The U.S. Path Forward for Sustainable Aviation Fuel

This is a significant—but achievable—challenge. In 2022, producers supplied nearly 16 million gallons of SAF to the U.S. market for the first time. This marks progress, but only a small beginning. Reaching 3 billion gallons of SAF will require sustained annual doubling of production. We cannot meet this challenge without leveraging the expertise of U.S. farmers to sustainably supply the renewable feedstocks needed to produce this fuel. President Biden stated that “over the next 20 years, U.S. farmers will supply 95% of sustainable aviation fuel (SAF) to the market.” The roadmap developed by the U.S. Department of Agriculture, the Environmental Protection Agency, and the Departments of Energy and Transportation recognizes that policy must support the use of existing agricultural feedstocks for SAF. Building new production facilities and the necessary supply chains will require substantial, sustained capital investment. The new tax credits in the Inflation Reduction Act (IRA) must support farmers, producers, and other partners willing to make these investments. The tax credits are designed to incentivize the aviation industry—and other carbon-reduction efforts—to produce low-carbon, renewable fuels by catalyzing investment in innovative new facilities that reduce fossil fuel use and create jobs and economic opportunities in rural America. Congress intended that early industry adopters—those from the renewable fuels sector already investing in low-carbon fuels—would be eligible for these credits. Congress also sought to ensure that SAF industry growth would not simply divert investment and feedstocks away from the rapidly expanding biodiesel and renewable diesel sectors. These clean fuels remain essential to continue decarbonizing heavy-duty road transportation and other sectors that, like aviation, will require direct fuel solutions for the foreseeable future. A threshold requirement for eligibility for the new tax credits is that all clean fuels—both transportation and aviation—must achieve at least a 50% reduction in emissions compared to the petroleum fuels they replace. How are these standards measured? As the Biden administration develops criteria for using these new tax credits, it must employ the most up-to-date and robust vehicle and fuel carbon-reduction modeling tools. The most current and authoritative model for evaluating and measuring lifecycle greenhouse gas emissions is Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model. For transportation fuels, the law specifies the use of the GREET model. For SAF, the law authorizes either the International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) model—or a “similar” model.

How to Claim the Clean Energy Tax Credit?

Tax-exempt entities and government agencies can benefit from the new options provided under the Inflation Reduction Act of 2022 (IRA) for clean energy tax credits. The IRA allows certain tax-exempt organizations to benefit from select clean energy tax credits through elective payment. For taxable years beginning after December 31, 2022, entities eligible for clean energy tax credits may elect elective payment. This election treats certain credits as a payment against federal income tax liability, rather than as nonrefundable credits. The credit amount first offsets the entity’s tax liability; any excess is refunded. How is the elective payment election made? The elective payment election is made on the annual tax return in the manner prescribed by the Internal Revenue Service (IRS), accompanied by any forms required to claim the relevant tax credit (e.g., source credit forms), a completed Form 3800, General Business Credit (or its successor form), and any other information required by the related instructions—including supporting calculations. Making the elective payment election involves multiple steps, including completing the prescribed pre-filing registration process. The annual tax return includes: 1. For any person normally required to file an annual tax return with the IRS—including exempt organizations filing Form 990-T for unrelated business income tax or the proxy tax under section 6033(e); or 2. For any person normally not required to file an annual tax return with the IRS (e.g., taxpayers located in U.S. territories), such a return must be filed if they are not located in a territory; if no such return is otherwise required (e.g., state, local, or Indian tribal government entities), then Form 990-T, Exempt Organization Business Income Tax Return, must be filed.

Clean Fuel Tax Credits Bring Alto Ingredients $8.9M Cash

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Alto Ingredients Inc. generated $8.9 million by selling 2025 Section 45Z Clean Fuel Production Tax Credits from low-carbon fuel operations. The company expects continued benefits in 2026 to support initiatives and enhance shareholder value.

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