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HIGHLIGHTS
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Bulletin No. 2026–9
February 23, 2026
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
REG-121244-23, page 579.
The proposed regulations would provide rules on the section 45Z clean fuel production credit as extended and modified by the One, Big, Beautiful Bill Act of 2025. Section
45Z provides a credit for clean transportation fuel produced domestically after December 31, 2024, and sold
by December 31, 2029. The proposed regulations would
address general requirements, such as credit eligibility,
emissions rates, claim filing, and registration. The pro-
Finding Lists begin on page ii.
posed regulations would also amend existing elective pay,
credit transfer, and registration regulations for clarity and
consistency. The proposed regulations would affect domestic fuel producers, credit claimants, and registrants.
Rev. Proc. 2026-13, page 563.
This revenue procedure provides discount factors for the
2025 accident year for use by insurance companies in
computing discounted unpaid losses under § 846 of the
Internal Revenue Code and discounted estimated salvage
recoverable under § 832.
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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
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The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
February 23, 2026
Bulletin No. 2026–9
Part III
26 CFR 601.601: Rules and regulations.
(Also: Part I, §§ 832, 846; 1.846-1.)
Schedule P (Analysis of Losses and Loss
Expenses) of the annual statement.
Rev. Proc. 2026-13
SECTION 2. SCOPE
SECTION 1. PURPOSE
This revenue procedure applies to any
insurance company that is required to
discount unpaid losses under § 846 for a
line of business using the discount factors
published by the Secretary of the Treasury
or the Secretary’s delegate (Secretary) and
also applies to any insurance company that
is required to discount estimated salvage
recoverable under § 832.
This revenue procedure provides discount factors for the 2025 accident year
for use by insurance companies in computing discounted unpaid losses under
§ 846 of the Internal Revenue Code1 and
discounted estimated salvage recoverable
under § 832. This revenue procedure also
provides, for convenience, discount factors for losses incurred in the 2024 accident year and earlier accident years for use
in taxable years beginning in 2025. The
discount factors for accident years before
2025 were provided in earlier revenue
procedures. See, e.g., Rev. Proc. 2025-15,
2025-11 I.R.B. 1090. See Rev. Proc. 202310, 2023-3 I.R.B. 411, for background
concerning the loss payment patterns and
application of the discount factors. This
revenue procedure also requests comments relating to the composite method
described in this revenue procedure and a
2024 change by the National Association
of Insurance Commissioners (NAIC) to
1
SECTION 3. DISCOUNT FACTORS
FOR THE 2025 ACCIDENT YEAR
.01 The tables in this section 3 present separately for each line of business
the discount factors for losses incurred in
the 2025 accident year for use by insurance companies in computing discounted
unpaid losses under § 846 and estimated
salvage recoverable under § 832. The discount factors presented in this section are
generally determined by using the applicable interest rate for 2025 under § 846(c),
which is 3.57 percent, compounded semiannually. The exceptions are the discount
factors for long-tail lines of business
determined using the composite method
described in section V of Notice 88-100,
1988-2 C.B. 439. See section 3.02 of this
revenue procedure. All discount factors are
determined by assuming all loss payments
occur in the middle of the calendar year.
.02 Section V of Notice 88-100 sets
forth a composite method for computing discounted unpaid losses for accident
years that are not separately reported on
the annual statement. Tables 1 and 2 separately provide discount factors for insurance companies that have elected to use the
composite method of Notice 88-100. See
Rev. Proc. 2002-74, 2002-2 C.B. 980. The
discount factors computed using the composite method are unrelated to the composite discount factors referred to in § 1.8461(b)(1)(ii) and (4), which apply to lines of
business for which the Secretary has not
published discount factors. The composite
discount factors for use with respect to such
lines of business are labelled “Short-Tail
Composite” (in Table 1, part B) and “LongTail Composite” (in Table 2, part B). The
“Miscellaneous Casualty” discount factors referenced in § 1.846-1(b)(2) are not
set forth in tables but are equivalent to the
“Short-Tail Composite” discount factors.
Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code or the Income Tax Regulations (26 CFR part 1).
Bulletin No. 2026–9
563
February 23, 2026
Discount Factors for 2025
2025 Interest Rate (using semi-annual compounding): 3.57%
Table 1 (part A)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2025 in Short-Tail Lines of Business
Taxable Year
Beginning in
Auto Physical
Damage
Fidelity/Surety
Financial Guaranty/
Mortgage Guaranty
International
Other*
2025
98.0171
94.8069
94.2020
94.9732
96.3288
2026
96.5385
96.5385
96.5385
96.5385
96.5385
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
Taxpayer Not Using Composite Method
Years after 2026
98.2463
Taxpayer Using the Composite Method
2027
Years after 2027
98.2463
Use composite method discount factors published for the accident year that is two years prior to the
specified taxable year.
* For the Accident and Health line of business (other than disability income or credit disability insurance), the discount
factor for taxable year 2025 is 98.2463 percent. This is also the discount factor used in later taxable years for taxpayers
not using the composite method. For taxpayers using the composite method, the discount factor for losses incurred in
2025 is the discount factor published for the Accident and Health line of business for losses incurred in the accident year
coinciding with the taxable year.
February 23, 2026
564
Bulletin No. 2026–9
Table 1 (part B)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2025 in Short-Tail Lines of Business
Taxable Year
Beginning in
Reinsurance Nonproportional
Assumed
Financial Lines
Reinsurance Nonproportional
Assumed
Liability
Reinsurance Nonproportional
Assumed
Property
Special Property
(Fire, Allied Lines,
Inland Marine,
Earthquake,
Burglary, Theft,
Pet)
2025
94.9406
93.8058
95.3714
97.0553
98.0069
96.6054
2026
96.5385
96.5385
96.5385
96.5385
96.5385
96.5385
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
Warranty
Short-Tail
Composite
Taxpayer Not Using Composite Method
Years after 2026
98.2463
Taxpayer Using the Composite Method
2027
Years after 2027
98.2463
Use composite method discount factors published for the accident year that is two years prior to the
specified taxable year.
Bulletin No. 2026–9
565
February 23, 2026
Table 2 (part A)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2025 in Long-Tail Lines of Business
Taxable Year
Beginning in
Commercial
Auto/Truck
Liability/Medical
Medical
Professional
Liability Claims-Made
Medical
Professional
Liability Occurrence
Multiple
Peril Lines
Other
Liability Claims-Made
Other
Liability Occurrence
2025
92.7912
89.9549
84.2073
94.4611
89.6344
87.9606
2026
93.5133
91.2521
86.4746
92.5690
90.7627
88.9863
2027
94.1823
91.6347
88.1348
92.6080
90.8107
89.8289
2028
94.5524
92.6662
89.7767
92.5264
91.0559
90.2447
2029
94.4332
92.4552
90.7378
92.2615
90.9686
90.6061
2030
93.8646
93.2174
91.1974
92.5637
91.0111
89.3763
2031
93.8845
92.6918
91.6531
92.6495
90.5663
89.3393
2032
94.4510
93.7328
91.4746
94.7671
92.5852
90.2206
2033
95.6118
95.3263
93.6570
95.7661
95.6185
91.4060
2034
97.8620
97.0999
95.6841
97.5155
96.3278
93.6044
Taxpayer Not Using Composite Method
2035
98.2463
98.2463
97.2501
98.2463
97.9703
95.2097
2036
98.2463
98.2463
98.2463
98.2463
98.2463
96.8131
Years after 2036
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
97.5177
98.2463
98.0050
96.3273
Taxpayer Using the Composite Method
2035
Years after 2035
98.2463
Use composite method discount factors published for the accident year that is ten years prior to the
specified taxable year.
February 23, 2026
566
Bulletin No. 2026–9
Table 2 (part B)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2025 in Long-Tail Lines of Business
Taxable
Year Beginning in
Private
Passenger
Auto Liability/
Medical
Products
Liability Claims-Made
Products
Liability Occurrence
Workers'
Compensation
Long-Tail
Composite
2025
94.9556
86.9550
86.1793
86.7823
92.0262
2026
94.5489
88.5282
87.8134
85.0171
91.1814
2027
94.6490
88.8084
89.1375
84.3111
90.8933
2028
94.5543
87.6563
89.8227
83.7305
90.1230
2029
93.4742
89.4311
90.2047
84.0629
89.7600
2030
92.7233
91.3355
90.7591
83.3153
89.1923
2031
93.4032
93.4192
91.8587
83.9937
89.4663
2032
93.5712
93.9397
92.1985
85.7493
91.0189
2033
94.4679
95.4488
93.4239
87.4231
92.6313
2034
97.0779
97.4692
95.8540
88.5091
94.1737
Taxpayer Not Using Composite Method
2035
98.2463
98.2463
97.4244
90.0263
95.7770
2036
98.2463
98.2463
98.2463
91.5785
97.3442
2037
98.2463
98.2463
98.2463
93.1661
98.2463
2038
98.2463
98.2463
98.2463
94.7893
98.2463
2039
98.2463
98.2463
98.2463
96.4458
98.2463
2040
98.2463
98.2463
98.2463
98.1221
98.2463
Years after 2040
98.2463
98.2463
98.2463
98.2463
98.2463
98.3230
97.6204
93.4950
96.8705
Taxpayer Using the Composite Method
2035
Years after 2035
98.2463
Use composite method discount factors published for the accident year that is ten years prior to the
specified taxable year.
Bulletin No. 2026–9
567
February 23, 2026
SECTION 4. DISCOUNT FACTORS
FOR TAXABLE YEARS BEGINNING
IN 2025
.01 The tables in this section 4 present separately for each line of business
discount factors for losses incurred in the
2025 accident year and earlier accident
years for use by insurance companies in
computing discounted unpaid losses under
§ 846 and estimated salvage recoverable
February 23, 2026
under § 832 in taxable years beginning in
2025.
.02 Tables 3 and 4 separately provide
discount factors for insurance companies that have elected to use the composite method of Notice 88-100. See Rev.
Proc. 2002-74. The discount factors
computed using the composite method
are unrelated to the composite discount
factors referred to in § 1.846-1(b)(1)(ii)
and (4), which apply to lines of business
568
for which the Secretary has not published discount factors. The composite
discount factors for use with respect
to such lines of business are labelled
“Short-Tail Composite” (in Table 3,
part B) and “Long-Tail Composite” (in
Table 4, part B). The “Miscellaneous
Casualty” discount factors referenced
in § 1.846-1(b)(2) are not set forth in
tables but are equivalent to the “ShortTail Composite” discount factors.
Bulletin No. 2026–9
Table 3 (part A)
Discount Factors Under Section 846 (percent)
For Taxable Years Beginning in 2025
Short-Tail Lines of Business
Accident Year
Auto Physical
Damage
Fidelity/Surety
Financial Guaranty/
Mortgage Guaranty
International
Other*
2025
98.0171
94.8069
94.2020
94.9732
96.3288
2024
96.9063
96.9063
96.9063
96.9063
96.9063
Taxpayer Not Using Composite Method
2023
98.5707
98.5707
98.5707
98.5707
98.5707
2022
98.6826
98.6826
98.6826
98.6826
98.6826
2021
98.5999
98.5999
98.5999
98.5999
98.5999
2020
98.4834
98.4834
98.4834
98.4834
98.4834
2019
98.4785
98.4785
98.4785
98.4785
98.4785
Years before 2019
98.5513
98.5513
98.5513
98.5513
98.5513
98.5707
98.5707
98.5707
98.5707
Taxpayer Using the Composite Method
Years before 2024
98.5707
* For the Accident and Health line of business (other than disability income or credit disability insurance), the discount
factor for taxable year 2025 is 98.2463 percent.
