Dear Secretary Bessent:
Thank you for the opportunity to comment on the Internal Revenue Service’s (IRS) proposed rulemaking to implement the Section 45Z Clean Fuel Production Credit (REG-121244-23) (“Proposed Rule”). We applaud the progress IRS has made in advancing this robust
regulatory package and supporting the efficient, effective, and science-based implementation of the Section 45Z Clean Fuel Production Credit (“45Z Credit”).
Growth Energy is the nation’s largest association of biofuel producers, representing 97 U.S. plants that each year produce more than 9.5 billion gallons of low-carbon, renewable fuel; 131 businesses associated with the production process; and tens of thousands of biofuel supporters around the country. Our members are critical to the supply of biofuel in the United States and have substantial interests in sound implementation of the 45Z Credit. Our industry is poised to assist the administration’s energy goals by providing low-cost, innovative, and American-made fuel as we remain committed to helping our country diversify its energy portfolio and provide consumers with better and more affordable choices at the fuel pump.
I. The 45Z Credit is Critical to the Ethanol Industry, the U.S. Agricultural Economy, and U.S. Energy Security.
For over two decades, the U.S. ethanol industry has played a substantial role in the U.S. economy and energy security. In 2025, U.S. ethanol production hit record highs of over 16.49 billion gallons, 14.34 billion of which were blended into motor gasoline for U.S. consumption.
These gallons displace petroleum gallons from the transportation fuel supply, thereby contributing to U.S. oil reserves in times of surplus and reducing dependence on foreign oil in times of shortage. As the Department of Energy (“DOE”) acknowledges, ethanol “strengthens national security by increasing resilience to natural disasters and fuel supply disruptions.” In addition, U.S. ethanol reduces consumer costs at the pump by 77 cents/gallon on average, for a total savings of $95.1 billion per year for U.S. consumers.4 U.S. Department of Agriculture
(“USDA”) analysis also shows that ethanol blending reduces price volatility, as a 10 cent/gallon
increase in crude oil prices would only result in increases of 2.8 cents/gallon over the short term
or 4.2 cents/gallon over the long term for E105 at the pump.6
Further, over 2 billion surplus ethanol gallons are sent to export markets including
Canada, Mexico, the United Kingdom, and the European Union. These energy exports
strengthen national security and diplomacy positions while simultaneously injecting wealth into
the U.S. economy.
In total, the ethanol industry contributed over $50 billion to U.S. GDP in 2025, generated
over $28 billion in employment-related income for workers, and supported more than 316,000
jobs in 2025.7
The industry also provided more than $10 billion in tax revenues to federal and
state governments.8
The majority of these benefits arise in the agricultural sector across
America’s heartland.9
A strong and stable agricultural sector sets the foundation for a strong and
stable American economy by reducing costs of key commodities across extensive supply
chains.10
The 45Z Credit plays a vital role in incentivizing innovation in the U.S. ethanol industry,
and Growth Energy applauds the IRS on issuing this Proposed Rule. In this letter, we identify
several key recommendations for the agency to further improve upon this rule. We encourage
the IRS to swiftly finalize the proposed regulations consistent with the adjustments suggested
below.
II. The Proposed Rule Takes Meaningful Steps to Further Recognition of Farm
Practices But Should Provide Greater Certainty in the Near Term.
The U.S. has the most advanced agricultural sector in the world, with farmers that are
constantly innovating and developing new techniques and practices to increase efficiency and
reduce emissions. Growth Energy thanks the IRS and its partner agencies for the steps it has
taken to recognize American innovation in the fields through the development of a 45ZCF FDCIC module, to be used as an input to the 45ZCF-GREET model. However, we urge the IRS to adopt reasonable interim measures to allow taxpayers to access emissions reductions from farm
practices swiftly and without unnecessary administrative delays.
