SECTION 2. BACKGROUND AND

OVERVIEW

.01 Applicable law generally . Section 13203 of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022, added § 40B and amended §§ 38(b), 40A, 87, 4101(a), 6426, and 6427(e)(1), to establish the SAF credits, effective for certain fuel mixtures containing SAF sold or used after December 31, 2022. The SAF credit is equal to the product of (1) the number of gallons of SAF in a qualified mixture and (2) the sum of (A) $1.25 and (B) the “applicable supplementary amount” with respect to such SAF. In general, the applicable supplementary

1 Unless otherwise specified, all references to “section” or “§” are references to sections of the Internal Revenue Code.

2 The “ANL-GREET model” refers to the following lifecycle analysis model: Wang, Michael, et al. (2022). Greenhouse gases, Regulated Emissions, and Energy use in Technologies Model ® (2022 Excel). Computer Software. USDOE Office of Energy Efficiency and Renewable Energy (EERE). 10 Oct. 2022. Web. https://www.osti.gov/doecode/biblio/80997 .

3 Letter from Joseph Goffman, Principal Deputy Assistant Administrator for the Office of Air and Radiation, U.S. Environmental Protection Agency, to Lily Batchelder, Assistant Secretary for Tax Policy, U.S. Department of Treasury (December 13, 2023) (EPA Letter), available at https://home.treasury.gov/system/files/136/Final-EPA-letter-to-UST-on-SAF-signed.pdf .

January 8, 2024 348 Bulletin No. 2024–2

amount increases the $1.25 base credit by $0.01 for each percentage point by which the emissions reduction percentage of the SAF exceeds 50 percent, for a maximum increase of $0.50. See §§ 40B(b) and 6426(k). Among a number of requirements, under § 40B(d)(1)(D) and (e), SAF must be certified to have a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent. Section 40B(e) defines the term “lifecycle greenhouse gas emissions reduction percentage” (emissions reduction percentage) to mean, with respect to any sustainable aviation fuel, the percentage reduction in lifecycle greenhouse gas emissions achieved by such fuel, as compared with petroleum-based jet fuel, as defined in accordance with (1) the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) that has been adopted by the International Civil Aviation Organization (ICAO) with the agreement of the United States or (2) any similar methodology that satisfies the criteria under § 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H), as in effect on August 16, 2022) (CAA).

Section 40B(f)(2)(A) requires a producer or importer of SAF to provide certification (in the form and manner prescribed by the Secretary of the Treasury or her delegate (Secretary)) from an unrelated party demonstrating compliance with (i) any general requirements, supply chain traceability requirements, and information transmission requirements established under CORSIA as described in § 40B(e) (1), or (ii) in the case of any similar methodology established under § 40B(e)(2), requirements similar to the sustainability requirements described in § 40B(f)(2)(A) (i). Section 40B(f)(2)(B) requires SAF producers or importers to provide such other information with respect to such fuel as the Secretary may require for purposes of carrying out § 40B.

.02 Notice 2023-6 . Notice 2023-6 provides guidance on the SAF credits and related credit and payment rules under §§ 34(a)(3), 38, 87, and 6427(e)(1). Notice 2023-6 also provides guidance relat

ed to the registration requirements under § 4101 for persons producing or importing SAF. For definitions of terms used in this notice and procedures for claiming a SAF credit, see Notice 2023-6.

Sections 4.04 and 5.01(4) of Notice 2023-6 include CORSIA-based safe harbors for determining the emissions reduction percentage under § 40B(e)(1) and for providing an unrelated party certification of sustainability requirements under § 40B(f)(2)(A)(i). However, Notice 20236 does not provide guidance regarding the calculation of the emissions reduction percentage under § 40B(e)(2) or the associated unrelated party certification of sustainability requirements under § 40B(f)(2) (A)(ii).

.03 Sections 3 through 6 of this notice . The Treasury Department and the IRS developed the guidance set forth in sections 3 through 5 of this notice, in consultation with the Environmental Protection Agency (EPA) and other agencies, to provide safe harbors for using the EPA’s Renewable Fuel Standard (RFS) program to calculate the emissions reduction percentage under § 40B(e)(2) and RFS guidance to certify related sustainability requirements under § 40B(f)(2)(A)(ii), and to address other models. Section 6 of this notice announces the § 40B(e)(2) GREET model is expected in early 2024.