It’s more than likely that you have seen information across the news about the potential for biofuels tax credits through 40B and 45Z. The 40B tax credits are for Sustainable Aviation Fuels (SAF) only, and expire at the end of 2024. 45Z, on the other hand, are tax credits for all sustainable biofuel facilities and includes low-carbon ethanol, biodiesel, renewable diesel and sustainable aviation fuels and will run for 3 years (between 2025 and 2027). Below we offer what we know right now, what we’re waiting for and what you can do right now.

Here’s what we know

The recent guidance released by the Department of the Treasury and IRS was specific to Sustainable Aviation Fuel (SAF) tax credits that run through the end of 2024. There are a limited number of online SAF plants for which this recent guidance can be used to potentially provide new revenue streams to farmers in the 2024 calendar year.

A new USDA pilot program was announced as part of the guidance document. 40B requires the bundling, or combination, of three regenerative ag practices for participation in the SAF pilot program:

1. Cover crop planting
2. No-till
3. Enhanced efficiency nitrogen fertilizer (corn only)

Note that SAF feedstocks are not required to generate field-specific Carbon Intensity (CI) scores, but certification, recordkeeping and verification of farming practices is required.

Here’s what we’re waiting for

As of today, there are currently no recognized pathways in the US that would enable a renewable fuels producer to provide additional incentives to farmers for having a lower CI score, as most pathways stop at the crop-level rather than extending back to the field. This is what makes the potential of 45Z tax credits, which will govern tax credits for ethanol, so exciting for farmers. Some are anticipating that farm-level CI scores could be taken into account. This means that for farmers who currently use cover crops, no-till and enhanced nitrogen practices, there is hope that updated 45Z guidance (which is expected by the end of the year) will create a new opportunity for renewable fuels plants to share these incentives with farmers.

However, a lot of work remains to translate the guidance from 40B into 45Z. You may hear about pilot programs launching to jumpstart what could be to come – but only time will tell if the rules as implemented allow for new farmer revenue opportunities, as well as how significant those opportunities might be.

Our team at Bayer is actively engaged in understanding how 45Z will be implemented to help ensure farmers will receive any benefit for which they’ve qualified. Through our ForGround by Bayer platform, we are committed to helping farmers understand and participate in real market opportunities as they become available.

What you can do now

While we wait for guidance on 45Z, farmers would be wise to keep tight records of field-level production practices in the Climate FieldView™ platform or another farm management system. If market opportunities become available in your area, you’ll have the field practice records at your fingertips to potentially take advantage of new revenue streams.

If you want to stay in-the-know about future opportunities, consider signing up for a free ForGround account and look for emails as more program details become available.