The Proposed Rule sets forth a multi-step, multi-agency process for implementing farm
practices, in which USDA would first finalize the USDA FD-CIC module, then DOE would
adopt a “45Z-specific” version of that FD-CIC module (“45ZCF FD-CIC”) within the 45ZCFGREET model, then IRS would publish “additional guidance” enabling taxpayers to use the
45ZCF FD-CIC module.11 This multilayered approach would delay taxpayers’ access to farm
practice incentives. As the IRS acknowledges, the USDA FD-CIC module is itself “undergoing
testing, peer review, and public comment” which will ensure that the final version of USDA FDCIC is robust and highly credible upon publication. If 45ZCF FD-CIC remains unavailable at
the time the IRS finalizes this Proposed Rule, IRS should allow taxpayers to utilize the final
USDA FD-CIC module to calculate credit amounts until such time that 45ZCF FD-CIC is
finalized.
Moreover, USDA has already published final technical guidelines for quantifying,
reporting, and verifying emissions reductions from farm practices.12 These guidelines were
adopted through a public notice and comment process and were specifically designed to “allow[]
for the differentiation and quantification of carbon intensities associated with the production of
farm crops used as biofuel feedstocks, through USDA FD-CIC, upon its finalization.”13 In
finalizing the Proposed Rule, the IRS should incorporate these USDA technical guidelines by
reference so that taxpayers may begin utilizing USDA FD-CIC, and later 45ZCF FD-CIC,
immediately upon the finalization of those modules without any further action needed from the
IRS.
Lastly, we emphasize that the four practices referenced in the Proposed Rule—no till,
reduced till, cover crops, and nutrient management14—is far from an exhaustive list of farm
practices that can be reliably quantified today. The 45ZCF FD-CIC module should include at
least the full scope of practices included in USDA FD-CIC, and both modules should be
regularly reevaluated for expansion into new farm practices as farmers continue to innovate. In
particular, the IRS should coordinate with USDA to include emissions reductions from biological
solutions (including biostimulants, biofertilizers, and biopesticides) that enhance soil health,
improve nutrient uptake, and increase crop yields. Often, best farm practices will vary across
individual farms due to the multitude of factors that impact crop production. It is therefore
critical that farmers have flexibility to apply those farm practices that work best for their unique
operations, leading to greater incentive and participation.
III. IRS Should Coordinate with DOE and Other Partner Agencies to Swiftly Release
Targeted Updates to the 45ZCF-GREET Model.
Though the 45ZCF-GREET model remains the best available science in lifecycle analysis
modeling, we encourage the IRS and its partners at the DOE to release certain targeted updates to
the model and the accompanying User Manual to further improve the current model.
a. The 45ZCF-GREET User Manual should clarify that taxpayers may calculate
emissions rates without inclusion of indirect land use change (“iLUC”), though
the 45ZCF-GREET model may still include iLUC as a separate line item.
IRS should work efficiently with the DOE to adjust the User Manual to clarify the
process for excluding emissions estimates attributed to indirect land use change (“iLUC”) from
45Z Credit calculations. As Growth Energy and other commenters have noted in the past,
assessments of iLUC emissions in lifecycle assessments are inherently highly speculative and
often fraught with incorrect assumptions. Congress appropriately addressed this issue through
amendments to the 45Z Credit in the One Big Beautiful Act (“OBBA”), clarifying that emissions
rates “shall be adjusted as necessary to exclude any emissions attributed to indirect land use
change” for all fuel produced after December 31, 2025.15
The most straightforward and efficient method to implement Congress’ directive is to
adjust the User Manual to clarify that taxpayers may simply exclude the values associated with
iLUC emissions when calculating overall CI scores. The 45ZCF-GREET model should continue
in the near-term to calculate iLUC separately, which may remain necessary for fuels produced
prior to December 31, 2025. In addition, while the 45ZCF-GREET model’s iLUC calculations
still represent an overestimate compared to real world impacts, the model remains the product of
rigorous, peer-reviewed technical analysis from multiple federal agencies. Preservation of this
work would provide a useful data point which other programs currently relying upon outdated
iLUC modeling, such as EPA’s Renewable Fuel Standard and various state clean fuels standards,
could and should draw upon in updating their methodologies.
