SECTION 4. LIFECYCLE — Internal Revenue Bulletin 2023-2

GREENHOUSE GAS EMISSIONS REDUCTION PERCENTAGE AND APPLICABLE SUPPLEMENTARY AMOUNT

.01 Applicability . The methods of determining the lifecycle greenhouse gas emissions reduction percentage and the applicable supplementary amount under section 4 of this notice apply only to a SAF qualified mixture.

.02 In general . The SAF synthetic blending component must be certified, in accordance with § 40B(e), as having a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent. See section 4.04 of this notice. This requirement also applies to § 6426(k). See § 6426(k)(2).

Once the SAF synthetic blending component meets the minimum 50 percent reduction threshold, the lifecycle greenhouse gas emissions reduction percentage is then used to calculate the applicable supplementary amount of the SAF credit under § 40B(b) or 6426(k). The applicable supplementary amount increases the $1.25 base credit by $0.01 for each whole percentage point by which the lifecycle greenhouse gas emissions reduction percentage with respect to such fuel exceeds 50 percent. The applicable supplementary amount determined under §§ 40B(b) and 6426(k) is calculated in $0.01 increments and cannot exceed $0.50.

.03 Lifecycle greenhouse gas emissions of petroleum-based jet fuel . Until further notice, for purposes of calculating the lifecycle greenhouse gas emissions reduction percentage, the IRS will treat the lifecycle greenhouse gas emissions of petroleum-based jet fuel as equal to 89 grams of carbon dioxide equivalent per megajoule of energy or 89 gCO2e/MJ as the baseline. This is the standard adopted by the ICAO. See Annex 16 - Environmental Protection: Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) (2018), https://elibrary.icao. int/home/product-details/229739.

.04 Calculating the lifecycle green- house gas emissions reduction percent- age; safe harbor . The IRS will accept a

January 9, 2023 330 Bulletin No. 2023–2

lifecycle greenhouse gas emissions reduction percentage calculated from the ICAO’s most recent publication of the CORSIA Default Life Cycle Emissions Values for CORSIA Eligible Fuels . At the time of publication of this notice, the most recently published version (Fourth Edition, June 2022) is available at: https:// www.icao.int/environmental-protection/ CORSIA/Pages/CORSIA-Eligible-Fuels. aspx.

The IRS will also accept a lifecycle greenhouse gas emissions reduction percentage calculated from the ICAO’s most recent publication of the CORSIA Meth- odology for Calculating Actual Life Cycle Emissions Values . At the time of publication of this notice, the most recently published version (Third Edition, June 2022) is available at: https://www.icao.int/environmental-protection/CORSIA/Pages/ CORSIA-Eligible-Fuels.aspx.

The lifecycle greenhouse gas emissions reduction percentage is calculated by multiplying a fraction, the numerator of which is the baseline for the lifecycle greenhouse gas emissions of petroleum-based jet fuel (LC) minus the lifecycle emissions value (LSf), and the denominator of which is the baseline (LC), by 100 percent ([(LC LSf)/ LC] × 100% = lifecycle greenhouse gas emissions reduction percentage). The lifecycle greenhouse gas emissions reduction percentage must be rounded down to the nearest whole percent.

The registered producer or importer of the SAF synthetic blending component must record the lifecycle greenhouse gas emissions reduction percentage on the Certificate for SAF Synthetic Blending Component. See section 7.02 of this notice.

.05 Calculating the applicable supple- mentary amount . To calculate the applicable supplementary amount for purposes of §§ 40B(b) and 6426(k), subtract 50 from the lifecycle greenhouse gas emissions reduction percentage, then multiply that number by the applicable rate for the supplementary amount (currently $0.01) ([lifecycle greenhouse gas emissions reduction percentage – 50] × applicable rate for the supplementary amount). The applicable supplementary amount under §§ 40B(b) and 6426(k) must be calculated using the same methodology used to determine the lifecycle greenhouse gas emissions reduction percentage under § 40B(e).