Bulletin No. 2026–9
569
February 23, 2026
Table 3 (part B)
Discount Factors Under Section 846 (percent)
For Taxable Years Beginning in 2025
Short-Tail Lines of Business
Accident
Year
Reinsurance Nonproportional
Assumed
Financial Lines
Reinsurance Nonproportional
Assumed
Liability
Reinsurance Nonproportional
Assumed
Property
Special Property
(Fire, Allied Lines,
Inland Marine,
Earthquake,
Burglary, Theft, Pet)
Warranty
Short-Tail
Composite
2025
94.9406
93.8058
95.3714
97.0553
98.0069
96.6054
2024
96.9063
96.9063
96.9063
96.9063
96.9063
96.9063
Taxpayer Not Using Composite Method
2023
98.5707
98.5707
98.5707
98.5707
98.5707
98.5707
2022
98.6826
98.6826
98.6826
98.6826
98.6826
98.6826
2021
98.5999
98.5999
98.5999
98.5999
98.5999
98.5999
2020
98.4834
98.4834
98.4834
98.4834
98.4834
98.4834
2019
98.4785
98.4785
98.4785
98.4785
98.4785
98.4785
Years before
2019
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5707
98.5707
98.5707
98.5707
98.5707
Taxpayer Using the Composite Method
Years before
2024
98.5707
February 23, 2026
570
Bulletin No. 2026–9
Table 4 (part A)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2025
Long-Tail Lines of Business
Accident Year
Commercial
Auto/Truck
Liability/Medical
Medical
Professional
Liability Claims-Made
Medical
Professional
Liability Occurrence
Multiple Peril
Lines
Other
Liability ClaimsMade
Other
Liability Occurrence
2025
92.7912
89.9549
84.2073
94.4611
89.6344
87.9606
2024
94.1807
92.1360
87.8094
93.3234
91.6872
90.0762
2023
95.2185
93.1025
90.1803
93.9066
92.4061
91.5784
2022
95.8620
94.4096
92.1748
94.3016
93.1601
92.5186
2021
95.3575
93.4953
92.9976
91.6759
92.3482
90.9746
2020
94.8262
93.0034
93.2158
91.2360
92.2753
90.3502
2019
95.0988
93.9636
94.0439
90.9051
92.7450
90.3437
2018
94.9804
95.1291
94.9993
91.0177
93.8378
91.9830
2017
96.4102
96.0160
96.1220
93.5200
94.9264
92.6228
2016
98.3585
97.7503
97.7902
94.8530
96.6876
94.4974
Taxpayer Not Using the Composite Method
2015
98.5513
98.5513
98.5513
96.1895
98.0033
95.8511
2014
98.5513
98.5513
98.5513
97.5045
98.5513
97.2176
Years before
2014
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
96.9185
98.0920
96.7300
Taxpayer Using the Composite Method
Years before
2016
98.5513
Bulletin No. 2026–9
571
February 23, 2026
Table 4 (part B)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2025
Long-Tail Lines of Business
Accident Year
Private
Passenger
Auto Liability/
Medical
Products
Liability Claims-Made
Products
Liability Occurrence
Workers'
Compensation
Long-Tail
Composite
2025
94.9556
86.9550
86.1793
86.7823
92.0262
2024
95.1115
89.6632
89.0194
86.4322
92.0595
2023
95.6012
90.7369
91.0112
86.8945
92.4617
2022
95.8576
90.5530
92.2079
87.3806
92.4240
2021
94.4178
85.5424
90.1962
83.9002
89.0997
2020
94.0255
85.8393
89.4917
82.1898
88.1551
2019
94.2553
87.2412
90.4215
82.5155
88.0992
2018
95.0550
89.0388
91.8072
84.1036
89.1661
2017
95.6473
90.2969
92.1992
84.7150
90.3858
2016
97.7282
91.5785
94.4133
86.5946
92.1457
Taxpayer Not Using the Composite Method
2015
98.5513
92.8838
95.7739
87.8065
93.4541
2014
98.5513
94.2124
97.1571
89.0414
94.7812
2013
98.5513
95.5629
98.5513
90.2995
96.1195
2012
98.5513
96.9299
98.5513
91.5813
97.4421
2011
98.5513
98.2868
98.5513
92.8867
98.5513
2010
98.5513
98.5513
98.5513
94.2154
98.5513
2009
98.5513
98.5513
98.5513
95.5661
98.5513
2008
98.5513
98.5513
98.5513
96.9334
98.5513
2007
98.5513
98.5513
98.5513
98.2913
98.5513
Years before 2007
98.5513
98.5513
98.5513
98.5513
98.5513
94.7288
96.6903
91.2579
95.0968
Taxpayer Using the Composite Method
Years before 2016
February 23, 2026
98.5513
572
Bulletin No. 2026–9
SECTION 5. REQUEST FOR
COMMENTS
.01 Effect of NAIC Change on Composite Method. Section V of Notice 88-100
sets forth a composite method for computing discounted unpaid losses for accident
years that are not separately reported on
the annual statement. Beginning in 2024,
the NAIC changed Schedule P of the
annual statement to require ten years of
data (and a “prior” row) to be reported for
all lines of business. Previously, only two
years of data were required to be reported
for some lines of business. As described in
Rev. Proc. 2025-15, the Department of the
Treasury (Treasury Department) and the
Internal Revenue Service (IRS) expect that
composite method discount factors, which
apply with respect to accident years not
separately reported on the annual statement, will be of limited use to insurance
companies with respect to the lines of
business set forth in Tables 1 and 3 following the 2024 NAIC change. This is
because the 2024 NAIC change generally
increases the number of accident years
being separately reported on the annual
statement for these lines of business.
Nonetheless, in Rev. Proc. 2025-15, the
Treasury Department and the IRS made no
change to the determination and application of composite method discount factors
to reflect the 2024 NAIC change to Schedule P. The Treasury Department and the
IRS instead requested comments regarding
composite method discount factors with
respect to the lines of business set forth in
Tables 1 and 3 following the NAIC change.
No comments were received.
Bulletin No. 2026–9
.02 Plans Regarding Composite
Method. The Treasury Department and
the IRS are making no change to the
determination and application of composite method discount factors to reflect
the 2024 NAIC change to Schedule P in
this revenue procedure. Accordingly, like
Rev. Proc. 2025-15, this revenue procedure provides composite method discount
factors for accident years that were separately reported on the annual statement
due to the 2024 NAIC change to Schedule
P, although section V of Notice 88-100
provides the composite method for computing discounted unpaid losses for accident years that are not separately reported
on the annual statement. Beginning with
the revenue procedure providing discount
factors for use by insurance companies
in computing discounted unpaid losses
under § 846 and discounted estimated salvage recoverable under § 832 for taxable
years beginning in 2026, the Treasury
Department and the IRS expect to provide composite method discount factors
only for accident years not separately
reported on the annual statement. Accordingly, with respect to the lines of business set forth in Tables 1 and 3, the Treasury Department and the IRS expect to
require that, for accident years separately
reported on the annual statement, taxpayers using the composite method must use
the same discount factors used by taxpayers not using the composite method.
Consistent with prior practice, although
the annual statement does not distinguish
between cancellable accident and health
insurance and other insurance designated
as “Other,” these two groups of policies
573
would continue to be treated as if their
losses were reported separately. Set forth
below, for informational purposes only,
are Table 1 (parts A and B) for the 2025
accident year and Table 3 (parts A and B)
for taxable years beginning in 2025, as
they would have appeared if the proposed
approach had been required for taxable
years beginning in 2025. The composite
method discount factors set forth in these
tables were derived using the loss payment patterns previously determined for
the 2022 determination year under section
846(d)(3)(B)(i). See Rev. Proc. 2023-10
for background concerning the loss payment patterns. The anticipated changes
to the discount factors used by insurance
companies using the composite method to
compute discounted unpaid losses under
§ 846 and discounted estimated salvage
recoverable under § 832 are expected to
change the proper time for the inclusion
of the item in income or the taking of the
item as a deduction. Accordingly, affected
insurance companies are expected to have
a change in method of accounting subject
to § 446(e) and § 1.446-1. The Treasury
Department and the IRS anticipate providing simplified procedures for insurance companies to change their method
of accounting to use such factors in their
first taxable year beginning after December 31, 2025. For example, the Treasury
Department and the IRS are considering
implementing the change on a cut-off
basis, providing automatic change request
procedures, and limiting the information
that must be provided on Form 3115,
Application for Change in Accounting
Method.
February 23, 2026
Table 1 (part A)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2025 in Short-Tail Lines of Business
(Informational Purposes Only)
Taxable Year
Beginning in
Auto Physical
Damage
Fidelity/Surety
Financial Guaranty/
Mortgage Guaranty
International
Other*
2025
98.0171
94.8069
94.2020
94.9732
96.3288
2026
96.5385
96.5385
96.5385
96.5385
96.5385
2027–2034
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
Taxpayer Not Using Composite Method
Years after 2034
98.2463
Taxpayer Using the Composite Method
2035
Years after 2035
98.2463
Use composite method discount factors published for the accident year that is two years prior to the
specified taxable year.
* For the Accident and Health line of business (other than disability income or credit disability insurance), the discount
factor for taxable years 2025 - 2034 is 98.2463 percent. This is also the discount factor used in taxable years after 2034
for taxpayers not using the composite method. For taxpayers using the composite method, the discount factor for losses
incurred in accident year 2025 for taxable years after 2034 is the discount factor published for the Accident and Health
line of business for losses incurred in the accident year coinciding with the taxable year.
February 23, 2026
574
Bulletin No. 2026–9
Table 1 (part B)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2025 in Short-Tail Lines of Business
(Informational Purposes Only)
Taxable Year
Beginning in
Reinsurance Nonproportional
Assumed
Financial Lines
Reinsurance Nonproportional
Assumed
Liability
Reinsurance Nonproportional
Assumed
Property
Special Property
(Fire,
Allied Lines,
Inland Marine,
Earthquake,
Burglary, Theft,
Pet)
2025
94.9406
93.8058
95.3714
97.0553
98.0069
96.6054
2026
96.5385
96.5385
96.5385
96.5385
96.5385
96.5385
2027–2034
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
98.2463
Warranty
Short-Tail
Composite
Taxpayer Not Using Composite Method
Years after 2034
98.2463
Taxpayer Using the Composite Method
2035
Years after 2035
98.2463
Use composite method discount factors published for the accident year that is two years prior to the
specified taxable year.
Bulletin No. 2026–9
575
February 23, 2026
Table 3 (part A)
Discount Factors Under Section 846 (percent)
For Taxable Years Beginning in 2025
Short-Tail Lines of Business
(Informational Purposes Only)
Accident Year
Auto Physical
Damage
Fidelity/Surety
Financial Guaranty/
Mortgage Guaranty
International
Other*
2025
98.0171
94.8069
94.2020
94.9732
96.3288
2024
96.9063
96.9063
96.9063
96.9063
96.9063
2023
98.5707
98.5707
98.5707
98.5707
98.5707
2022
98.6826
98.6826
98.6826
98.6826
98.6826
2021
98.5999
98.5999
98.5999
98.5999
98.5999
2020
98.4834
98.4834
98.4834
98.4834
98.4834
2019
98.4785
98.4785
98.4785
98.4785
98.4785
2018
98.5513
98.5513
98.5513
98.5513
98.5513
2017
98.5513
98.5513
98.5513
98.5513
98.5513
2016
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5707
98.5707
98.5707
98.5707
Taxpayer Not Using Composite Method
Years before 2016
98.5513
Taxpayer Using the Composite Method
Years before 2016
98.5707
* For the Accident and Health line of business (other than disability income or credit disability insurance), the discount
factor for taxable year 2025 is 98.2463 percent.