Because the 45ZCF-GREET model helpfully breaks out the emissions calculation
associated with iLUC as a separate line item, it can readily be deducted from the overall
emissions calculation. This structure is also most consistent with the text of Congress’ OBBA
amendments, which describe the exclusion of iLUC as an “adjustment” made to the emissions
rate.16 Clarifying in the User Manual that taxpayers may exclude iLUC in this manner would
provide much-needed certainty in the near-term for determining 45Z Credit eligibility.
b. The User Manual should allow producers to fully account for CCUS-related
emissions reductions verified using a Section 45Q lifecycle analysis.
Ethanol producers are employing innovative carbon capture, utilization, and storage
(“CCUS”) technologies across the industry that create both value and efficiencies in the use of
carbon dioxide for food and beverage products while reducing emissions. Approximately 25%
of the ethanol industry already captures carbon dioxide, and a growing number of facilities plan to install the technology in the near future. Carbon dioxide captured from ethanol facilities is
used in a wide and growing variety of applications.17
As the final rule is developed, we encourage the IRS and DOE to ensure that the 45Z
framework accurately reflects the full range of emissions-reducing activities being undertaken by
ethanol producers. Regulatory approaches that account for the breadth of verified, real-world
emissions reductions achieved across the industry will support the program’s objectives and
encourage continued investment in clean fuel production.
c. The 45V rules for EACs for renewable electricity address concerns not applicable
in the 45Z context and should not apply.
An updated 45ZCF-GREET model should not fully mimic the rules established under
section 45V for energy attribute certificates (“EACs,” more commonly referred to as Renewable
Energy Certificates (“RECs”)) for renewable electricity,
18 because, unlike in hydrogen
production, induced grid emissions are not a “significant” indirect emission within the meaning
of Clean Air Act § 211(o)(1)(H) and 26 U.S.C. § 45Z(b)(1)(B) for clean fuel production.
The 45V rules were adopted specifically for the electrolytic hydrogen context which
requires substantial electricity resources. Notably, the “three pillars” of “deliverability,”19
“temporal matching,”20 and “incrementality”21 were included not to address direct emissions
from the generation of electricity actually used in the production process, but rather to address
indirect “induced” emissions from a concern that electricity demand from hydrogen projects
would be so substantial that it would materially alter the mix of electricity generation on the grid
as renewable resources are diverted in bulk towards hydrogen production.
22
In contrast, the modest quantities of electricity used in biofuel production bears no
semblance to the quantities of electricity used in electrolytic hydrogen production. As such, the
risk that the carbon intensity reductions claimed by biofuels producers through renewable RECs
may be offset by induced indirect emissions from the electricity grid is therefore insignificant, or
even non-existent.
Section 45Z’s definition of “lifecycle greenhouse gas emissions”—incorporating the
same definition from Clean Air Act § 211(o)(1)(H)—includes only those indirect emissions
which are “significant.”23 Neither Treasury nor DOE nor EPA has established that biofuels
producers’ use of RECs has any indirect emissions impacts, and certainly none that would rise to
the level of “significant.”
As the 45V rules for RECs have no statutory basis as applied to 45Z, have no material
emissions benefit, and would be a burdensome restriction on biofuels producers’ ability to deploy cost-effective carbon-intensity reduction strategies, the IRS should not finalize identical rules for
the 45Z Credit. At a minimum, Treasury should clarify that annual matching of RECs to clean
fuel production is appropriate under 45Z for the full duration of the credit, and that hourly
matching requirements established for REC use in hydrogen production after 2029 do not apply
to clean fuel production under 45Z.
d. An updated 45ZCF-GREET model should include additional ethanol feedstocks
and process emissions reductions strategies.
