Clean Fuel Tax Credits Out of Reach for Many Farmers

Sustainable aviation fuel and clean fuel production tax credits have the potential to benefit farmers while lowering America’s carbon emissions, but shortcomings in the provisions could put the benefits out of reach for many farmers in the U.S.

Four groups, including the American Farm Bureau Federation, American Soybean Association, National Corn Growers Association and National Farmers Union, today sent a letter to Treasury Secretary Janet Yellen and U.S. Office of Management and Budget Director Shalanda Young, asking them to ensure the Clean Fuel Production Credit (45Z) works for U.S. farmers.

The letter states, “As farmers, we are growing the feedstocks necessary for clean fuel production, such as corn, soybeans and other biomass. The 45Z tax credit has the potential to be a game-changer for our industry, offering a valuable incentive for the production and use of biofuels that will lower carbon emissions. However, without clear domestic feedstock requirements, the benefits of this policy are at risk of being diverted from American farmers.”

Currently, there is no requirement that feedstocks be grown domestically, which means foreign feedstock producers can take advantage of the clean fuel production credit. This goes against the broader goal of supporting U.S. agriculture and rural communities, and will lead to market distortions.

Additionally, the bundling of climate-smart agriculture practices and cumbersome reporting requirements in the sustainable aviation fuel guidance will exclude a large number of farmers from benefitting from the SAF credit. “The implementation of no-till farming, cover cropping and enhanced efficiency fertilizers requires significant upfront investments in both time and resources. Without a greater incentive, many farmers may simply be unable to implement these bundled practices based on economic limitations alone,” the groups write. “Moreover, even if geography allows farmers to comply with the CSA (climate-smart agriculture) requirements, the cumbersome reporting requirements will dissuade even the most sophisticated farming businesses from participating. Additional options for compliance must be considered that would give farmers the ability to comply with CSA requirements without running afoul of the Internal Revenue Service.”

The groups are asking the administration to create a domestic feedstock requirement for the clean fuel production tax credit and to broaden eligibility for the sustainable aviation fuel credit while addressing the unworkable paperwork requirement.

Read the full letter here.

To read an American Farm Bureau Federation Market Intel on the tax credits, click here.