February 23, 2026
576
Bulletin No. 2026–9
Table 3 (part B)
Discount Factors Under Section 846 (percent)
For Taxable Years Beginning in 2025
Short-Tail Lines of Business
(Informational Purposes Only)
Reinsurance Non-proportional
Assumed
Property
Special Property
(Fire, Allied Lines,
Inland Marine,
Earthquake,
Burglary, Theft,
Pet)
Warranty
Short-Tail
Composite
93.8058
95.3714
97.0553
98.0069
96.6054
96.9063
96.9063
96.9063
96.9063
96.9063
96.9063
2023
98.5707
98.5707
98.5707
98.5707
98.5707
98.5707
2022
98.6826
98.6826
98.6826
98.6826
98.6826
98.6826
2021
98.5999
98.5999
98.5999
98.5999
98.5999
98.5999
2020
98.4834
98.4834
98.4834
98.4834
98.4834
98.4834
2019
98.4785
98.4785
98.4785
98.4785
98.4785
98.4785
2018
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
2017
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
2016
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5513
98.5707
98.5707
98.5707
98.5707
98.5707
Accident
Year
Reinsurance Nonproportional
Assumed
Financial Lines
Reinsurance Nonproportional
Assumed
Liability
2025
94.9406
2024
Taxpayer Not Using Composite Method
Years before
2019
98.5513
Taxpayer Using the Composite Method
Years before
2024
98.5707
Bulletin No. 2026–9
577
February 23, 2026
.03 Comments Regarding Composite
Method.
The Treasury Department and the IRS
request comments on the plans described
in section 5.02 of this revenue procedure,
including:
(1) comments on whether the Treasury
Department and the IRS should permit
taxpayers using the composite method to
use discount factors determined using the
approach described in section 5.02 of this
revenue procedure in taxable years beginning in 2024 or 2025, and also provide
simplified procedures for taxpayers using
the composite method to change their
method of accounting to use such factors
in such taxable years;
(2) comments regarding any alternative approaches the Treasury Department
and the IRS should consider, including
elimination or alteration of the composite
discount method described in Section V of
Notice 88-100, either for short-tail lines
February 23, 2026
of business only or for both short-tail and
long-tail lines of business; and
(3) comments on what, if any, additional guidance regarding composite
method discount factors insurance companies require.
.04 Procedures for Submitting Comments.
(1) Deadline. Written comments should
be submitted by May 22, 2026.
(2) Form and manner. The subject line
for the comments should include a reference to Revenue Procedure 2026-13. All
commenters are strongly encouraged to
submit comments electronically. However, comments may be submitted in one
of two ways:
(a) Electronically via the Federal
eRulemaking Portal at www.regulations.
gov (type IRS-2026-0134 in the search
field on the regulations.gov homepage to
find this revenue procedure and submit
comments); or
578
(b) By mail to: Internal Revenue Service, CC:PA:01:PR (Revenue Procedure
2026-13), Room 5503, P.O. Box 7604,
Ben Franklin Station, Washington, D.C.,
20044.
(3) Publication of comments. The Treasury Department and the IRS will publish
for public availability any comment submitted electronically or on paper to its
public docket on regulations.gov.
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Grace Chang of the Office
of Associate Chief Counsel (Financial
Institutions & Products). For further information regarding this revenue procedure,
contact Ms. Chang at (202) 317-4286 (not
a toll-free call).
Bulletin No. 2026–9
Part IV
Notice of Proposed
Rulemaking
Section 45Z Clean Fuel
Production Credit
REG-121244-23
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking and public hearing.
SUMMARY: This document contains
proposed regulations regarding the
clean fuel production credit enacted by
the Inflation Reduction Act of 2022 and
amended by the One, Big, Beautiful Bill
Act (OBBBA). These proposed regulations would provide rules for determining
clean fuel production credits, including
credit eligibility rules, emissions rates,
and certification and registration requirements. In addition, the proposed regulations would amend three sets of final
regulations: the elective payment election regulations and the credit transfer
election regulations, to clarify language
relating to ownership of clean fuel production facilities, and the Federal excise
tax registration regulations, to make
them clearer and more consistent with
the clean fuel production credit registration requirements in these proposed regulations. The proposed regulations would
affect domestic producers of clean transportation fuel, taxpayers that may claim
a credit for a related producer’s fuel, and
excise tax registrants.
DATES: Written or electronic comments must be received by April 6, 2026.
The public hearing is being held on May
28, 2026, at 10 a.m. Eastern Time (ET).
Requests to speak and outlines of topics to
be discussed at the public hearing must be
received by April 6, 2026. If no outlines
are received by April 6, 2026, the public
hearing will be cancelled. Requests to
attend the public hearing must be received
by 5 p.m. ET on May 26, 2026.
Bulletin No. 2026–9
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemaking Portal at https://www.regulations.gov
(indicate IRS and REG-121244-23) by
following the online instructions for submitting comments. Requests for a public
hearing must be submitted as prescribed
in the “Comments and Requests for a
Public Hearing” section. Once submitted
to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comments submitted to the IRS’s public docket. Send paper
submissions to: CC:PA:01:PR (REG121244-23), Room 5503, Internal Revenue Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044. A plain
language summary of the proposed regulations will be made available at https://
www.regulations.gov.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Jennifer Golden or Danielle
Mayfield of the Office of Associate Chief
Counsel (Energy, Credits, and Excise Tax)
at (202) 317-6855 (not a toll-free number);
concerning submissions of comments or
the public hearing, Publications and Regulations Section at (202) 317-6901 (not
a toll-free number) or by email at publichearings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Authority
This document contains proposed
amendments to the Income Tax Regulations (26 CFR part 1) regarding sections
45Z, 1361, 4101, 6417, and 6418 of the
Internal Revenue Code (Code) as they
relate to the clean fuel production credit
determined under section 45Z (proposed
regulations). This document also contains
proposed amendments to the Manufacturers and Retailers Excise Tax Regulations
(26 CFR part 48) regarding section 4101
as they relate to excise tax registration.
The proposed regulations would be issued
under the authority granted by sections
579
45Z, 1361(b)(3)(A), 4101(a)(1) and (c),
4222(c), 6001, 6417(h), 6418(h), and
7805(a) of the Code.
Section 45Z contains several delegations of authority to the Secretary of
the Treasury or the Secretary’s delegate
(Secretary). Section 45Z(e) directs the
Secretary to issue guidance no later than
January 1, 2025, regarding implementation of section 45Z, including calculation
of emissions factors of transportation
fuel, the emissions rate table described
in section 45Z(b)(1)(B)(i), and the determination of clean fuel production credits under section 45Z. Section 45Z(f)(2)
further authorizes the Secretary to issue
regulations regarding the fuel production
attributable to the taxpayer in the case of a
facility with multiple owners, and section
45Z(f)(1)(A)(i)(II) authorizes the Secretary to issue guidance on certification and
other information with respect to certain
transportation fuels.
Section 45Z(f)(3) authorizes the Secretary to prescribe additional related person
rules for other entities similar to the rule
described for corporations that are members of an affiliated group of corporations
filing a consolidated return. This includes
the authority to prescribe rules for related
persons with respect to which the taxpayer
has reason to believe will sell fuel to an
unrelated person in a manner described in
section 45Z(a)(4).
Section 45Z(d)(5)(C) directs the Secretary to issue regulations or other guidance
as the Secretary determines necessary to
carry out the purposes of section 45Z(d)
(5)(A)(iv), which excludes from the definition of “transportation fuel” any fuel
produced from a fuel for which a credit
under section 45Z is allowable.
Section 45Z(b)(1)(B)(ii) authorizes
the Secretary to determine, in the case
of any transportation fuel that is not a
sustainable aviation fuel (SAF), whether
a model is a successor model to the
Greenhouse gases, Regulated Emissions,
and Energy use in Transportation model
developed by the Argonne National
Laboratory (ANL). Additionally, section 45Z(b)(1)(B)(i) directs the Secretary, subject to section 45Z(b)(1)(B)(ii)
through (v), to annually publish a table
February 23, 2026
setting forth the emissions rate for similar types and categories of transportation
fuels based on the amount of lifecycle
greenhouse gas (GHG) emissions as
described in section 211(o)(1)(H) of the
Clean Air Act (CAA) (42 U.S.C. 7545(o)
(1)(H)), as in effect on August 16, 2022
(CAA-2022) for such fuels, expressed
as kilograms of equivalent carbon dioxide (CO2e) per 1,000,000 British thermal
units (mmBTU), which a taxpayer must
use for purposes of section 45Z. The proposed regulations cite to the CAA-2022
as enacted by section 1501(a)(2) of the
Energy Policy Act of 2005, Public Law
109-58, 119 Stat. 594, 1067 (2005),
amended by section 202(a)(1) of the
Energy Independence and Security Act
of 2007, Public Law 110-140, 121 Stat.
1492, 1521-22 (2007).
Section 45Z(b)(1)(B)(iv) authorizes the
Secretary to determine the regulations or
methodologies for emissions rate adjustments to exclude any emissions attributed
to indirect land use change.
Section 45Z(b)(1)(B)(v)(I) requires
the Secretary to provide a distinct emissions rate with respect to any transportation fuel derived from animal manure.
The emissions rate must be based on the
specific animal manure feedstock, which
may include dairy manure, swine manure,
poultry manure, and any other sources that
the Secretary determines to be appropriate.
Section 45Z(b)(1)(B)(v)(II) authorizes
the Secretary to provide an emissions rate
less than zero with respect to any transportation fuel derived from animal manure.
Section 1361(b)(3)(A) authorizes the
Secretary to prescribe regulations providing exceptions to the subparagraph’s treatment of a qualified subchapter S subsidiary (as defined in section 1361(b)(3)(B))
for purposes of the Code.
Section 4101(a)(1) authorizes the Secretary to prescribe regulations related to
any registration required under section
4101, including the time, form, manner,
and terms and conditions of such registration.
Section 4101(c) provides that rules
similar to the rules of section 4222(c)
apply to registration under section 4101.
Section 4222(c) authorizes the Secretary
to prescribe regulations related to the
denial, revocation, or suspension of any
February 23, 2026
registration under section 4222 if the Secretary determines that a registrant has used
such registration to avoid the payment of
tax or to postpone or interfere with the
collection of tax, or that such denial, revocation, or suspension is needed to protect
the revenue.
Section 6001 authorizes the Secretary
to prescribe regulations related to recordkeeping, statements, and special returns.
Section 6417(h) directs the Secretary
to issue such regulations or other guidance
as may be necessary to carry out the purposes of section 6417.
Section 6418(h) directs the Secretary
to issue such regulations or other guidance
as may be necessary to carry out the purposes of section 6418.
These regulations would also be issued
under the express delegation of authority
under section 7805(a) of the Code, which
authorizes the Secretary to prescribe
all needful rules and regulations for the
enforcement of the Code, including all
rules and regulations as may be necessary
by reason of any alteration of law in relation to Internal Revenue.
Background
I. Overview
Section 45Z, added to the Code by section 13704 of Public Law 117-169, 136
Stat. 1818, 1997 (August 16, 2022), commonly known as the Inflation Reduction
Act (IRA), and amended by section 70521
of Public Law 119-21, 139 Stat. 72, 276
(July 4, 2025), commonly known as the
OBBBA, provides an income tax credit
(section 45Z credit) for clean transportation fuel produced domestically after
December 31, 2024, and sold by December 31, 2029. See section 13704(c) of the
IRA; section 70521(d) of the OBBBA;
section 45Z(g). The section 45Z credit is
a general business credit under section 38
of the Code.
The section 45Z credit replaces an
assortment of prior fuel incentives. Those
incentives consisted of income tax credit,
excise tax credit, and excise tax payment
provisions for various biofuels and other
alternative fuels sold for use as a fuel or
used as a fuel, including biodiesel, renewable diesel, compressed natural gas, second generation biofuel, and SAF. See sec-
580
tions 40(b)(6); 40A(b)(1) and (2); 40B;
6426(c) through (e) and (k); and 6427(e).
Section 4101 authorizes the Secretary to require registration with respect
to the section 4041 and section 4081 fuel
excise taxes, and requires registration with
respect to certain fuel tax credits, including the section 45Z credit. Section 4101(a)
(1), as amended by section 70521(i) of the
OBBBA, and section 45Z(f)(1)(A)(i)(I)
impose a registration requirement under
section 4101 (section 4101 registration)
on a taxpayer claiming the section 45Z
credit.
Section 6417, added to the Code by
section 13801(a) of the IRA, and amended
by sections 70512(j)(2) and 70522(c) of
the OBBBA, allows an applicable entity
to elect to treat applicable credits (as
defined in section 6417(b)), including the
section 45Z credit, as a payment against
the tax imposed by subtitle A of the Code.
