As your crops are rolling in this fall, don’t forget about your second harvest – crop data.
Both the ag and ethanol industries have been on the edge of their seats, anxious to see what will happen with the 45Z Clean Fuels Production Tax Credit in 2025.
While guidance has not been released for the tax credit that is set to begin on January 1st – we do know the corn being harvested right now will be utilized for whatever credits do come together in 2025.
Although there still are many lingering questions, one thing is clear: farmers need to gather carbon intensity (CI) data on their crops this harvest season if they want any chance at capturing those opportunities in 2025.
“We are still waiting for guidance surrounding the 45Z tax credit,” says Donna Funk, Pinion biofuels advisor. “But corn farmers need to have their data ready so that a CI score can be determined once we know how to determine it.”
Preparing for the 45Z Clean Fuel Tax Credit
Previously, USDA Secretary, Tom Vilsack, has expressed optimism that guidance would be released by January 20, 2025. However, with the election results and a change in administration we anticipate this guidance could be delayed even longer while the new administration in put in place and reviews all regulation OR the current administration could move into hyper mode and get regulations issued before the new administration has a chance to weigh in.
Until then, we can only speculate on what flexibility will be allowed and what options farmers will have. But we do see that ethanol producers want to share the 45Z value with farmers, if there is something to share.
Ethanol producers are making very large capital expenditures, and they need to retain some of the credit value to recover their investment and also allow for a return to their members. There are a lot of pieces to the tax credit sharing puzzle that must all be put together.
“Ethanol producers want to share the 45Z value with farmers, they simply don’t know yet what they have to share,” says Funk. “That’s where communication and data gathering – not false promises – is key right now.”
Farmers and ethanol producers have to work together to capture the opportunities ahead, and farmers need to have their data ready.
Steps for Farmers to Take this Harvest
- Capture your data. Work with your implement dealer if you do not know how to get the data out of your equipment.
- Calculate your CI score. Until the Treasury releases guidance, no one knows which method they’ll require to calculate CI score. However, we recommend using the GREET model, so you have some idea what your CI score is. It’s okay to be wrong – the important thing is that you have data to work with.
- Communicate with your buyers. Engage in conversations with those you sell grain to, so you understand what their business model is.
Potential Changes to the Fuel Tax Credit
Separation of attributes – Efforts are underway to encourage the U.S. Treasury to adopt guidance allowing for separation of the green attributes and the physical kernel of corn. This would help ensure there is no mass disruption in the grain markets.
If this is allowed, the corn farmer might be dealing with two different parties: one for green attribute payments and one for corn .
Extension of the credit – There are some industry champions that have introduced legislation to extend the tax credit from 3 years to 10. But this could be an uphill battle.
Pinion is keeping a close eye on the evolving discussions around tax credits, applicability and strategy expected to come from 45Z.
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