SECTION 2. BACKGROUND

.01 In general . Section 45Z, added to the Code by § 13704 of Public Law 117169, 136 Stat. 1818, 1997 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022, provides an income tax credit for clean transportation fuel produced domestically after December 31, 2024, and sold by December 31, 2027. The § 45Z credit is a general business credit under § 38.

A taxpayer must meet several requirements to be eligible to claim the § 45Z credit. Generally, a taxpayer must: (1) produce a transportation fuel that has a lifecycle greenhouse gas emissions rate

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

February 3, 2025 704 Bulletin No. 2025–6

(emissions rate) of not greater than 50 kilograms (kg) of carbon dioxide equivalent based on relative global warming potential (CO2e) per million British thermal units (mmBTU) and that satisfies certain suitability and coprocessing requirements; (2) produce the fuel in the United States at a qualified facility; (3) be registered as a producer of clean fuel under § 4101 at the time of production; and (4) sell the fuel to an unrelated person in a qualifying manner during the taxable year. See § 45Z(a)(1) & (4), (d)(4)-(5)(A), and (f)(1). A taxpayer producing a transportation fuel that is sustainable aviation fuel (SAF transportation fuel) must also provide unrelated party certification demonstrating compliance with certain requirements. See § 45Z(f)(1)(A)(i)(II).

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).

For a fuel to be eligible for the § 45Z credit, one requirement is that it must have an emissions rate that is not greater than 50 kg of CO2e per mmBTU. See § 45Z(d) (5)(A)(ii). This is the baseline emissions rate. The amount of the credit is based on the transportation fuel’s emissions factor, which is a calculation of the fuel’s emissions rate against the baseline emissions rate. See § 45Z(b)(1)(A)(i).

.02 Emissions factor . The emissions factor for a transportation fuel is the quotient of 50 kilograms of CO2e per mmBTU, minus the emissions rate for such fuel, divided by 50 kilograms of CO2e per mmBTU. See § 45Z(b)(1)(A)(i). Expressed mathematically, the calculation is as follows: Emissions factor = (50 kg

of CO2e per mmBTU - emissions rate in kg of CO2e per mmBTU) ÷ 50 kg of CO2e per mmBTU.

Under § 45Z(b)(2), if any amount determined under § 45Z(b)(1)(A) is not a multiple of 0.1, such amount must be rounded to the nearest multiple of 0.1.

.03 Applicable amount . Section 45Z(a) (2) and (3) provide the applicable amounts for transportation fuels. Section 45Z(c)(1) provides that for calendar years beginning after 2024, the applicable amounts in § 45Z(a)(2) and (3) must each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale of the transportation fuel occurs. Section 45Z(c)(2) provides that the inflation adjustment factor for the § 45Z credit is the inflation adjustment factor determined and published by the Secretary of the Treasury or her delegate (Secretary) pursuant to § 45Y(c), determined by substituting “calendar year 2022” for “calendar year 1992” in § 45Y(c)(3). ² The Treasury Department and the IRS intend to provide guidance on the inflation adjustment factor for the 2025 calendar year at a later time. Such guidance will be published in the Internal Revenue Bulletin.

4. Emissions rates . Section 45Z divides transportation fuel into two categories: non-SAF transportation fuel and SAF transportation fuel. Section 45Z(b) (1)(B)(ii) and (iii) provides the methods for determining emissions rates for nonSAF transportation fuel and SAF transportation fuel.

Section 45Z(b)(1)(B)(i) directs the Secretary, subject to § 45Z(b)(1)(B)(ii) and (iii), to annually publish a table that sets forth the emissions rates for similar types and categories of transportation fuels based on the amount of lifecycle greenhouse gas emissions ³ as described in § 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) ⁴ for such fuels, expressed as kg of CO2e per mmBTU. This notice contains the initial table that sets forth such emissions rates for purposes of the § 45Z credit. See section 4.05 of this notice and the appendix to this notice.

