Lawmakers propose 45Z extension, limiting to US feedstocks
Oct. 5—A bipartisan group of lawmakers are sponsoring legislation to restrict the eligibility of the 45Z tax credit to renewable fuels derived only from domestically sourced feedstock and extending the credit for seven years.
The bicameral and bipartisan Farmer First Fuel Incentives Act is co-led by U.S. Sens. Roger Marshall, R-Kansas, and Sherrod Brown, D-Ohio, with companion legislation introduced by U.S. Reps. Tracey Mann, R-Kansas, and Marcy Kaptur, D-Ohio.
Created by the Inflation Reduction Act, the Clean Fuel Production Credit (45Z) for low carbon fuels, including sustainable aviation fuel (SAF), will be in effect from 2025 to 2027, which is not enough time, lawmakers said.
Extending the credit to 10 years would give the ethanol industry the time and financial incentive to build up the infrastructure needed for the U.S. to be less reliant on foreign fuel, open new markets for farmers and increase ethanol production across the Midwest, according to a news release.
"It's very tough in farm country with high interest rates and low commodity prices, which is exactly why we can't have a tax policy that will lower commodity prices even more," Marshall said. "While we support free trade and open markets, we do not believe foreign feedstocks should be incentivized through the hard-earned dollars of U.S. taxpayers to the detriment of American farmers."
Illinois Farm Bureau President Brian Duncan submitted comments to USDA in July stressing the 45Z tax credit should benefit only producers manufacturing biofuels from feedstocks sourced from the U.S. The department received 260 comments.
"The use of low-carbon commodities provides new market opportunities for U.S. farmers. However, without the proper framework, farmers may face unnecessary barriers limiting access to these markets," Duncan wrote. "It is imperative that the program design and structure for low-carbon feedstocks is done correctly the first time so there will be optimal participation from farmers across the country."
Illinois' two senators and four representatives, including Nikki Budzinski, D-Springfield; Darin LaHood, R-Dunlap; Eric Sorenson, D-Moline; and Robin Kelly, D-Matteson, previously signed onto bipartisan letters in support of limiting the credit to domestically produced renewable fuels derived from domestically produced feedstocks.
Failure to properly structure the feedstock sustainability criteria associated with 45Z credit will incentivize the use of foreign feedstocks over those from U.S. suppliers, contrary to the intent of Congress, the senators' July 30 letter to Treasury Secretary Janet Yellen stated.
Commodity group leaders applauded the recently introduced legislation.
"Corn growers are making every effort to help the airline industry lower its greenhouse gas emissions through the use of corn ethanol," said Minnesota farmer and National Corn Growers Association President Harold Wolle. "We are deeply appreciative of these leaders for introducing legislation that establishes requirements for the tax credit that will level the playing field for America's corn growers."
American Soybean Association President Josh Gackle said farmers who grow the crops utilized in biofuels take pride in reducing greenhouse gas emissions while supporting the U.S. economy and energy independence.
"However, for continued growth of America's promising biofuels industry, U.S. farmers need the support of a final 45Z rule that prioritizes domestically sourced feedstock," said Gackle, a North Dakota soybean farmer.
USDA Secretary Tom Vilsack has said restricting the credit to domestically produced feedstocks could spur retaliation against U.S. ag exports. The ag secretary has also said he is "confident" the clean fuels tax credit will be finalized by January.