Section 6418, added to the Code by
section 13801(b) of the IRA, and amended
by sections 70512(h), 70513(b)(3)(B)(ii),
and 70521(j)(2) of the OBBBA, allows an
eligible taxpayer to elect to transfer eligible credits (as defined in section 6418(f)
(1)), including the section 45Z credit.
A taxpayer making a section 6417 or
section 6418 election must also complete
pre-filing registration, as provided in
regulations under those provisions. This
pre-filing registration is distinct from the
registration required for the section 45Z
credit, which is done under section 4101.
II. The Section 45Z Credit
A. Credit Eligibility
Under section 45Z(a)(1)(A), if a taxpayer qualifies for a section 45Z credit,
the taxpayer is eligible to claim a section 45Z credit for the taxable year in
which the taxpayer sells a transportation
fuel. To qualify for a section 45Z credit,
a taxpayer must: (i) produce a transportation fuel that meets the requirements for
suitability, emissions rate, coprocessing,
and prevention of double crediting; (ii)
produce the fuel at a qualified facility in
the United States, including in any U.S.
territories; (iii) be registered as a producer
of clean fuel under section 4101 at the time
of production; and (iv) sell the fuel to an
unrelated person in a qualified sale during
Bulletin No. 2026–9
the taxable year. See section 45Z(a)(1) and
(4), (d)(4), (d)(5)(A), and (f)(1). Transportation fuel produced after December 31,
2025, must be exclusively derived from a
feedstock that was produced or grown in
the United States, Mexico, or Canada. See
section 45Z(f)(1)(A)(iii); section 70521(a)
(2) of the OBBBA.
A taxpayer also cannot be: (i) a specified foreign entity, for taxable years
beginning after July 4, 2025; or (ii) a foreign-influenced entity (other than a foreign-influenced entity described in section
7701(a)(51)(D)(i)(II) of the Code), for
taxable years beginning after July 4, 2027.
See sections 45Z(f)(8) and 7701(a)(51).
Section 45Z(d)(4) defines “qualified
facility” as a facility used for the production of transportation fuels. However,
the term “qualified facility” excludes any
facility for which one of the following
credits is allowed under section 38 for the
taxable year: (i) the credit for production
of clean hydrogen under section 45V of the
Code (section 45V credit); (ii) the credit
determined under section 46 of the Code
to the extent that such credit is attributable to the energy credit determined under
section 48 of the Code with respect to any
specified clean hydrogen production facility for which an election is made under
section 48(a)(15) (section 48(a)(15) election); and (iii) the credit for carbon oxide
sequestration under section 45Q of the
Code (section 45Q credit). Because these
credits cannot be stacked with the section
45Z credit, this preamble refers to the
section 45V credit, the section 48(a)(15)
election, and the section 45Q credit collectively as the “anti-stacking credits” and
individually as an “anti-stacking credit.”
Section 45Z(d)(5)(A) defines “transportation fuel” as a fuel that meets four
requirements. First, the fuel must be suitable for use as a fuel in a highway vehicle
or aircraft. Second, the fuel must have a
lifecycle GHG emissions rate (emissions
rate) of not greater than 50 kilograms (kg)
of CO2e per mmBTU. Section 45Z(d)(1)
defines “mmBTU” to mean 1,000,000
British thermal units; section 45Z(d)(2)
defines “CO2e” to mean, with respect to
any GHG, the equivalent carbon dioxide
(as determined based on relative global
warming potential). Third, the fuel must
not be derived from coprocessing an applicable material (or materials derived from
an applicable material) with a feedstock
that is not biomass. Section 45Z(d)(5)(B)
(i) defines “applicable material” to mean
monoglycerides, diglycerides, and triglycerides; free fatty acids; and fatty acid
esters. Section 45Z(d)(5)(B)(ii) defines
“biomass” to have the same meaning as
in section 45K(c)(3) of the Code, which
provides that biomass means any organic
material other than oil and natural gas (or
any product thereof), and coal (including
lignite) or any product thereof. Fourth, the
fuel must not be produced from a fuel for
which a section 45Z credit is allowable.
In the case of a taxpayer producing a
transportation fuel that is SAF, section
45Z(f)(1)(A)(i)(II) requires the taxpayer
to provide certification from an unrelated person.1 For this purpose, section
45Z(a)(3) defines “sustainable aviation
fuel,” which these proposed regulations
refer to as a “SAF transportation fuel,” to
mean the non-kerosene portion of liquid
fuel that is a transportation fuel, is sold
for use in an aircraft, is not derived from
palm fatty acid distillates or petroleum,
and meets the requirements of either: (i)
ASTM International Standard D7566 or
(ii) the Fischer Tropsch (FT) provisions
of ASTM International Standard D1655,
Annex A1.
Section 45Z(a)(4) requires a taxpayer
to sell transportation fuel to an unrelated
person: (i) for use by such person in the
production of a fuel mixture; (ii) for use
by such person in a trade or business; or
(iii) who sells such fuel at retail to another
person and places such fuel in the fuel tank
of such other person. Section 45Z(f)(3)
provides that persons are treated as related
to each other if they would be treated as a
single employer under the regulations prescribed under section 52(b) of the Code.2
Section 45Z(f)(3) further provides that if
a corporation is a member of an affiliated
group of corporations filing a consolidated
return, such corporation is treated as selling fuel to an unrelated person if another
member of the group sells the fuel to an
unrelated person. Section 45Z(f)(3) also
authorizes the Secretary to prescribe similar sale attribution rules for other related
entities, including rules for related persons with respect to which the taxpayer
has reason to believe will sell fuel to an
unrelated person in a manner described in
section 45Z(a)(4).
Section 45Z(f)(1)(A)(i)(II) requires
a taxpayer producing a SAF transportation fuel to provide certification (in such
form and manner as the Secretary prescribes) from an unrelated person demonstrating compliance with: (i) any general
requirements, supply chain traceability
requirements, and information transmission requirements established under the
Carbon Offsetting and Reduction Scheme
for International Aviation (CORSIA);
or (ii) for any methodology similar to
CORSIA that satisfies the criteria under
section 211(o)(1)(H) of the CAA-2022,
requirements similar to the requirements
described for CORSIA. A taxpayer producing a SAF transportation fuel must
also provide such other information as the
Secretary may require for purposes of carrying out section 45Z.
B. Credit Amount
Under section 45Z(a)(1), a taxpayer
calculates the amount of the section
45Z credit by multiplying the applicable
amount per gallon or gallon equivalent
with respect to a transportation fuel produced by the taxpayer and sold in a qualified sale by the emissions factor for such
fuel. Per section 45Z(a)(5), if the credit
amount is not a multiple of one cent, then
it is rounded to the nearest cent. A taxpayer’s total section 45Z credit for a taxable
year is the sum of the section 45Z credit
for each transportation fuel sold during
the taxable year.
1. Applicable Amount
For fuel produced after December 31,
2025, the applicable amount for any transportation fuel is either $0.20 or $1.00. See
section 45Z(a)(2); section 70521(g)(2) of
the OBBBA.
Both the preamble to the proposed regulations and the proposed regulations use the term “unrelated person” when describing the certification required by section 45Z(f)(1)(A)(i)(II). Section
45Z(f)(1)(A)(i)(II) refers to an “unrelated party,” which is synonymous with an unrelated person as used in section 45Z(a)(4) and (f)(3).
2
In determining eligibility for the section 45Z credit, a taxpayer must apply the controlled group rules under section 52 consistent with the statutory purpose of section 45Z.
1
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February 23, 2026
For fuel produced on or before December 31, 2025, the applicable amount varies
depending on whether the transportation
fuel is a SAF transportation fuel or is not
a SAF transportation fuel (non-SAF transportation fuel) and is higher for SAF transportation fuel than for non-SAF transportation fuel. For non-SAF transportation
fuel, the applicable amount is either $0.20
or $1.00. Section 45Z(a)(2). For SAF
transportation fuel, the applicable amount
is either $0.35 or $1.75. Section 45Z(a)(3)
(repealed for fuel produced after December 31, 2025, by section 70521(g)(2) of
the OBBBA).
The increased applicable amount is
available if the taxpayer produces the
transportation fuel at a qualified facility that satisfies the prevailing wage and
apprenticeship (PWA) requirements.
Section 45Z(c)(1) provides that for
calendar years beginning after 2024, the
applicable amount must be adjusted by
multiplying such amount by the inflation
adjustment factor for the calendar year in
which the sale of the transportation fuel
occurs. Section 45Z(c)(2) provides that
the inflation adjustment factor for the
section 45Z credit is the inflation adjustment factor determined and published by
the Secretary pursuant to section 45Y(c),
determined by substituting “calendar
year 2022” for “calendar year 1992” in
section 45Y(c)(3). The inflation adjustment factor for purposes of section 45Z
means, with respect to a calendar year,
a fraction the numerator of which is the
gross domestic product (GDP) implicit
price deflator for the preceding calendar
year and the denominator of which is the
GDP implicit price deflator for the calendar year 2022. In this context, the term
“GDP implicit price deflator” means the
most recent revision of the implicit price
deflator for the GDP as computed and
published by the Department of Commerce before March 15 of the calendar
year.
If any inflation-adjusted applicable
amount is not a multiple of one cent, it
must be rounded to the nearest multiple of
one cent. Section 45Z(c)(1).
Section 45Z(f)(6)(A) provides that
rules similar to the prevailing wage
requirements of section 45(b)(7) apply.
Section 45Z(f)(6)(B) provides a special
rule for qualified facilities placed in ser-
February 23, 2026
vice before January 1, 2025, under which
such a facility need only satisfy prevailing wage requirements for any alteration
or repair in taxable years beginning after
December 31, 2024. Section 45Z(f)(7)
provides that rules similar to the apprenticeship requirements of section 45(b)(8)
apply. Section 1.45Z-3 provides additional
rules on the PWA requirements under section 45Z.
2. Emissions Factor and Emissions Rate
Under section 45Z(b)(1)(A), a transportation fuel’s emissions factor measures
the reduction in a fuel’s emissions rate,
expressed as kg of CO2e per mmBTU,
relative to the statutory baseline emissions rate of 50 kg of CO2e per mmBTU,
expressed as a fraction of the statutory
baseline. Expressed mathematically, the
emissions factor calculation is as follows:
(50 kg CO2e per mmBTU - emissions
rate) ÷ 50 kg CO2e per mmBTU
Under section 45Z(b)(2), any emissions
factor determined under section 45Z(b)(1)
(A) that is not a multiple of 0.1 must be
rounded to the nearest multiple of 0.1.
A taxpayer determines a fuel’s emissions rate by either using the annual
emissions rate table published by the
Secretary or obtaining a provisional
emissions rate (PER) determination
from the Secretary. See section 45Z(b)
(1)(B) and (D). The emissions rate may
not be less than zero for any transportation fuel produced after December 31,
2025, except for fuel derived from animal manure. See section 45Z(b)(1)(B)(v)
and (b)(1)(E); section 70521(b) and (c)
(1) of the OBBBA.
Section 45Z(b)(1)(B)(i) directs the
Secretary, subject to section 45Z(b)(1)
(B)(ii) through (v), to annually publish
a table setting forth the emissions rates
for similar types and categories of transportation fuels based on the amount of
lifecycle GHG emissions as described in
section 211(o)(1)(H) of the CAA-2022
for such fuels, expressed as kg of CO2e
per mmBTU. Section 211(o)(1)(H) of
the CAA-2022 defines lifecycle GHG
emissions as “the aggregate quantity of
greenhouse gas emissions (including
direct emissions and significant indirect
582
emissions such as significant emissions
from land use changes), as determined by
the Administrator [of the Environmental Protection Agency (EPA)], related
to the full fuel lifecycle, including all
stages of fuel and feedstock production
and distribution, from feedstock generation or extraction through the distribution and delivery and use of the finished
fuel to the ultimate consumer, where the
mass values for all greenhouse gases
are adjusted to account for their relative
global warming potential.” See also 42
U.S.C. 7602(a). Section 45Z(d)(3) provides that “greenhouse gas” has the same
meaning as under section 211(o)(1)(G) of
the CAA-2022.