Growth Energy urges the IRS, in coordination with the DOE, to expand the ethanol
pathways covered by the 45ZCF-GREET model. Growth Energy members today are producing
low-carbon renewable fuels from wheat slurry, sorghum oil, and proso millet, demonstrating that
each of these pathways are sufficiently developed to be included in the 45ZCF-GREET
emissions rate table. IRS and DOE should also adopt a generic U.S. grain and starch pathway
for ethanol produced in a fermentation process as a catch-all for feedstocks that are not otherwise
specified in the rate table. Such a category would help 45ZCF-GREET stay up to date as
producers increasingly innovate with new feedstocks. Inclusion of each of these feedstock
classifications in the rate table is especially critical due to delay concerns with the proposed PER
petition process, as discussed further below.
Further, 45ZCF-GREET should be expanded to recognize the use of additional process
energies. For example, low-carbon natural gas is produced utilizing CCUS at the upstream point
of production to significantly reduce the lifecycle emissions of the natural gas product.24 As with
renewable natural gas (“RNG”), low-carbon natural gas provides a lower-emissions alternative to
the use of conventional natural gas at biorefineries, and thereby reduces the emissions rate of fuel
produced at the biorefinery. Other examples of low emissions process energy include waste
wood and landfill gas. An updated 45ZCF-GREET model should include options to designate
these sources as process energy.
IV. Greater Flexibility and Administrative Efficiency Is Needed in the Provisional
Emissions Rate (“PER”) Process.
Producers of transportation fuels for which an emissions rate has not been established
under the 45ZCF-GREET model may file a petition to establish a provisional emissions rate
(“PER”).25 This PER petition process is intended to incentivize producers and facilities that can
demonstrate, as a technical matter, lower emissions rates than those included in the categorical
rate table. It is also intended to be a swift and efficient process to provide certainty and
investability to innovative producers reliant upon the 45Z Credit. While Growth Energy thanks
the IRS for addressing the urgent need for additional clarity on the PER petition process in the
present rulemaking, the approach set forth in the Proposed Rule is unnecessarily burdensome and
undercuts both of these core purposes of the PER mechanism.
a. The PER petition process should allow producers of fuels included on the
emissions rate table and specific efficient facilities to demonstrate process
efficiencies that reduce emissions rates. Contrary to the 45Z Credit’s statutory purposes to incentivize innovation and emissions
reductions, the Proposed Rule asserts that the DOE and IRS will deny any “PER petition for a
type and category of fuel included in the applicable emissions rate table” and will also deny any
“PER petition based on a facility rather than a type or category of fuel.”26 The Proposed Rule
further defines both “type of transportation fuel” and “category of transportation” broadly, such
that “type” refers to “a particular kind of transportation fuel” and “category” refers to “the
unique primary feedstock and pathway (also known as production process) used to produce a
type of transportation fuel.”27 Thus, IRS asserts that “fermentation of U.S. corn starch ethanol”
is a single “type and category” of transportation fuel.28
Restricting the PER petition process in this way will prevent efficient producers from
accessing the intended incentives for reducing the carbon intensity of their fuel. For example,
some Growth Energy members deploy unique technologies in processing corn starch ethanol that
are not currently encompassed in 45ZCF-GREET to lower their ethanol’s carbon intensity.
Under the Proposed Rule, the PER would be unavailable for them to more accurately calculate
their 45Z Credit eligibility because the U.S. corn-starch ethanol “type and category” is already
encompassed within existing emissions rate tables. Congress included a PER process to spur
investments in efficiency improvements, including by experimenting with innovative emissions
reduction technologies and practices at specific facilities; the Proposed Rule would do the exact
opposite.
The most straightforward adjustment to enable the PER petition process to properly
incentivize efficient producers is to remove the restrictions on types and categories included in
the rate table and on specific facilities. Alternatively, IRS could adopt narrower definitions for
“type” and “category.” As Growth Energy has previously explained, a “category of
transportation fuel” in the context of the 45Z Credit is best read to refer not only to the feedstock
(e.g. corn starch) and general production process (e.g. fermentation), but rather to each distinct
combination of factors that impact carbon intensity, including facility-specific process
technologies and agricultural practices.29
b. IRS should remove unnecessary and time-consuming steps from the PER petition
process.