The registered producer or importer of the SAF synthetic blending component must record the applicable supplementary amount on the Certificate for SAF Synthetic Blending Component. See section 7.02 of this notice. .06 Example . A blender used 100,000 gallons of a SAF synthetic blending component to produce a SAF qualified mixture. The SAF synthetic blending component was produced via a pathway that has a lifecycle carbon dioxide emission equivalent of 28.9 grams per megajoule of energy. To calculate the amount of the credit, first calculate the lifecycle greenhouse gas emissions reduction percentage (rounding down to the nearest whole percent): [(89 gCO2e/MJ – 28.9 gCO2e/MJ)/ 89 gCO2e/ MJ] × 100% = 67.5%, rounded down to 67%. Because the lifecycle greenhouse gas emissions reduction percentage is at least 50 percent, the SAF synthetic blending component qualifies for the $1.25/gallon credit. Additionally, the SAF synthetic blending component qualifies for the applicable supplementary amount, which is calculated by subtracting 50 from the lifecycle greenhouse gas emissions reduction percentage (67), and then multiplying by the applicable rate ($0.01): (67 – 50) × $0.01 = $0.17 per gallon.

The SAF credit is calculated as follows: 100,000 gallons × ($1.25 + $0.17) = $142,000.00.

SECTION 5. REGISTRATION; SUSTAINABLE AVIATION FUEL; BLENDERS OF SAF SYNTHETIC BLENDING COMPONENTS; PRODUCERS OF SAF CO-PROCESSED QUALIFIED MIXTURES

.01 Registration . (1) In general . Section 4101(a)(1) provides that every person producing or importing sustainable aviation fuel must register with the Secretary at such time, in such form and manner, and subject to such terms and conditions, as the Secretary may by regulations prescribe. Section 48.41011 provides the registration requirements for fuel registrants.

Section 40B(f) provides that no SAF credit is allowed with respect to any sustainable aviation fuel unless the producer

or importer of such fuel is registered with the Secretary under § 4101, and provides such information with respect to such fuel as the Secretary may require for purposes of carrying out § 40B, including certification (in such form and manner as the Secretary prescribes) from an unrelated party demonstrating compliance with— (1) any general requirements, supply chain traceability requirements, and information transmission requirements established under the CORSIA described in § 40B(e)(1), or (2) in the case of any methodology established under § 40B(e)(2), requirements similar to the requirements described in § 40B(f)(2)(A)(i). See also § 6426(k)(3).

Until further notice, the IRS will treat the producer or importer of a SAF synthetic blending component and the United States producer of a SAF co-processed qualified mixture as the persons required to register under § 4101. The IRS will not register an importer of a co-processed liquid fuel or an importer of a SAF qualified mixture as an importer of sustainable aviation fuel due to the requirement that a qualified mixture be produced in the United States. See § 40B(c)(1).

(2) Procedure for registering . Application for registration is made on Form 637, Application for Registration (For Certain Excise Tax Activities), under Activity Letter “SA,” in accordance with the instructions for that form. The IRS is revising Form 637 to add Activity Letter “SA.” Until the revised Form 637 is released, applicants may use the current Form 637 by writing in “Activity Letter SA” and providing the following:

(a) The annual volume of the sustainable aviation fuel the applicant produces;

(b) The locations and a description of the applicant’s production facilities;

(d) A statement indicating whether the applicant produces sustainable aviation fuel under an ASTM D7566 Annex or ASTM D1655 Annex A1, and if applicable, the specific ASTM D7566 Annex under which the SAF synthetic blending component is produced;

(e) A sample Certificate of Analysis (as defined in section 6.04(3) of this notice) for the type of sustainable aviation fuel the applicant produces, demonstrating confor

Bulletin No. 2023–2 331 January 9, 2023

mance with either an ASTM D7566 Annex or ASTM D1655 Annex A1;

(f) Certification from the International Sustainability and Carbon Certification (ISCC), Roundtable on Sustainable Biomaterials (RSB), or other unrelated party demonstrating compliance with— (i) any general requirements, supply chain traceability requirements, and information transmission requirements established under CORSIA, which has been adopted by the ICAO with the agreement of the United States, or (ii) any similar methodology that satisfies the criteria under section 211(o)(1) (H) of the Clean Air Act (42 U.S.C. 7545(o) (1)(H)), as in effect on August 16, 2022;