Regarding the determination of emissions rates, § 45Z(b)(1)(B)(ii) provides that in the case of non-SAF transportation fuel, the lifecycle greenhouse gas emissions of such fuel must be based on the most recent determinations under the Greenhouse gases, Regulated Emissions, and Energy use in Transportation model developed by the Argonne National Laboratory (ANL), or a successor model as determined by the Secretary.

Section 45Z(b)(1)(B)(iii) provides that for SAF transportation fuel, 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 (ICAO) with the agreement of the United States or (II) any methodology similar to the most recent CORSIA that satisfies the criteria under § 211(o)(1)(H) of the CAA.

Section 3 of this notice provides background on the methodologies used to determine emissions rates.

Section 4 of this notice instructs taxpayers how to calculate emissions rates using either (1) determinations under the most recent version of the 45ZCF-GREET model or (2) determinations from fuel pathways approved under the most recent CORSIA Default Life Cycle Emissions Values for CORSIA Eligible Fuels lifecycle approach (CORSIA Default) or the most recent CORSIA Methodology for Calculating Actual Life Cycle Emissions Values lifecycle approach (CORSIA Actual).

Section 45Z(b)(1)(D) provides that in the case of any transportation fuel for

2 Accordingly, the inflation adjustment factor for purposes of § 45Z means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 2022. In this context, the term “GDP implicit price deflator” means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year. See § 45Y(c)(3).

3 Section § 211(o)(1)(H) of the Clean Air Act defines the term “lifecycle greenhouse gas emissions” as “the aggregate quantity of greenhouse gas emissions (including direct emissions and significant indirect emissions such as significant emissions from land use changes), as determined by the [EPA] Administrator, related to the full fuel lifecycle, including all stages of fuel and feedstock production and distribution, from feedstock generation or extraction through the distribution and delivery and use of the finished fuel to the ultimate consumer, where the mass values for all greenhouse gases are adjusted to account for their relative global warming potential.” See also 42 U.S.C. 7602(a).

4 This notice cites to the CAA as added by § 1501(a)(2) of the Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594, 1067 (2005) and amended by § 202(a)(1) of the Energy Independence and Security Act of 2007, Public Law 110-140, 121 Stat. 1492, 1521-22 (2007).

Bulletin No. 2025–6 705 February 3, 2025

or CORSIA Actual becomes publicly available after the first day of the taxable year of production (but still within such taxable year), then the taxpayer may, in its discretion, treat such updated version as the most recent version of CORSIA Default or CORSIA Actual.

At the time of publication of this notice, the most recently published versions of CORSIA Default (Sixth Edition, October 2024) and CORSIA Actual (Fifth Edition, October 2024) are both available at: https://www.icao.int/environmental- protection/CORSIA/Pages/CORSIA- Eligible-Fuels.aspx

.03 Determining emissions rates for non-SAF transportation fuels . If an emissions rate for a non-SAF transportation fuel is established under § 45Z(b)(1)(B)(i) (which means that the type and category of non-SAF transportation fuel is established in the most recent determinations under the emissions rate table), a taxpayer producing such type and category of fuel must use the most recent determinations under the emissions rate table to determine the fuel’s emissions rate. See section 4.06 of this notice if the non-SAF transportation fuel is not established in the most recent determinations under the 45ZCF-GREET model. .04 Determining emissions rates for SAF transportation fuel . If an emissions rate for a SAF transportation fuel is established under § 45Z(b)(1)(B)(i) (which means that the type and category of SAF transportation fuel is established in the most recent determinations under the emissions rate table), a taxpayer producing such type and category of fuel must determine the SAF emissions rate pursuant to (1) an analysis using the most recent version of CORSIA Default or CORSIA Actual (see section 4.02 of this notice or (2) an analysis using the most recent determinations under the 45ZCF‑GREET model (see section 4.01 of this notice). For a given SAF transportation fuel, a taxpayer must use the same methodology for determining the emissions associated with all stages of fuel feedstock production and distribution.

If the Treasury Department and the IRS conclude that an additional methodology

which an emissions rate has not been established under § 45Z(b)(1)(B), a taxpayer producing such fuel may file a petition with the Secretary for determination of the emissions rate with respect to such fuel, also known as a provisional emissions rate (PER). See section 4.05 and 4.06 of this notice.