The PER petition process should be nimble, predictable, and efficient to provide
producers with certainty early in the development process. Instead, under the Proposed Rule’s
framework, producers must obtain approvals from both the DOE (to establish an emissions value
(“EV”)) and the IRS (to approve the PER petition) before receiving a PER.
30 Growth Energy
encourages IRS to finalize the § 1.45Z-2(f)(5) deemed accepted provision; however, it remains
unclear how a DOE-dependent PER petition process would be any quicker or less onerous than
establishing a final emissions rate through DOE updates to the 45ZCF-GREET model. Indeed, to date DOE has not issued guidance addressing the 45Z Emissions Value Request Process, and
has indicated that it “will not issue emissions values until after such guidance is published.”31
We urge IRS to streamline the PER petition process by allowing for third-party
verification as an alternative to a DOE-calculated EV. The Proposed Rule already incorporates
third-party verification in its certification process for SAF emissions rates,32 as well as the
emissions rate safe harbor for non-SAF fuels.33 Numerous other regulatory programs also rely
on third-party verification to reduce agency burden and delay, including the California LCFS
Standard34 and ICAO Carbon Offsetting and Reduction Scheme for International
Aviation (CORSIA)35 for determining the lifecycle emissions of fuel pathways, and the EPA
Renewable Fuels Standard for validation of certain other aspects of registering and reporting
renewable fuel production. 36 IRS should similarly allow producers to rely upon certifications
obtained in substantially the same form and manner as those described in proposed § 1.45Z-5 to
establish an EV for use in the PER petition.
Moreover, IRS should allow producers to initiate the PER petition process at earlier
stages in project development. The Proposed Rule would require PER applicants to provide
“[s]pecific sections of the Class 3 front-end engineering and design (FEED) study (or studies) …
or similar indication of project maturity such as project specification and cost estimation
sufficient to inform a final investment decision, as determined by the DOE, that has been
completed for each qualified facility at which the applicant produces the eligible fuel.”37 This
requires producers to conduct the level of FEED analysis generally necessary to make a final
investment decision (“FID”) prior to even applying for an EV from DOE. And, as discussed
above, subsequent to obtaining an EV from DOE, the producer must still petition for and obtain a
PER from the IRS. Since the result of a PER determination may be material to the FID, projects
will be left in limbo for months or years because, despite completing a FEED study, the project
cannot proceed with FID until first DOE evaluates and issues an EV and then IRS accepts a PER
petition.
To mitigate this potential for delay, we encourage IRS to allow producers to initiate the
EV and PER petition process using Class 4 estimates or other indications of project maturity that
can be demonstrated prior to a project approaching FID. At a minimum, Class 3 FEED or
equivalent should not be required until the PER petition before IRS, rather than the initial DOE
EV request.
Lastly, Growth Energy supports the relation back of PERs and other newly-established
emissions rates to January 1, 2025 to mitigate the impacts of delays in the PER petition process.
38 However, while helpful, this does not obviate the need for efficiency in the petition
process, as establishing an emissions rate early in the development process can be critical for
producers to attract investment. At a minimum, IRS should coordinate closely with DOE to open
the EV request process as soon as possible.
V. Growth Energy Supports the Proposed Definition of Qualified Sale and Requests
Clarification on Documentation Requirements.
Growth Energy thanks the IRS for clarifying that “qualified sale” includes “the sale of
fuel to an unrelated person that subsequently resells the fuel in its trade or business,” and
encourages the IRS to finalize this proposed definition.39 We further encourage IRS in the final
rule to clarify documentation sufficient to establish a “qualified sale” in a manner consistent with
the practicalities of the existing fuel distribution market.