(g) Certification in accordance with § 40B(e) that the SAF synthetic blending component has a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent; (h) The names and addresses of any person(s) acting for the applicant as an agent or broker in buying, selling, or transporting any sustainable aviation fuel;

(i) The business entities to which the applicant sells sustainable aviation fuel;

(j) The business entities from or with which the applicant buys, trades, transfers, or exchanges any sustainable aviation fuel; and

(k) The annual volume of the sustainable aviation fuel the applicant buys, sells, trades, transfers, or exchanges.

(3) Requirements . The IRS will register an applicant with Activity Letter “SA” only if the IRS— (A) concludes that the applicant is engaged as a producer or importer of a SAF synthetic blending component or the producer of a SAF co-processed qualified mixture, or is likely to become so engaged within a reasonable time after being registered under § 4101; 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 § 48.41011(b)(5)). The IRS will not consider an applicant likely to become engaged in the business of producing or importing a SAF synthetic blending component or producing a SAF co-processed qualified mixture unless the producer or importer (as applicable) can provide certification from an unrelated party demonstrating compliance with § 40B(d)(1)(D) and (f)(2)(A).

(4) Certification demonstrating com- pliance with § 40B(f)(2)(A); safe harbor . The IRS will consider a producer or importer of a SAF synthetic blending component or the producer of a SAF co-processed qualified mixture to meet the requirements of § 40B(f)(2)(A), relating to the sustainability requirements of CORSIA, if the producer or importer (as applicable) has a valid, relevant certificate from ISCC, RSB, or other ICAO-approved sustainability certification scheme. At the time of publication of this notice, the most recently published version (First Edition, November 2020) of CORSIA Approved Sustainability Certification Schemes, which lists ICAO-approved sustainability certification schemes, is available at https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-Eligible-Fuels.aspx.

.02 Blenders of SAF synthetic blending components and ASTM D1655 kerosene used to produce SAF qualified mixtures . Section 4101 and § 48.4101-1 require any person who produces taxable fuel to be registered. Section 4083(a)(1) defines taxable fuel to include kerosene, which for jet fuel means ASTM D1655 kerosene (and ASTM D7566 and D1655 compliant SAF). The person who blends the SAF synthetic blending component with ASTM D1655 kerosene to produce a SAF qualified mixture produces ASTM D1655 compliant SAF, which meets the specifications of ASTM D1655 and is a taxable fuel.

As a result, the blender is required to be registered either under Activity Letter “S” if the blending occurs within the bulk transfer/terminal system (that is, above the rack) or under Activity Letter “M” if the blending occurs outside the bulk transfer/ terminal system (that is, below the rack).

Pursuant to § 48.4101-1(h)(1)(v), each registrant must notify the IRS of any change in the information the registrant submitted in connection with its application for registration within 10 days after the change occurs. A previously-registered “S” registrant or a previously-registered “M” registrant that begins producing SAF qualified mixtures must inform the IRS of this change by contacting the IRS office with which the registrant is registered.

.03 Producers of SAF co-processed qualified mixtures and co-processed liq-

uid fuel . As stated above, § 4101 and § 48.4101-1 require any person who produces taxable fuel to be registered. The person who produces a SAF co-processed qualified mixture is also producing kerosene, a taxable fuel under § 4083(a)(1). As a result, the producer is required to be registered under Activity Letter “S” in addition to Activity Letter “SA.”

A person who produces co-processed liquid fuel (regardless of whether it qualifies for the SAF credit or as a SAF co-processed liquid fuel) is also producing kerosene. As a result, the producer is required to be registered under Activity Letter “S.”

In addition, a previously-registered “S” registrant that begins producing co-processed liquid fuel or a SAF co-processed qualified mixture must inform the IRS of this change by contacting the IRS office with which the registrant is registered.