SECTION 2. OVERVIEW AND

BACKGROUND OF THE § 45Z CREDIT

.01 Section 45Z generally . Section 13704 of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), added § 45Z and amended §§ 38(b) and 4101(a), ² enacting the § 45Z credit for transportation fuel produced in the United States by the taxpayer at a qualified facility after December 31, 2024, and sold by the taxpayer to an unrelated person in a manner described in § 45Z(a) (4) during the taxable year. For purposes of § 38, the § 45Z credit is an amount equal to the product of (A) the applicable amount per gallon (or gallon equivalent) with respect to any transportation fuel which is produced by the taxpayer at a qualified facility and sold in the manner

described in § 45Z(a)(4) during the taxable year and (B) the emissions factor for such fuel as determined under § 45Z(b). See § 45Z(a)(1).

.02 Applicable amounts, emissions factors, emissions rates, and provisional emissions rates . Section 45Z(a)(2) and (3) provides the applicable amounts for transportation fuels. Section 45Z(b) generally provides the rules for emissions factors for transportation fuels used to calculate the amount of the § 45Z credit. Section 45Z(b)(1)(A) provides the rules for calculating the emissions factor for a transportation fuel by using the emissions rate for such fuel.

Section 45Z(b)(1)(B)(i) directs the Secretary of the Treasury or her delegate (Secretary), subject to § 45Z(b)(1)(B)(ii) and (iii), to publish annually a table that sets forth the emissions rate for similar types and categories of transportation fuels based on the amount of lifecycle greenhouse gas emissions as described in § 211(o)(1)(H) of the Clean Air Act (CAA) (42 U.S.C. 7545(o)(1)(H)), as in effect on August 16, 2022 (emissions rate table).

Section 45Z(b)(1)(B)(ii) provides that in the case of any transportation fuel that is not a sustainable aviation fuel (non-SAF transportation fuel), the lifecycle greenhouse gas emissions of such fuel is based on the most recent determinations under the Greenhouse gases, Regulated Emissions, and Energy use in Transportation model developed by the Argonne National Laboratory, ³ or a successor model (as determined by the Secretary).

Section 45Z(b)(1)(B)(iii) provides that in the case of any transportation fuel that is a sustainable aviation fuel (SAF), the lifecycle greenhouse gas emissions of such fuel is determined in accordance with (I) the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) which has been adopted by the International Civil Aviation Organization with the agreement of the United States, or (II) any similar methodology which satisfies the criteria under § 211(o)

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

2 Under section 13704(c) of the IRA, these amendments apply to transportation fuel produced after December 31, 2024. See also footnote 4.

3 Section 45Z(b)(1)(B)(ii) refers to “the Greenhouse gases, Regulated Emissions, and Energy use in Transportation model developed by Argonne National Laboratory.” The name of that model was changed to “Greenhouse gases, Regulated Emissions, and Energy use in Technologies,” and as of December 2023, it is generally referred to as “R&D GREET.”

Bulletin No. 2024–26 1781 June 24, 2024