Capitol Hill’s Finishing Touches to the “Big Beautiful” Revamp of 45Z  

Last month, in an article titled “The 45Z Tax Credit Gets a ‘Big Beautiful’ Alteration,” we described amendments to the Clean Fuels Production Credit (better known as 45Z for the section of the tax code) proposed in the House version of the budget reconciliation bill, H.R. 1. By way of follow-up, today we update that coverage by reviewing the key changes to 45Z contained in Section 70521 of the “One Big Beautiful Bill Act” which was ultimately enacted by both chambers of Congress and signed into law on July 4, 2025. 

Key Provisions (in general, all changes take effect January 1, 2026) 

1. A Two-Year Extension of the Tax Credit – The expiration date for 45Z was extended from December 31, 2027 to December 31, 2029. 
2. Elimination of the $1.75 per gallon special rate for Sustainable Aviation Fuel (SAF) – it will now be eligible for the same $1.00 per gallon available to all other qualifying fuels. 
3. Elimination of Indirect Land Use Change from the Calculation of Emissions Rates for Qualifying Pathways – this will make crop-based biofuels (such as those produced from corn or soybean oil) eligible for credits similar to those for waste-based biofuels (such as those produced from tallow or used cooking oil). 
4. Calculation of Specific Emissions Rates for Manure-Based Biofuels – renewable natural gas (RNG) produced from livestock manure will be assigned species-specific emissions rates. 
5. Prohibition of Negative Emissions Rates – Previously, the statute did not directly address whether negative emissions rates were allowed. Notably, manure-based fuels are specifically exempted from this provision. 
6. Eligibility Limited to Fuels Produced from North American Feedstocks – fuels must be produced from feedstocks generated in the U.S., Canada, or Mexico. 
7. Prohibition on “Double-Dipping” – Fuels produced from other qualifying fuels are not eligible for this credit (e.g., for SAF produced from ethanol, credits cannot be earned by both the ethanol and the SAF). 
8. Clarification on the Definition of Related Persons – Instructs the Secretary of the Treasury to issue rules clarifying what constitutes a qualifying sale when the producer and the buyer are related parties. 
9. Prohibited Foreign Entities – Disqualifies fuels which are produced by entities deemed to be influenced by certain foreign entities (generally entities connected with Russia, China, Iran, or North Korea). 

Note: The above information is provided for the general awareness of our readers. Stillwater Associates does not provide tax advice. All parties potentially eligible to claim this tax credit should consult with their tax advisors to assess their specific circumstances. 

Looking for strategic guidance on maximizing your credit eligibility? Want to understand how the new rules apply to your operations? If you have questions about how these changes to the 45Z Clean Fuels Production Credit affect your business, Stillwater Associates is here to help. Our team specializes in fuel policy, regulatory compliance, and market strategy. Contact Stillwater Associates today to schedule a consultation and ensure you’re making the most of the new 45Z tax credit landscape.