The Internal Revenue Service has issued Notice 2026-53, providing the 2026 emissions rate table used to calculate the Section 45Z Clean Fuel Production Tax Credit, alongside additional guidance covering manure-derived fuels and regenerative agricultural practices. The credit applies to eligible clean transportation fuels produced domestically and sold in a qualified sale, including sustainable aviation fuel, with the credit amount generally scaling to a fuel's lifecycle greenhouse gas emissions rate: lower-emission fuels qualify for larger credits.
What Changed Under the Working Families Tax Cuts Act
The Working Families Tax Cuts (WFTC) legislation amended and extended Section 45Z, introducing several substantive changes this notice implements. Emissions rates must now exclude emissions attributable to indirect land use change (ILUC). Eligible transportation fuel is limited to feedstock produced or grown exclusively in the United States, Mexico or Canada, a geographic restriction that did not previously exist in this form. Negative emissions rates are now prohibited across the credit generally, with a specific exception carved out for transportation fuel derived from animal manure. The law also requires distinct, separately calculated emissions rates for fuels derived from specific types of animal manure feedstock, rather than a single blended manure category.
Why the ILUC Exclusion Is a Notable Policy Choice
Indirect land use change, when biofuel crop demand displaces food or feed production that then expands into new land elsewhere, has been a recurring point of dispute in biofuel policy globally, including the EU's own contested soybean oil ILUC classification covered elsewhere in this series. The US approach here goes the opposite direction from that EU dispute: rather than debating how to measure and price ILUC risk, the WFTC simply excludes ILUC emissions from the federal tax credit's emissions rate calculation entirely, removing the question from this specific credit's scope rather than resolving it analytically.
The Manure-Specific Provisions
The 2026 emissions rate table includes distinct rates for dairy manure and swine manure specifically, with Treasury and the IRS stating the underlying 45ZCF-GREET model is expected to be updated later in 2026 to add poultry manure and beef manure as primary feedstocks. The guidance also allows farm-specific prior manure management practices to be factored into emissions calculations, letting individual farms' actual historical practices affect their fuel's calculated emissions rate rather than applying a single national average regardless of on-farm conditions.
How Regenerative Agriculture Enters the Calculation
Following the US Department of Agriculture's finalisation of its regenerative agricultural practice rules on 29 June 2026, this notice integrates those USDA standards into the 45ZCF-GREET model and provides a safe harbor available specifically for 2025 clean fuel production. For agricultural feedstocks more broadly, the guidance lets taxpayers account for qualifying low-carbon farming practices using the 45Z-specific Feedstock Carbon Intensity Calculator, alongside transition relief for 2025 and 2026 production from certain requirements around developing a nutrient budget before applying fertiliser.
Transition Rules for Feedstocks Already in Use
The notice provides transition rules covering used cooking oil and other feedstocks for cases where an allowed emissions methodology has not yet been updated to reflect the WFTC's changes, giving producers a defined interim approach rather than leaving a gap between the law's effective changes and the underlying model's technical capacity to calculate them.
What Remains Pending
The broader Section 45Z proposed regulations implementing the WFTC's changes, issued 4 February 2026, remain under final consideration by the IRS and Treasury Department; this notice addresses specific technical modeling questions ahead of that final rule rather than completing the full regulatory picture. The DOE's corresponding updates to the 45ZCF-GREET model for poultry and beef manure are also still in development.
Source: Internal Revenue Service, 8 September 2026.
