Energy Efficiency, GHG Emissions, Regulation  -  December 19, 2023

IRS Provides Guidance on SAF Credit

The U.S. Department of the Treasury and Internal Revenue Service (IRS) released guidance on the Sustainable Aviation Fuel (SAF) Credit.

The SAF credit was established by the Inflation Reduction Act (IRA).

The Treasury Department worked closely with the Environmental Protection Agency (EPA), Department of Transportation (DOT), Department of Agriculture (USDA), and Department of Energy (DOE) on today’s Notice.  

“The Biden Administration is driving American innovation to create good-paying jobs and help the U.S. clear hurdles in our clean energy transition,” said Secretary of the Treasury Janet L. Yellen, in a statement. “Incentives in the Inflation Reduction are helping to scale production of low-carbon fuels and cut emissions from the aviation sector, one of the most difficult-to-transition sectors of our economy.” 

The Treasury Department’s guidance provides clarity around eligibility for the SAF credit, which incentivizes the production of SAF that achieves a lifecycle GHG gas emissions reduction of at least 50% as compared with petroleum-based jet fuel. Producers of SAF are eligible for a tax credit of $1.25 to $1.75 per gallon. SAF that decreases GHG emissions by 50% is eligible for the $1.25 credit per gallon amount and SAF that decreases GHG emissions by more than 50% is eligible for an additional $0.01 per gallon for each percentage point the reduction exceeds 50%, up to $0.50 per gallon. 

Numerous fuels will qualify for the credit, including valid biomass-based diesel, advanced biofuels, cellulosic biofuel, or cellulosic diesel that has been approved by the EPA under the Renewable Fuel Standard (RFS). 

Fuels that achieve a 50% or greater reduction in lifecycle GHG emissions under the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) standard will continue to qualify under today’s guidance. 

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