First, IRS should clarify that sales contracts between the taxpayer and third parties are
sufficient to substantiate qualified sales under the proposed § 1.45Z-4(g)(3) safe harbor. This
safe harbor provides that a taxpayer may demonstrate a “qualified sale” by obtaining from the
purchaser a certificate “prior to or at the time of sale” asserting that the purchaser is unrelated to
the taxpayer and that the transportation fuel will be used by the purchaser in one of three
qualifying ways.40
However, alternative documentation to the prescribed model certificate should be
sufficient to establish the safe harbor, particularly where the information specified in the model
certificate is largely duplicative of that in standard sales documentation such as invoices and
trade confirmations already utilized by market participants. Specifically, the Proposed Rule
indicates that the IRS “may provide other methods through which a taxpayer may substantiate a
qualified sale” other than the qualified sale model certificate in § 1.45Z-4(g)(3)(ii).
41 We urge
the agency to allow taxpayers to substantiate a qualified sale and establish the safe harbor by
providing either: (1) sales contracts and any supplemental documentation from which the
existence of a qualified sale may be ascertained, or (2) certifications or sales contracts and
supplemental information from terminals where multiple taxpayers’ fuel products have been
commingled. Terminal operators’ reconciliation of sales volumes should also be sufficient to
establish a safe harbor in lieu of obtaining documentation from the purchaser.
For most transactions, it will be apparent from the sales contract or trade confirmation
that a transaction is a qualified sale. On rare occasions where a sales contract may be incomplete
or otherwise lack information relevant to the qualified sale criteria, taxpayers may choose to
provide supplemental information, such as a taxpayer’s certification that the purchaser is an
unrelated entity. We therefore encourage the IRS to clarify that various sales documentation may
be used to substantiate a qualified sale for safe harbor purposes, consistent with the statutory and
regulatory definitions.Further, IRS should allow certification of qualified sales for the safe harbor to apply
retroactively for any sales made between January 1, 2025 and the date that this Proposed Rule,
including the § 1.45Z-4(g)(3)(ii) model certificate, is finalized.
Relatedly, Growth Energy supports and encourages IRS to finalize the addition of ASTM
D8651 for undenatured ethanol within the definition of “low-GHG ethanol,”42 which further
affirms that undenatured ethanol for export may qualify for 45Z Credit as fuel that is “suitable
for use” in highway vehicles or aircraft (or may be blended into such a fuel mixture).43
VI. Prevailing Wage Criteria Should be Flexible to Industry Realities.
The prevailing wage criteria are important components of the 45Z Credit; however, as
Growth Energy has explained in prior comments, these criteria should be flexible to the practical
realities of rural markets.
a. Flexibility is needed for rural markets where available workforce is limited.
To claim additional credit for meeting prevailing wage criteria, taxpayers must pay the
wages set by the Department of Labor (“DOL”) under general wage determinations for a
geographic area.44 However, due to the unique geography of biofuels production and the types
of labor required, biofuels producers are encountering situations where there is no DOL-issued
prevailing wage determination or labor classification in the county in which their facilities are
situated despite there being such determination/classification in an adjacent county. We
understand that this may be the case where DOL does not have enough data to publish a
prevailing wage determination or classification for a specific locality.
The current IRS regulations provide that, in such circumstances, taxpayers may request
“supplemental wage determinations” or “additional classifications and rates for those localities
or specific types of labor.45 These additional procedural steps pose multiple challenges that
could be avoided through an easily-administered solution. First, the supplemental wage
determination processes impose regulatory burdens on DOL that may result in untimely
processing of such requests, where it is critical that the biofuels producer has certainty regarding
magnitude of credit eligibility for fuel pricing and other considerations. The regulations provide
that “[t]he Wage and Hour Division will resolve requests for a prevailing wage rate for an
additional classification within 30 days of receipt of the request or will advise the requester
within the 30-day period that additional time is necessary.”46 Despite establishing a presumptive
30-day timeline, however, the rule provides no means of relief to taxpayers if DOL requests an
open-ended amount of additional time or otherwise does not process the request in a timely
manner.