Section 45Z divides transportation
fuel into two categories for purposes of
emissions rates: non-SAF transportation
fuel and SAF transportation fuel. Section
45Z(b)(1)(B)(ii) and (iii) provides the
methods for determining emissions rates
in each case.
Section 45Z(b)(1)(B)(ii) provides that
for non-SAF transportation fuel, the lifecycle GHG emissions of such fuel must be
based on the most recent determinations
under the Greenhouse gases, Regulated
Emissions, and Energy use in Transportation model developed by the ANL, or
a successor model as determined by the
Secretary.
Section 45Z(b)(1)(B)(iii) provides that
for SAF transportation fuel, the lifecycle
GHG emissions of such fuel is determined in accordance with: (i) the most
recent CORSIA methodologies that have
been adopted by the International Civil
Aviation Organization (ICAO) with the
agreement of the United States; or (ii) any
methodology similar to the most recent
CORSIA methodologies that satisfies the
criteria under section 211(o)(1)(H) of the
CAA-2022.
Section 45Z(b)(1)(B)(iv) provides
that for transportation fuel produced after
December 31, 2025, notwithstanding
section 45Z(b)(1)(B)(i) through (iii), the
emissions rate must be adjusted to exclude
any emissions attributed to indirect land
use change. See section 70521(c) of the
OBBBA.
Section 45Z(b)(1)(B)(v) provides
that for any transportation fuel derived
from animal manure and produced after
December 31, 2025, a distinct emissions
Bulletin No. 2026–9
rate must be provided with respect to such
fuel based on the specific animal manure
feedstock. Such an emissions rate may be
less than zero. See section 70521(c) of the
OBBBA.
In the case of any transportation fuel
for which an emissions rate has not been
established in the annual emissions rate
table under section 45Z(b)(1)(B), a taxpayer producing such fuel may file a petition with the Secretary for determination
of the PER with respect to such fuel. See
section 45Z(b)(1)(D).
C. Other Rules
Section 45Z(f)(2) provides that, if a
facility has more than one owner, production from the facility will be allocated
among the owners in proportion to their
respective ownership interests in the gross
sales from such facility, except to the
extent provided in regulations prescribed
by the Secretary.
Section 45Z(f)(4) provides that under
regulations prescribed by the Secretary,
rules similar to the rules of section 52(d)
will apply to a pass-thru in the case of
estates and trusts.
Section 45Z(f)(5) provides that rules
similar to the rules of section 45Y(g)(6)
will apply for the allocation of the credit
to patrons of an agricultural cooperative.
III. Section 4101 Registration
Section 4101 of the Code generally provides rules for taxpayer registration. Section
4101(a)(1) provides a specific delegation of
authority to the Secretary to prescribe the
form and manner of registration by requiring every person required to register under
section 4101 to register with the Secretary
at such time, in such form and manner, and
subject to such terms and conditions, as the
Secretary may by regulations prescribe.
Section 4101(a)(1) further provides that a
section 4101 registration may be used only
in accordance with regulations prescribed
under section 4101. Section 4101(a)(5)
requires reregistration under regulations
prescribed by the Secretary in the event of
certain changes in ownership.
3
A. Section 45Z Registration Requirement
Section 45Z(f)(1)(A)(i)(I) provides
that no section 45Z credit shall be determined unless the taxpayer is registered
as a producer of clean fuel under section
4101 at the time of production. Section
4101(a)(1) requires registration by “every
person producing a fuel eligible for the
clean fuel production credit (pursuant to
section 45Z),” effective for transportation
fuel produced after December 31, 2024.3
B. Denial, Revocation, or Suspension of
Registration
entity for the taxable year as a payment
against Federal income taxes imposed by
subtitle A of the Code equal to the amount
of the credit. Section 6417(b)(9) provides
that the 45Z credit is an applicable credit.
V. Section 6418
Section 6418 permits an eligible taxpayer to elect to transfer all or a portion of
an eligible credit determined with respect
to such taxpayer for any taxable year to an
unrelated taxpayer. Section 6418(f)(1)(A)
(viii) provides that the section 45Z credit
is an eligible credit.
Under section 4101(c), rules similar
to the rules of section 4222(c) apply for
purposes of denial, revocation, or suspension of registration under section 4101.
Section 4222 generally requires registration for certain tax-free sales under section 4221. Section 4222(c) provides that
under regulations prescribed by the Secretary, the registration of any person under
section 4222 may be denied, revoked, or
suspended if the Secretary determines: (i)
that such person has used such registration
to avoid the payment of any tax imposed
by chapter 32 of the Code (chapter 32), or
to postpone or in any manner to interfere
with the collection of any such tax, or (ii)
that such denial, revocation, or suspension
is necessary to protect the revenue. The
flush language of section 4222(c) provides that denial, revocation, or suspension under section 4222(c) is in addition
to any penalty provided by law for any act
or failure to act.
Section 48.4222(a)-1 provides rules for
registration, including application instructions. Section 48.4222(c)-1 provides rules
for revocation or suspension of registration and authorizes the IRS in certain circumstances to revoke or temporarily suspend, upon written notice, the registration
of any person under section 4222.
VI. Prior Guidance and Publications
IV. Section 6417
C. Treasury Decision 9993 (Credit
Transfer Election Regulations)
Section 6417 permits an applicable
entity to elect to treat an applicable credit
determined with respect to the applicable
A. Notice 2022-58 (Request for
Feedback)
Notice 2022-58, 2022-47 I.R.B. 483
(released November 3, 2022), requested
stakeholder feedback on questions arising under section 45Z that should be
addressed in guidance.
B. Treasury Decision 9988 (Elective
Payment Election Regulations)
The Treasury Department and the IRS
published Treasury Decision 9988 in the
Federal Register (89 FR 17546, March
11, 2024), which finalized regulations
concerning the election to treat applicable
credits as a payment of Federal income
tax under section 6417 (Elective Payment
Election Regulations). The Elective Payment Election Regulations contain rules
on section 6417 that apply with respect
to an applicable credit, including the section 45Z credit. Section 1.6417-2(c)(4)
requires an applicable entity or electing
taxpayer to own the underlying eligible credit property except in the case of
the advanced manufacturing production
credit under section 45X.
The Treasury Department and the IRS
published Treasury Decision 9993 in the
See section 13704(b)(5) of the IRA, as amended by section 70521(i) of the OBBBA.
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February 23, 2026
Federal Register (89 FR 34770, April
30, 2024), which finalized regulations
concerning the transfer election with
respect to eligible credits under section
6418 (Credit Transfer Election Regulations). The Credit Transfer Election Regulations contain rules on section 6418
that apply with respect to an eligible
credit, including the section 45Z credit.
Section 1.6418-2(d)(1) requires an eligible taxpayer to own the underlying eligible credit property except in the case of
the advanced manufacturing production
credit under section 45X.
D. Notice 2024-49 (Registration
Requirement)
Notice 2024-49, 2024-26 I.R.B. 1781
(released May 31, 2024), provides guidance on the section 45Z registration
requirements, including the time, form,
and manner of registration. Section 3 of
Notice 2024-49 also provides general
definitions, initial definitions of SAF
and non-SAF transportation fuels, and
an initial, non-exclusive list of primary
feedstocks, to help taxpayers applying
for registration identify fuels and primary feedstocks that may qualify for
the section 45Z credit. Notice 2025-10,
2025-6 I.R.B. 682 (released January 10,
2025), discussed later in this Background
section, modifies and supersedes these
definitions, and replaces them with the
definitions in the Appendix to Notice
2025-10.
E. Treasury Decision 9998 (PWA
Regulations)
The Treasury Department and the IRS
published Treasury Decision 9998 in the
Federal Register (89 FR 53184, June
25, 2024), which finalized regulations
concerning the PWA requirements under
several sections of the Code (PWA Regulations), including section 45Z. Section
1.45Z-3 provides rules on the application
of the PWA requirements to section 45Z.
The preamble to the PWA Regulations
contains a detailed discussion of the PWA
requirements, including applicability
dates and transition rules with respect to
the section 45Z credit. These proposed
regulations only address § 1.45Z-3 for
context and to the extent necessary to
February 23, 2026
clarify the rules herein. The PWA Regulations are otherwise outside the scope of
this rulemaking.
F. Fact Sheet FAQs
A section 45Z Fact Sheet, FS-2024-25
(released July 10, 2024), provides answers
to certain frequently asked questions
(FAQs) on the section 45Z registration
requirements. This Fact Sheet is available at https://www.irs.gov/newsroom/
frequently-asked-questions-about-applying-for-registration-for-the-clean-fuelproduction-credit-under-ss-45z.
G. Notice 2025-10 (Notice of Intent to
Propose Rules)
Notice 2025-10 announced that the
Treasury Department and the IRS intended
to propose regulations (forthcoming proposed regulations) addressing the section
45Z credit. In addition to providing background on the section 45Z credit, Notice
2025-10 explains the intended rules to be
included in forthcoming proposed regulations and requests public feedback on
the draft regulatory text in the Appendix
to the notice. These proposed regulations
are the forthcoming proposed regulations
announced in Notice 2025-10.
H. Notice 2025-11 (Emissions Rate
Guidance)
Notice 2025-11, 2025-6 I.R.B. 704
(released January 10, 2025), provides
guidance regarding methodologies for
determining emissions rates under section
45Z and provides the initial emissions rate
table required by section 45Z(b)(1)(B)(i).
Notice 2025-11 also requests feedback
related to emissions rates for the section
45Z credit.
The public feedback received in
response to Notice 2025-10, Notice 202511, and Notice 2022-58 was carefully considered in the development of these proposed regulations.
I. Notice 2025-37 (2025 Inflation
Adjustment Factor)
Notice 2025-37, 2025-30 I.R.B. 198
(July 21, 2025), provides the calendar
year 2025 inflation adjustment factor and
584
applicable amounts for the section 45Z
credit.
Explanation of Provisions
I. Overview
A. Section 45Z Regulations
These proposed regulations include six
sections relating to section 45Z, proposed
§§ 1.45Z-1, 1.45Z-2, 1.45Z-4 through
1.45Z-6, and 1.4101-1. These sections,
together with existing § 1.45Z-3, comprise
the “section 45Z regulations” referenced
in this Explanation of Provisions. The
section 45Z regulations would set forth
provisions to determine the eligibility for,
and the amount of, the section 45Z credit
for the production of clean transportation
fuel. These proposed regulations would
also provide rules for registration and for
filing claims for the section 45Z credit.
Proposed § 1.45Z-1 would provide the
definitions of terms generally applicable
for purposes of the section 45Z regulations. Proposed § 1.45Z-2 would provide
general rules applicable to section 45Z,
such as rules for determining the amount
and timing of the credit, including rules
for the emissions factor and emissions rate
for transportation fuel and the PER process. Proposed § 1.45Z-4 would provide
special rules applicable to section 45Z,
including required registration, anti-stacking, anti-abuse, production attribution,
facility ownership, foreign feedstock and
prohibited foreign entity restrictions, and
recordkeeping and substantiation rules.
Proposed § 1.45Z-5 would provide the
procedures for certification of emissions
rates for SAF transportation fuel. Proposed § 1.45Z-6 would provide procedures for claiming a section 45Z credit.
Proposed § 1.4101-1 would provide rules
for registration under section 4101.
B. Amendments to Existing Sections
6417, 6418, and 4101 Regulations
The proposed regulations would
amend §§ 1.6417-2(c), 1.6418-2(d), and
48.4101-1. The proposed amendments
to §§ 1.6417-2(c)(4) and 1.6418-2(d)(1)
would clarify that sections 45Z and 45(d)
(3)(C) do not require a taxpayer to own
the underlying eligible credit property.
Bulletin No. 2026–9
Proposed § 48.4101-1(a)(7) would provide that a letter of registration is not a
determination of tax treatment under the
Code or a determination letter. Proposed
§ 48.4101-1(a)(8) would provide rules for
reregistration in the event of a change of
ownership or a change of employer identification number (EIN).
