to Submit Registration

• File Form 637 Application for Registration for Certain Excise Tax Activities

• The two following new codes are to be used:

• • CN = non‐SA
  • CA = SAF

• The applicant must provide the following information for each non‐SAF production facility.

(A) Each type of non‐SAF transportation fuel and the annual volume of each type of non‐SAF transportation fuel the applicant produces. If a type of non‐SAF transportation fuel the applicant produces is not described in the IRS notice, state “Other” and provide a description of the fuel;

Fuel types described in the IRS notice are:

1. Low‐GHG Biodiesel;
2. Low‐GHG Butanol;
3. Low‐ GHG Diesel;
4. Low‐ GHG Dimethyl ether;
5. Low‐GHG Ethanol
6. Low‐GHG Gasoline;
7. Low‐GHG Hydrogen;
8. Low‐GHG Liquefied Petroleum Gas (LPG);
9. Low‐GHG Methanol;
10. Low‐GHG Natural Gas

(B) The feedstock(s) and country of origin of each feedstock used to produce each type of non‐SAF transportation fuel the applicant produces;

(C) The location(s) and a description of the applicant’s production facilities;

(D) Each production facility’s annual fuel production capacity, and whether the applicant’s production facilities are operational and currently producing volumes of non‐SAF transportation fuel;

(E) The names and addresses of any person(s) acting for the applicant as an agent or broker in buying, selling, or transporting any non‐SAF transportation fuel;

(F) The business entities to which the applicant sells non‐SAF transportation fuel;

(G) The business entities from or with which the applicant buys, trades, transfers, or exchanges any non‐SAF transportation fuel;

(H) The annual volume of non‐SAF transportation fuel the applicant buys, sells, trades, transfers, or exchanges;

(I) A statement indicating under which ASTM standard(s), SAE standard(s), or both, the applicant produces non‐SAF transportation fuel.

The guidance goes on to say,

“The IRS will register an applicant with Activity Letter “CN” only if the IRS (A) concludes that the applicant is engaged as a producer of non‐SAF transportation fuel that may be eligible for the § 45Z credit, or is likely to become so engaged within a reasonable time after being registered; and (B) is satisfied with the filing, deposit, payment, reporting, and claim history for all federal taxes of the applicant and any related person (as defined in § 48.4101‐1(b)(5)).”

Appendix A provides the eligible listing of feedstocks used to make fuels that could be eligible for the 45Z tax credit. These feedstocks are what should be referenced in item B above. For non‐SAF ethanol the most common feedstocks are: Corn, Grain sorghum and Wheat. 

All information can be referenced in the full Appendix A located in the IRS notice on their website:  https://www.irs.gov/pub/irs-drop/n-24-49.pdf.

If you have any questions regarding eligibility or requirements, please reach out to a Pinion advisor.