To avoid lengthy delays that can cause significant uncertainty for biofuels producers, the
IRS should amend the regulations to allow taxpayers to use the relevant prevailing wage
determination or labor classification from the nearest locality when DOL is unable to provide one within the allotted 30-day timeframe. Doing so would align with the IRS’ treatment of
offshore facilities, for which “in lieu of requesting a supplemental wage determination” a
taxpayer “may rely on the general wage determination for the relevant category of construction
that is applicable in the geographic area closest to the area in which the qualified facility will be
located.”47 IRS can apply this same approach to onshore facilities in geographic areas lacking
applicable wage determinations. This approach would still allow DOL to make determinations
once it has sufficient data to do so while providing taxpayers with a safe harbor for claiming the
prevailing wage tax credit in cases where DOL is unable to provide such determinations within
the prescribed timeframe.
b. IRS should ensure compliance mechanisms are reasonable and should afford
flexibility to taxpayers in correcting unintentional non-compliance.
Growth Energy understands and appreciates the importance of including compliance
mechanisms to ensure that prevailing wages are actually paid to laborers when claimed by a
taxpayer. The current regulations establish penalties for failure to satisfy the prevailing wage
requirements (and failure to correct inadequate payments).48 These regulations further establish
heightened penalties if the IRS determines that there was an intentional disregard of the
prevailing wage requirements.49 To make this determination, the IRS considers various facts and
circumstances, including (among others) whether taxpayers conducted reviews on a quarterly or
more frequent basis as to (a) what the prevailing wage classifications are, (b) what the prevailing
wage rates are, and (c) whether payroll reflects proper payment of prevailing wages.50
While Growth Energy appreciates the importance of reviewing such data on a periodic
basis to ensure and demonstrate compliance, quarterly reviews impose an unnecessary burden on
taxpayers. Growth Energy requests that IRS amend this provision to allow for annual reviews of
applicable prevailing wage requirements and payroll compliance to demonstrate that there was
no intentional disregard of the prevailing wage requirements.
Further, if a taxpayer has not intentionally disregarded the prevailing wage requirements
and has made comprehensive and fulsome efforts to obtain the identity of a laborer or mechanic
that may have completed prevailing wage covered work, the taxpayer should be given flexibility
to fully cure the potential violation by remitting funds to state unclaimed property funds, paying
a penalty to the IRS, and/or establishing an escrow account that would be available to individuals
that alert the taxpayer that a corrective payment may be owed to the individual.
Finally, to avoid any confusion and ensure that biofuels producers are claiming the full
credit for which they are eligible, IRS should clarify in guidance or in the final Section 45Z
regulations that, in order to claim the additional prevailing wage credit, taxpayers will only need
to demonstrate compliance with prevailing wage requirements for the taxable year in which they
are claiming the credit. Taxpayers would not need to meet prevailing wages requirements in any
year prior or any year following the taxable year for which the credit is being claimed. This clarification aligns with the statutory language on prevailing wage requirements for Section 45Z
and avoids potential confusion that could lead to unnecessary burdens on taxpayers.
c. IRS should provide a de minimis threshold and/or safe harbor distinguishing
between maintenance work and alteration or repair work.
Prevailing wage requirements are applicable to “construction, alteration, or repair of a
similar character.”51 These terms are defined to exclude maintenance work, described as work
that is “designed to maintain and preserve functionality of a facility after it is placed in service
[including] regular inspections of the facility, regular cleaning and janitorial work, regular
replacement of materials with limited lifespans such as filters and light bulbs, and the regular
calibration of equipment.”52 However, given the broad range of work necessary to support a
biorefinery, it may not always be clear whether a particular activity is best categorized as
maintenance work, on the one hand, or alteration or repair work, on the other. We therefore
encourage the IRS to establish a de minimis cost threshold, below which work can be classified
as routine maintenance rather than alteration or repair. Additionally, or at a minimum
alternatively, we encourage the IRS to establish a safe harbor allowing taxpayers to rely upon a
contractor’s certification of whether the work conducted was maintenance or alteration/repair in
nature.