II. Definitions
Proposed § 1.45Z-1 would provide
definitions that apply for purposes of section 45Z and the proposed regulations.
In addition, proposed § 1.45Z-1 would
clarify key statutory terms as discussed
in Parts II.A. through II.M. of this Explanation of Provisions. The definitions
would also adopt the statutory language
for the terms “applicable amount” (section 45Z(a)), “applicable material” (section 45Z(d)(5)(B)(i)), “biomass” (section
45Z(d)(5)(B)(ii) (citing section 45K(c)
(3))), “CO2e” (section 45Z(d)(2)), “emissions factor” (section 45Z(b)(1)(A)),
“greenhouse gas (GHG)” (section 45Z(d)
(3)), “lifecycle GHG emissions” (section
45Z(b)(1)(B)(i)), and “mmBTU” (section
45Z(d)(1)), and identify abbreviations
used in the proposed regulations, such
as “ASTM,” “Code,” U.S. Department
of Energy (DOE), EPA, “Secretary,”
IRS, “section 45Z credit,” and “section
45Z regulations.” Further, the definitions would specify the relevant CORSIA
methodologies, define an emissions rate
in accordance with section 45Z(b)(1), and
define terms associated with the PER process (see Part III.F.2. of this Explanation
of Provisions).
A. 45ZCF-GREET Model
Proposed § 1.45Z-1(b)(1) would define
“45ZCF-GREET model” as the model by
that name developed by the ANL and published by the DOE for use in determining
the amount of lifecycle GHG emissions
for purposes of section 45Z. The 45ZCFGREET model is a user interface designed
to accept input related to a transportation
fuel production facility, execute calculations in the background, and display the
full lifecycle (in other words, well-towheel) carbon intensity of produced trans4
portation fuel, measured in kg of CO2e per
mmBTU.4 The 45ZCF-GREET model is
currently available at https://www.energy.
gov/eere/greet. All publicly available versions of the 45ZCF-GREET model, the
accompanying user manual, additional
information including FAQs, and any log
of changes to the model are available at
https://www.energy.gov/eere/greet. Part
III.E.3. of this Explanation of Provisions
discusses the use of the 45ZCF-GREET
model for purposes of section 45Z(b)(1)
(B).
B. Claim
Proposed § 1.45Z-1(b)(7) would define
“claim” to mean a completed Form 7218,
Clean Fuel Production Credit, including
all required information and documentation that a taxpayer files with its Federal
income tax return or Federal information return for the taxable year for which
the section 45Z credit is determined. A
“claim” would include the making of an
election under section 6417 or section
6418. The proposed regulation would also
define “Form 7218” to mean Form 7218
and any successor form(s). These defined
terms, coupled with the claim filing procedures in proposed § 1.45Z-6, would
explain how a taxpayer may claim a section 45Z credit.
C. Fuel
Proposed § 1.45Z-1(b)(19) would
define “fuel” as any liquid or gaseous
substance that can be consumed to supply heat or power. Therefore, for purposes
of section 45Z, the term “fuel” would
not include electricity. For an additional
explanation, see Part II.I.2. of this Explanation of Provisions.
D. Gallon Equivalent
Section 45Z(a)(1)(A) bases the section 45Z credit on a gallon (or gallon
equivalent) of transportation fuel without
defining the terms or providing a baseline
for non-liquid fuels. The proposed regulations would use a gallon measurement
for liquid fuels and a gallon equivalent
for non-liquid fuels. Proposed § 1.45Z-
1(b)(20)(i) would define “gallon equivalent” for purposes of section 45Z(a)(1)
(A) to mean, with respect to any non-liquid fuel, the amount of such fuel that has
the energy equivalent of a gallon of gasoline, which refers to the amount of such
fuel that has a Btu content of 116,090
(lower heating value). The proposed regulations would use gasoline as the most
appropriate baseline fuel for determining gallon equivalency because gasoline
is the most common transportation fuel
in the United States, and section 45Z is
designed to incentivize domestic production of transportation fuels that may
serve as alternatives to existing fossil
fuels. The use of a gasoline gallon equivalent is also consistent with the gasoline
gallon equivalent requirement in section
6426(d)(3), which provided an excise
tax credit for many of the same types of
fuel that are eligible for the section 45Z
credit. Using the gasoline gallon equivalent standard in section 6426(d)(3) in the
section 45Z context is further supported
by the fact that section 45Z replaced section 6426(d). Proposed § 1.45Z-1(b)(20)
(ii) would provide that a fuel is considered non-liquid if it is in a gaseous state
at ambient pressure and temperature of 1
atmosphere and 60 degrees Fahrenheit,
respectively.
To facilitate implementation of a gallon equivalent standard for non-liquid
fuels, it is necessary to specify whether
the standard is based on a lower heating
value or a higher heating value of the
baseline fuel, as the two types of heating
values have different energy contents. The
proposed regulations would use a lower
heating value, rather than a higher heating
value, because it is a better representation
of the useful energy provided by a transportation fuel. Proposed § 1.45Z-1(b)(20)
(iii) would explain that the gallon equivalent for a non-liquid fuel is calculated by
dividing the lower heating value of that
fuel (measured in Btu) by the lower heating value of a gallon of gasoline (116,090
Btu), rounded to 5 decimal places. Proposed § 1.45Z-1(b)(20)(iv) and (v) would
provide the lower heating values of some
non-liquid fuels and an example of the
calculation of a gallon equivalent, respectively.
As used in the preamble to these proposed regulations, the term “well-to-wheel” includes well-to-wake with respect to aviation fuel.
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February 23, 2026
E. Producer and Taxpayer Treated as a
Producer
1. In General
Proposed § 1.45Z-1(b)(26)(i) would
generally define the term “producer” for
purposes of section 45Z as the person that
engages in the production of a transportation fuel. Proposed § 1.45Z-1(b)(26)(iii)
would provide examples illustrating the
application of the definition. Section 45Z
requires the taxpayer to be registered as a
producer of clean fuel but does not specify
who the producer is if the production process involves multiple persons and multiple steps. The proposed regulations would
clarify this point.
2. Producer of Alternative Natural Gas
Proposed § 1.45Z-1(b)(26)(ii) would
provide that the “producer” of alternative
natural gas, including renewable natural
gas (RNG), for purposes of section 45Z
is the person that processes the untreated
sources of alternative natural gas (processor) to remove water, carbon dioxide, and
other impurities such that it is interchangeable with fossil natural gas. This definition
would be consistent with the purpose of
section 45Z because the processor is the
most active participant in the production
process, and section 45Z incentivizes
production. The definition of “producer”
would therefore exclude any person that
removes conventional or alternative natural gas (CANG) from a pipeline, compresses it further after removal, and then
sells such further-compressed CANG
(compressor). Compression of CANG that
is already interchangeable with fossil natural gas also would not meet the proposed
definition of “production” (see Part II.F. of
this Explanation of Provisions).
Several stakeholders have raised questions about who should be considered the
producer of RNG for purposes of section
45Z. The Treasury Department and the
IRS understand that the processor and
the compressor are typically different
persons, and that the processor typically
performs most of the active production
and owns (or uses) a facility, as that term
is defined in proposed § 1.45Z-1(b)(18).
The Treasury Department and the IRS
further understand that the compressor
February 23, 2026
typically performs the final compression
step before a fuel is used in a vehicle and
typically owns (or uses) only compression equipment rather than a facility. As
a result, the compressor is not engaging in
production of a transportation fuel under
section 45Z(a)(1) and the production standard in proposed § 1.45Z-1(b)(27), and
would be unable to meet the requirement
that transportation fuel be produced at a
qualified facility as provided in section
45Z(d)(4) and proposed § 1.45Z-1(b)(28).
F. Production
Proposed § 1.45Z-1(b)(27)(i) would
define “production” (except for purposes
of section 45Z(a)(4)(A)) as all steps and
processes used to make a transportation
fuel. Production would begin with the
processing of primary feedstock(s) and
end with a transportation fuel ready to be
sold in a qualified sale. Production would
not include instances in which a person
uses a primary feedstock to produce a fuel
that meets the same ASTM standard as
the primary feedstock. The definition of
“production” would also incorporate the
rules in section 45Z(f)(1)(A)(ii) and (f)(1)
(B) requiring production to occur in the
United States.
The definition of “production” would
further clarify that minimal processing
would not qualify as production for purposes of the section 45Z credit. Minimal
processing would generally include creating a fuel mixture or otherwise engaging
in activities that do not result in a chemical transformation. However, with respect
to CANG, production would include
processing untreated sources of alternative natural gas to remove water, carbon
dioxide, and other impurities such that it
is interchangeable with fossil natural gas.
Production of CANG would not include
compressing CANG that is already interchangeable with fossil natural gas to a
higher pressure.
Under the proposed regulations, the
blending of a transportation fuel into
another fuel to create a fuel mixture,
regardless of whether the fuel mixture
itself satisfies the requirements of section
45Z(d)(5)(A), would not constitute production of a transportation fuel because
the blending process would constitute
minimal processing. For example, the
586
blending of ethanol and gasoline would
not constitute production of a transportation fuel.
Further, importing fuel that is largely
finished fuel and undergoes only minimal
processing in the United States would not
constitute production. Proposed § 1.45Z1(b)(27)(ii) would provide examples of
minimal processing, including instances
in which the same person engages in production and subsequent blending.
In enacting section 45Z, Congress
replaced fuel credits and payments that
specifically incentivize blending (including the credits under sections 40B and
6426(k), and the payment under section
6427(e)) with the section 45Z production credit. Congress’s shift from blending incentives to a production incentive
demonstrates that Congress no longer
intended to incentivize blending. Therefore, equating production with blending
would be contrary to Congress’s purpose
in enacting section 45Z.
G. Qualified Facility
1. Facility
Proposed § 1.45Z-1(b)(18) would
define a “facility,” as used in section
45Z(d)(4) and the proposed regulations,
to mean a single production line that produces a transportation fuel and would
include all components that function interdependently to produce a transportation
fuel. The definition of “facility” would
also clarify the treatment of indirect,
post-production, and multipurpose equipment. The definition would, for instance,
exclude CANG compression equipment
from a facility because it is post-production equipment. The definition would
include examples involving carbon capture equipment and SAF transportation
fuel.
The proposed definition of “facility” is
neutral as to geographic proximity of the
components of the production line and
focuses instead on interdependent pieces
of equipment used to produce transportation fuel. This definition is consistent
with how provisions of the Code under
which similar tax credits are determined
define “facility.” It is also consistent with
stakeholders’ requests that a facility be
narrowly defined to minimize overlap
Bulletin No. 2026–9
with other credits and their concerns that
physical boundaries may be inadequate.
Accordingly, the proposed definition considers that a section 45Z facility may be
co-located with another credit-eligible
facility, and that some production equipment may be located upstream or downstream from, or in a different building
than, other equipment.
2. Qualified Facility
Proposed § 1.45Z-1(b)(28)(i) would
incorporate the definitions of “qualified
facility” in section 45Z(d)(4) and “facility” in proposed § 1.45Z-1(b)(18) and
clarify that a “qualified facility” must
satisfy the anti-stacking rules in section
45Z(d)(4)(B) and proposed § 1.45Z-4(b).
Proposed § 1.45Z-1(b)(28)(ii) would
define the term “anti-stacking credit” to
mean any of the three credits listed in section 45Z(d)(4)(B).
H. Qualified Sale
The draft regulatory text in the Appendix to Notice 2025-10 used the term
“qualifying sale.” The proposed regulations would instead use the term “qualified sale.” Proposed § 1.45Z-1(b)(29)
would define a “qualified sale” as a sale of
a transportation fuel in a manner described
in section 45Z(a)(4). The definition would
also: (i) clarify the term “sold for use in
a trade or business” for purposes of section 45Z(a)(4)(B); (ii) incorporate the sale
attribution rule in section 45Z(f)(3) if fuel
is sold by another member of the taxpayer’s consolidated group (as defined in §
1.1502-1(b) and (h), respectively); and
(iii) prescribe an additional sale attribution rule, as authorized by section 45Z(f)
(3), for fuel sold by a related person if the
taxpayer is not a member of a consolidated group.
