By TIM ALEXANDER

Illinois Correspondent

BLOOMINGTON, Ill. — New published guidance from the U.S. Department of Treasury on the 45Z Clean Fuel Production tax credit includes language prohibiting foreign feedstocks, providing both clarity and fuel for thought for Illinois and Corn Belt growers. After this and other modifications to key aspects of the proposal (which now enters a formal comment period until May 26), the Illinois Soybean Association (ISA) reversed its position on the tax credit and now endorses many of its provisions, including the removal of an indirect land use change penalty on agricultural feedstocks. 

“Illinois Soy supports putting out rules for 45Z and finalizing the new RFS volumes because without them the biofuels industry is currently at a standstill,” Kevin ‘KJ” Johnson, director of government relations and strategy for ISA, told Farm World. “There are certain provisions in the newer version of 45Z that we support like North American feedstocks, and the elimination of indirect land use change. Both of these help set a more level playing field for Illinois soybean farmers.”

ISA’s reversal on 45Z mirrored that of parent organization American Soybean Association (ASA), which applauded the updated language and, along with the National Oilseed Processors Association, urged swift finalization of the Treasury proposal, which was issued on Feb. 3. The two organizations noted that  the guidance must be paired with swift finalization of the Trump administration’s Renewable Fuel Standard proposal to further promote “pro-farmer and pro-American” biofuel production.

“Updating federal biofuel policies to prioritize soy-based fuels is a key ASA priority, and we applaud Treasury for this action which will help build domestic markets for U.S. soybeans,” said Scott Metzger, ASA President and Ohio farmer. “While Treasury’s work to update tax guidance is critical, ASA strongly urges the administration to immediately finalize RFS blending targets that complement the work of Treasury and Congress, by setting robust biofuel volumes and implementing new policies that will prioritize the utilization of U.S. soybeans in production.” 

According to Renewable Fuels Association President Geoff Cooper, “The proposal appears to resolve some of previous confusion around what constitutes a ‘qualified sale,’ and begins to integrate the important improvements to 45Z that resulted from the One Big Beautiful Bill Act, such as removal of indirect land use change emissions from the carbon intensity scoring framework.”

Cooper added that there continue to be unresolved issues around the new 45Z language, including the release of a revised version of the 45Z GREET model used to calculate greenhouse gas emissions in order to determine credit values. “Questions remain to be resolved around the quantification of emissions related to low-carbon feedstock production at the farm level, implementation of foreign feedstock prohibitions, and provisions related to the use of energy attribute credits,” he said.

A new feedstock carbon intensity calculator is currently under development by the U.S. Department of Agriculture that will allow for carbon intensity adjustments for feedstocks produced using no-till farming, cover crops and nutrient management practices.

Soybean growers were dead-set against the 45Z tax credit proposal as recently as August, when Farm World spoke with ISA District 6 Director and Utilization Committee Chair, Jim Martin, during the Farm Progress Show in Decatur, Illinois. At that time, Martin lambasted the 45Z tax incentive as using tax dollars to promote imported feedstocks and displacing soybean oil in biofuels. He said that 45Z, which is a carbon intensity-based credit modeled after California’s Low Carbon Fuel Standard, stacked the deck against Midwest soybean growers and gave farm-based feedstocks artificially-lower scores, pushing U.S. farmers out of the biofuel marketplace. 

Rep. Nikki Budzinski (D-Ill.), a staunch supporter of the 45Z Clean Fuels Production Credit, said the revised rules reflect several of the key requests she had made to the administration that are critical for growers and producers in her district. “By taking steps to lock in rules through 2029, this guidance will provide a long-term commitment that allows our ethanol and biodiesel producers to plan, invest, and fully benefit from the 45Z tax credit,” she said. 

“While there is still work to be done to ensure growers producing low-emission feedstocks are rewarded, this renewed clarity is a strong foundation. Together, these policies will grow the biofuels sector, create economic opportunity, and deliver real support for rural America.”

According to Illinois Corn Growers Association President Mark Bunselmeyer, whether or not farmers can participate in the new and improved 45Z tax credit this growing season hinges on the timeliness of the final rule. 

“In today’s challenging farm economy, farmers need durable market signals and opportunities to build a positive balance sheet. When crafted appropriately, this tax policy can help. I would urge the USDA to finalize its guidance and Treasury to promptly adopt the language, because our members need opportunities to consider changes to their on-farm management that will result in financial gain,” Bunselmeyer stated. “ICGA looks forward to continued engagement with agency officials regarding this rule and submitting formal comments to the docket.” 

 A Treasury Department hearing on 45Z will be held on May 28 following the closure of the comment period on May 26.