VII. IRS Should Adjust the SAF Certification Process to Ease Potential Bottlenecks and
Administrative Complications.
As a general matter, Growth Energy supports IRS’ proposal to designate 45ZCF-GREET
as a “similar methodology” to CORSIA for purposes of determining the emissions rate for SAF
transportation fuel,
53 and to utilize individuals accredited under either the American National
Standards Institute National Accreditation Board (“ANAB”) or under the California Low Carbon
Fuel Standard (“LCFS”) program to certify fuels consistent with 26 U.S.C. §
45Z(f)(1)(A)(i)(II)(B).54 In this section, we provide recommendations to further improve and
streamline this certification process.
First, we encourage IRS to expand the pool of eligible certifiers to ensure adequate
capacity exists as the SAF market continues to grow. In addition to verifiers registered under the
California LCFS program, IRS should accept verifiers registered under analogous clean fuels
standards in other states, including the Oregon Clean Fuels Program, Washington Clean Fuels
Standard, and New Mexico Clean Transportation Fuel Program. Moreover, any individuals with
accreditations recognized under proposed § 1.45Z-5(b)(3)(i) to certify taxpayers who use
CORSIA to establish emissions rates should similarly be recognized as capable of certifying
taxpayers who use 45ZCF-GREET to establish rates under § 1.45Z-5(b)(3)(ii).
Additionally, with respect to certification requirements for verifying an emissions rate,
while Growth Energy recognizes the importance of accuracy in measurement and periodic
instrument calibration, annual calibration of metering equipment, as set forth in the Proposed
Rule, is unnecessary and not practical at all production facilities.55 Maintenance and calibrationneeds vary considerably by the specific equipment at issue. For example, steam meters are
certified and calibrated upon installation and then verified through monthly accounting
reconciliation using the monthly energy allocation reporting. The steam meter will not deviate
from its initial calibration unless there is a failure, which will become evident in the monthly
data.
The Proposed Rule’s one-size-fits-all approach is therefore inappropriate, and could be
costly, unnecessary, or simply not applicable to the metering equipment at issue. IRS should
instead tailor the calibration requirements in the 45Z Credit regulations to the particular
maintenance and calibration requirements suggested by the original equipment manufacturer
(“OEM”).
VIII. Anti-Stacking Clarifications
Growth Energy supports IRS’ clarifications to the anti-stacking provisions indicating that
taxpayers may make separate elections for each taxable year regarding which anti-stacking credit
to claim.56 IRS should further clarify that, consistent with the definition in Proposed § 1.45Z1(b)(18)(iv)(A) that carbon capture equipment is included in a “facility” only “if such carbon
capture equipment contributes to the lifecycle GHG emissions rate,” use of carbon capture
equipment that does not contribute to the emissions rate for a transportation fuel for which 45Z
credit is claimed, does not preclude a taxpayers claim for 45Q credit.57 For example, if an
ethanol producer (a) produces low-GHG ethanol as calculated using 45ZCF-GREET without
consideration of carbon intensity emissions reductions associated with sequestration of carbon
dioxide from process emissions and (b) sequesters carbon dioxide from the facility consistent
with 45Q, the producer should be eligible to claim both 45Q and 45Z as it avoids Congress’s
intended prohibition against “double-counting” the same activity. Growth Energy requests that
IRS clarify Example 4 in the final anti-stacking regulations to clarify this circumstance.
* * *
Growth Energy appreciates the IRS’ consideration of this input as it works to finalize the
Section 45Z regulations. We look forward to engaging further on this important work and would
be happy to meet with your staff to present on these issues in more detail and answer any
questions.
Sincerely,
Chris Bliley
Senior Vice President of Regulatory Affairs
Growth Energy
The post Growth Energy Provides Comments for Treasury’s Final 45Z Rule appeared first on Growth Energy.
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