The draft regulatory text in the Appendix to Notice 2025-10 defined the term
“sold for use in a trade or business” to
mean sold for use as a fuel in a trade
or business within the meaning of section 162 of the Code. The term did not
include a sale for blending or for further
processing, including use as a primary
feedstock to produce another fuel. Many
stakeholders raised concerns about the
interpretation of “sold for use in a trade
Bulletin No. 2026–9
or business.” They noted that in the fuel
industry, many producers sell to related or
unrelated intermediaries, such as wholesalers or dealers, rather than directly to
unrelated final purchasers. They asserted
that the “use as a fuel” language could
prevent all sales for resale, such as those
to intermediary dealers or wholesalers, from qualifying for the section 45Z
credit. These stakeholders requested that
the “use as a fuel” language be removed
and that the phrase “use . . . in a trade
or business” be incorporated as written
in section 45Z(a)(4)(B). Stakeholders
also said that a “use as a fuel” limitation
could undercut the language in section
45Z(d)(5)(A), which requires only that a
transportation fuel be “suitable for use as
a fuel in a highway vehicle or aircraft,”
but not actually so used.
The proposed regulations would adopt
the stakeholders’ suggestion to remove
the “use as a fuel” language from the definition of “sold for use in a trade or business.” Under the proposed regulations,
“trade or business” would have the same
meaning as in section 162 of the Code.
The meaning of “sold for use” would be
determined under these proposed regulations and would apply solely for purposes
of section 45Z. The proposed regulations
would also explicitly clarify that the
term “sold for use in a trade or business”
includes the sale of fuel to an unrelated
person that subsequently resells the fuel in
its trade or business.
The proposed regulations retain the
draft regulatory text from the Appendix
to Notice 2025-10 that excludes a sale
for blending from the definition of “sold
for use in a trade or business.” A sale for
blending (if made to an unrelated person)
would qualify as a sale for use in the production of a fuel mixture under section
45Z(a)(4)(A) and proposed § 1.45Z-1(b)
(29)(i)(A). Therefore, including a sale for
blending in the “sold for use in a trade or
business” definition, which relates to section 45Z(a)(4)(B), would render a significant part of section 45Z(a)(4)(A) superfluous.
The proposed regulations do not retain
the draft regulatory text from the Appendix to Notice 2025-10 that defined “sold
for use in a trade or business” to exclude
a sale for further processing, including
use as a primary feedstock to produce
587
another fuel. To prevent double crediting,
the OBBBA amended section 45Z(d)(5) to
exclude from the definition of a “transportation fuel” any fuel produced from a fuel
for which a section 45Z credit is allowable. See section 70521(e) of the OBBBA.
This statutory revision suggests that a sale
for use as a primary feedstock to produce
another fuel may qualify as a sale for use
in a trade or business under section 45Z(a)
(4)(B). The proposed regulations would
align the definition of “sold for use in a
trade or business” with the statutory language.
The proposed regulations would further define “sold for use in a trade or business” to exclude a sale of fuel to a reseller
that subsequently sells the fuel at retail to
another person and places the fuel in the
tank of such other person. Such a sale (if
made to an unrelated person) would be
a qualified sale under section 45Z(a)(4)
(C) and proposed § 1.45Z-1(b)(29)(i)(C).
Therefore, inclusion of such sales in the
definition of “sold for use in a trade or
business,” which relates to section 45Z(a)
(4)(B), would render section 45Z(a)(4)(C)
superfluous.
As noted earlier, the proposed definition of “sold for use in a trade or business”
gives meaning to section 45Z(a)(4)(A)
and (C) and is consistent with a plain reading of section 45Z(a)(4)(B). The proposed
definition is also consistent with the “suitable for use as a fuel in a highway vehicle
or aircraft” language in section 45Z(d)(5)
(A).
The draft regulatory text in the Appendix to Notice 2025-10 incorporated the
sale attribution rule in section 45Z(f)(3)
for fuel sold by another member of the
taxpayer’s consolidated group. Many
stakeholders requested the adoption of
a broader “look-through” rule for sales
made through related intermediaries, so
that a taxpayer would be treated as selling fuel to an unrelated person if a related
person (for example, a related intermediary dealer or wholesaler) ultimately sold
the fuel to an unrelated person. The stakeholders pointed to similar look-through
rules that the Treasury Department and
the IRS adopted with regard to credits
under sections 45 and 45J of the Code
in Notice 2008-60, 2008-30 I.R.B. 178,
and Notice 2023-24, 2023-13 I.R.B. 571,
respectively. The stakeholders expressed
February 23, 2026
that many fuel producers are not organized as corporations and cannot utilize
the sale attribution rule under section
45Z(f)(3).
After the release of Notice 2025-10,
the OBBBA added rulemaking authority
to section 45Z(f)(3) that allows the Secretary to prescribe additional related-person sale attribution rules similar to the
statutory rule. See section 70521(f) of
the OBBBA. Based on this new grant of
authority, the proposed regulations would
adopt the stakeholders’ suggestion regarding a broader look-through rule for sales
made through related persons. Proposed
§ 1.45Z-1(b)(29)(iv) would provide that,
for purposes of section 45Z, a taxpayer that
is not a member of a consolidated group is
treated as selling fuel to an unrelated person if a related person sells the fuel to the
unrelated person. This rule would apply to
all sales made by related persons except
those specifically addressed in section
45Z(f)(3) and proposed § 1.45Z-1(b)(29)
(iii).
Proposed § 1.45Z-1(b)(29)(v) would
provide examples illustrating the definition of “qualified sale,” including the
“sold for use in a trade or business” definition as it relates to section 45Z(a)(4)(B),
the sale attribution rule for fuel sold by
another member of a taxpayer’s consolidated group, the sale attribution rule for
fuel sold by a related person (other than
another member of a taxpayer’s consolidated group), and a sale made by a taxpayer that produces and subsequently
blends a transportation fuel.
I. Transportation Fuel
1. In General
Proposed § 1.45Z-1(b)(34) would
define “transportation fuel” as provided
in section 45Z(d)(5)(A), and would also
define associated terms. The proposed
regulations would define the term “suitable for use as a fuel in a highway vehicle
or aircraft” (suitable for use) to mean that
the fuel has practical and commercial fitness for use as a fuel in a highway vehicle
or aircraft, or may be blended into a fuel
mixture that has practical and commercial
fitness for use as a fuel in a highway vehicle or aircraft. The proposed definition of
“suitable for use” is consistent with long-
February 23, 2026
standing excise tax rules under § 48.40811(c)(2) of the Manufacturers and Retailers
Excise Tax Regulations, with which the
fuel industry is familiar.
The proposed regulations would also
clarify that actual use as a fuel in a highway vehicle or aircraft is not required. For
example, diesel fuel that has practical and
commercial fitness for use as a fuel in a
highway vehicle or aircraft, but is ultimately used as marine fuel, would satisfy
the “suitable for use” standard. The proposed regulations would further provide
that CANG is suitable for use once it is
produced so that it is interchangeable with
fossil natural gas and would require only
minimal processing (for example, further
compression or liquefaction) to meet the
specifications of ASTM D8080. In addition, the proposed regulations would also
provide that a fuel that does not require
further processing and that may be
blended with or used as a component of
taxable fuel (within the meaning of section 4083 of the Code) is suitable for use.
The proposed regulations would define
the term “produced from a fuel for which
a section 45Z credit is allowable,” as
used in section 45Z(d)(5)(A)(iv), to mean
that a fuel has a primary feedstock that
meets the definition of a transportation
fuel under section 45Z (without regard to
section 45Z(d)(5)(A)(iv)). This proposed
rule would prevent double crediting by
ensuring that only the first transportation
fuel in a production chain qualifies for a
section 45Z credit. See section 70521(e)
of the OBBBA. Thus, if one fuel is used
as a primary feedstock to produce a second fuel, and the first fuel qualifies as a
transportation fuel for purposes of section
45Z, the second fuel would not qualify for
a section 45Z credit. For instance, SAF
produced from ethanol as a primary feedstock, and hydrogen produced from RNG
as a primary feedstock, may not qualify as
transportation fuel for purposes of section
45Z. However, a fuel could still qualify
for a section 45Z credit if its production
process uses a transportation fuel solely as
a process fuel or other non-primary-feedstock input.
The proposed regulations would provide examples illustrating the definitions
of “suitable for use” and “produced from
a fuel for which a section 45Z credit is
allowable.”
588
2. Electricity
The proposed regulations would not
include electricity in the definition of
“transportation fuel,” for several reasons.
Electricity production would therefore be
ineligible for the section 45Z credit.
First, at the time section 45Z was
enacted, the Code contained an assortment
of income tax credit, excise tax credit, and
excise tax payment provisions for various
biofuels and other alternative fuels sold
for use as a fuel or used as a fuel. These
included incentives for biodiesel, renewable diesel, and several different alternative fuels (including compressed natural
gas and second generation biofuel). Joint
Committee on Taxation, General Explanation of Tax Legislation Enacted in the
117th Congress, JCS 1-23, at 278 (Dec.
31, 2023). Congress designed the section
45Z credit to replace these incentives,
which were only available for liquid or
gaseous fuels. See sections 40(b)(6);
40A(b)(1) and (2); 40B; 6426(c) through
(e) and (k); 6427(e). Therefore, for purposes of section 45Z, it would be reasonable to understand the term “fuel” as referring to a liquid or gaseous substance that
can be consumed to supply heat or power.
As a result, the term “transportation fuel”
under the proposed regulations would not
include electricity.
Second, the anti-stacking rules in section 45Z(d)(4)(B) disallow receiving both
a section 45Z credit and certain other
credits with respect to the same facility for
a taxable year. See proposed § 1.45Z-1(b)
(28)(ii) (definition of anti-stacking credit);
Part IV.B. of this Explanation of Provisions (discussion of anti-stacking rules).
The inclusion of the anti-stacking rules
indicates that Congress understood the
potential for activity at a particular facility
to generate multiple credits for a taxable
year and wished to foreclose that possibility. However, the section 45Y clean electricity production credit is not included in
the anti-stacking rules, which indicates
that the production of electricity is not
eligible for the section 45Z credit. Thus,
Congress’s omission of the section 45Y
credit from the anti-stacking rules suggests
that Congress did not understand the term
“fuel” to include electricity for purposes
of section 45Z. Further, Notice 2025-10,
which stated that the forthcoming pro-
Bulletin No. 2026–9
posed regulations intended to exclude
electricity as a transportation fuel, was
published approximately 6 months before
the enactment of the OBBBA. Though
the OBBBA amended certain aspects of
section 45Z discussed in Notice 2025-10,
including the definition of “transportation
fuel,” the OBBBA did not amend or clarify the definition of “transportation fuel”
to include electricity.
Third, the Code already provides a
separate credit for clean electricity production under section 45Y. When Congress created the section 45Z credit, it also
created the section 45Y credit. Generally,
the section 45Y credit is not limited based
on how the electricity is ultimately used.
If the definition of “transportation fuel”
in section 45Z were to include electricity, there would be significant overlap
between the electricity eligible for a credit
under section 45Z and the electricity eligible for a credit under section 45Y. Further,
a reading of section 45Z to include electricity in the definition of “transportation
fuel” would not be consistent with Congressional intent in separately enacting
section 45Y to incentivize clean electricity
production and section 45Z to incentivize
production of clean transportation fuel.
J. Non-SAF Transportation Fuel
Proposed § 1.45Z-1(b)(24)(i) would
define “non-SAF transportation fuel” for
purposes of section 45Z as any transportation fuel that is not a SAF transportation
fuel. Proposed § 1.45Z-1(b)(24)(ii) would
provide a non-exclusive list of non-SAF
fuels that may qualify as a transportation
fuel, as well as descriptions of such fuels.
A non-SAF fuel described in proposed
§ 1.45Z-1(b)(24)(ii) would also need to
meet all the other applicable requirements
under section 45Z to qualify as a transportation fuel. The list of non-SAF fuels
would generally track those fuels listed in
section 3.03 of Notice 2024-49. Proposed
§ 1.45Z-1(b)(24)(ii) would also retain a
few modifications that Notice 2025-10
made to the definitions in Notice 2024-49
to address concerns raised by stakeholders. Consistent with Notice 2025-10, the
proposed regulations would clarify the
description of low-GHG CANG, including the ASTM D8080 reference, and
would list ASTM D1152 (neat methanol)
Bulletin No. 2026–9
as a specification for low-GHG methanol
in addition to ASTM D5797 (fuel blend
methanol).
The Treasury Department and the IRS
are cognizant of existing business practices in which producers make fuel that
may not meet all the proposed ASTM
specifications for that particular fuel.
Therefore, the proposed ASTM specifications would be both non-exhaustive
and non-exclusive with respect to determining whether a fuel is a transportation
fuel for purposes of section 45Z. Prescribing exclusive fuel-by-fuel specifications in these proposed regulations would
be impractical and may unintentionally
restrict future market developments. The
Treasury Department and the IRS request
comments on this general approach and
whether in some cases additional specificity is needed.
K. SAF Transportation Fuel
Proposed § 1.45Z-1(b)(30) would
define “SAF transportation fuel” to mean
SAF as defined in section 45Z(a)(3), and
would also define associated terms. Further, the proposed regulations would clarify that a synthetic blending component
sold to a person that blends the fuel into
a fuel mixture described in ASTM D7566
is “sold for use in an aircraft” within the
meaning of section 45Z(a)(3).
L. Types and categories of transportation
fuel
Proposed § 1.45Z-1(b)(35) would
define the term “type of transportation
fuel” as a particular kind of fuel, and the
term “category of transportation fuel” as
the unique primary feedstock and pathway
used to produce a type of transportation
fuel. The definitions would clarify those
terms as used in section 45Z(b)(1)(B)(i).
M. Unrelated Person
Consistent with section 45Z(f)(3), proposed § 1.45Z-1(b)(36) would define the
term “unrelated person” as a person not
related to the taxpayer. The term “unrelated party” has the same meaning as
“unrelated person” for purposes of the
certification required by section 45Z(f)(1)
(A)(i)(II)(aa). The definition would also
589
incorporate the related person definition
in section 45Z(f)(3).
III. General Rules
Proposed § 1.45Z-2 would provide general rules regarding the section 45Z credit.
The proposed regulations would incorporate and clarify the rules in section 45Z(a)
through (c) regarding the amount of the
credit, the credit calculation, the timing
of the credit, emissions factors, and emissions rates (including the emissions rate
table and the PER process).
A. Amount of Credit
Proposed § 1.45Z-2(a)(1) would incorporate and clarify the credit calculation
rules in section 45Z(a)(1). Proposed §
1.45Z-2(a)(2) would provide that the volume of a liquid fuel is measured on the
basis of gallons adjusted to ambient pressure and temperature of 1 atmosphere
and 60 degrees Fahrenheit. The proposed
rule would reference proposed § 1.45Z1(b)(20)(ii) and (iii), respectively, for the
determination of whether a fuel is liquid
or non-liquid and the calculation of the
gallon equivalent of a non-liquid fuel.
Proposed § 1.45Z-2(a)(3) would provide rules and examples for the calculation of the section 45Z credit. Proposed
§ 1.45Z-2(a)(3)(i) would implement the
rounding rule provided in section 45Z(a)
(5) for credit amounts and would clarify
that the rule applies only after multiplying
the applicable amount, quantity of fuel,
and emissions factor. Proposed § 1.45Z2(a)(3)(ii) would require pro rata allocation for sales of transportation fuel produced after December 31, 2024, and held
in common storage with other fuels.
Prior to the enactment of the OBBBA,
the applicable amount meant either the
base amount provided in section 45Z(a)
(2)(A) or the alternative amount provided
in section 45Z(a)(2)(B), with an increased
base amount and alternative amount for
SAF transportation fuel under section
45Z(a)(3)(A). Section 70521(g)(2) of the
OBBBA eliminated the increased base
amount and alternative amount for SAF
transportation fuel produced after December 31, 2025. Proposed § 1.45Z-2(a)(4)
would define the term “applicable amount”
in accordance with section 45Z(a)(2), as
February 23, 2026
amended by the OBBBA. Under the proposed definition, the alternative amount
would apply in the case of any transportation fuel produced at a qualified facility
that satisfies the PWA requirements. The
base amount would otherwise apply in the
case of any transportation fuel produced at
a qualified facility that does not satisfy the
PWA requirements.
Proposed § 1.45Z-2(a)(4)(iv) would
implement the inflation adjustment
mechanics for the applicable amount provided under section 45Z(c), including the
inflation adjustment factor as provided in
section 45Z(c)(2). In Notice 2025-37, the
Treasury Department and the IRS published the section 45Z inflation adjustment
factor for calendar year 2025. The section
45Z inflation adjustment factor for subsequent calendar years will also be published in the Internal Revenue Bulletin.
B. Timing of Credit
Proposed § 1.45Z-2(b)(1) would clarify that a taxpayer is eligible to claim
the section 45Z credit only for the taxable year in which a qualified sale of a
transportation fuel occurs, provided the
taxpayer meets all other requirements to
claim the credit. See section 45Z(a)(1)
(A)(ii). Proposed § 1.45Z-2(b)(2) would
incorporate the effective date in section
13704(c) of the IRA, which provides that
section 45Z applies to transportation fuel
produced after December 31, 2024.
Proposed § 1.45Z-2(b)(3)(i) would
clarify that a transportation fuel may be
produced in an earlier taxable year than
the taxable year in which the qualified sale
of the fuel occurs, but that a qualified sale
may not occur before the date the fuel is
produced. As a result, if a taxpayer sells
transportation fuel before production, the
qualified sale would occur on the date of
production. Proposed § 1.45Z-2(b)(3)(ii)
would provide that a qualified sale occurs
at the time of the taxpayer’s sale to the
unrelated person, or if a related-person
sale attribution rule applies, at the time of
the related person’s sale to the unrelated
person.
C. Emissions Factor
Proposed § 1.45Z-2(c)(1) would incorporate the definition of “emissions factor”
February 23, 2026
provided under section 45Z(b)(1)(A). Proposed § 1.45Z-2(c)(2) would incorporate
the emissions factor rounding rule in section 45Z(b)(2) and provide an example.
D. Emissions Rate
Proposed § 1.45Z-2(d)(1) would incorporate the rules for determining the emissions rate of a transportation fuel in section 45Z(b)(1)(B) and (D). To determine
an emissions rate for a fuel, a taxpayer
would either use the applicable emissions
rate table published by the Secretary or, if
the applicable emissions rate table does
not establish an emissions rate for the
taxpayer’s fuel, a PER determined by the
Secretary.
Proposed § 1.45Z-2(d)(2) would incorporate section 70521(b) and (c)(1) of the
OBBBA, which provide that for transportation fuel produced after December 31,
2025, the emissions rate cannot be less
than zero, unless such fuel is derived from
animal manure. Section 45Z(b)(1)(B)(v),
which was added by section 70521(c)(1)
of the OBBBA, provides that, notwithstanding that general rule, the Secretary
“may provide an emissions rate that is less
than zero” for a transportation fuel derived
from an animal manure feedstock such as
dairy, swine, or poultry manure. Proposed
§ 1.45Z-2(d)(2) would clarify that the limitation regarding negative emissions rates
also applies to any transportation fuel
used as a production input. The proposed
rule would provide examples illustrating
the negative-emissions-rate limitation and
the effect of a negative emissions rate on
the emissions factor calculation.
Proposed § 1.45Z-2(d)(3) would incorporate the rule in section 45Z(b)(1)(B)(iv),
which was added by section 70521(c)(1)
of the OBBBA, that excludes emissions
attributed to indirect land use changes for
transportation fuel produced after December 31, 2025.
As discussed in Part III.E. and III.F.
of this Explanation of Provisions, under
proposed § 1.45Z-2(e)(2), the applicable
emissions rate table would direct a taxpayer to use the allowed methodologies
described in section 45Z(b)(1)(B)(ii) and
(iii) and set out in proposed § 1.45Z-2(e)
(3), and any PER would be determined
pursuant to section 45Z(b)(1)(D) and the
procedures in proposed § 1.45Z-2(f).
590
E. Emissions Rate Table
1. In General
Proposed § 1.45Z-2(e) would incorporate the rules in section 45Z(b)(1)(B)
regarding the annual publication of a table
of emissions rates for similar types and categories of transportation fuels (emissions
rate table), including the requirement in
section 45Z(b)(1)(B)(i) that the emissions
rate table be published “[s]ubject to” the
requirements in section 45Z(b)(1)(B)(ii)
through (v).
The Treasury Department and the IRS
will annually publish an emissions rate
table for each calendar year in the Internal
Revenue Bulletin. The annual emissions
rate table for calendar year 2025 was published in Notice 2025-11.
Proposed § 1.45Z-2(e)(2) would provide rules for identifying the applicable
emissions rate table that a taxpayer must
use in a given taxable year. Proposed
§ 1.45Z-2(e)(2)(i) would clarify that the
applicable emissions rate table for a taxpayer is the emissions rate table that is
in effect on the first day of the taxpayer’s
taxable year of production. The proposed
rule would also clarify that, for production after December 31, 2024, in taxable
years beginning before January 1, 2025,
the applicable emissions rate table is the
emissions rate table effective for 2025.
In response to Notice 2025-10, stakeholders requested the ability to use an
emissions rate table tied to the year construction of a facility began, regardless
of when the taxpayer actually produces
a transportation fuel. If a taxpayer begins
constructing a facility in 2025 but such
facility does not begin producing fuel
until a subsequent calendar year, the
stakeholders’ requested rule would allow
the taxpayer to use the emissions rate table
for 2025 to determine the emissions rate
of its fuel for all taxable years.
The proposed regulations would not
adopt this suggestion. Section 45Z(b)
(1)(B)(i) directs the Secretary to annually publish an emissions rate table and
requires taxpayers to use such tables. The
statute does not contemplate taxpayers
locking in the use of old tables in later
years. Additionally, the amount of the
section 45Z credit depends in part on the
emissions rate of the transportation fuel
Bulletin No. 2026–9
produced in a given taxable year. Accordingly, the emissions rate of a fuel is properly established using the emissions rate
table in effect for the taxable year in which
such fuel was produced. The beginning of
construction date for the facility in which
the fuel is produced has no significance
with respect to emissions rates and is
unrelated to the actual emissions associated with the production of transportation
fuel after the facility is placed in service.
Proposed § 1.45Z-2(e)(2)(ii) would
clarify that if a taxpayer produces a fuel
for which the applicable emissions rate
table establishes an emissions rate, the
taxpayer must use the corresponding
allowed methodologies, as specified in
proposed § 1.45Z-2(e)(3), as provided in
such table to determine the emissions rate
for all such fuel produced during the taxpayer’s taxable year.
Proposed
§
1.45Z-2(e)(2)(iii)(A)
would clarify that the applicable emissions rate table establishes the emissions
rate for a fuel if the emissions rate table
includes both the type and category of
that fuel. Proposed § 1.45Z-2(e)(2)(iii)
(B) would clarify that if an emissions rate
table does not initially include a type or
category of fuel, but an allowed methodology is updated to add such type or category of fuel during the calendar year, then
that type or category of fuel is considered
included in such emissions rate table.
The proposed regulations would generally require a taxpayer to use the latest
annual emissions rate table (as opposed to
prior annual tables) and would prevent the
use of outdated modeling.
2. Allowed Methodologies
Proposed § 1.45Z-2(e)(3)(i) would provide that a taxpayer producing a fuel for
which an emissions rate is established by
the applicable emissions rate table must
determine the fuel’s emissions rate using
the allowed methodologies described in
proposed § 1.45Z-2(e)(3)(iv) and (v), as
directed by the applicable emissions rate
table.
Proposed § 1.45Z-2(e)(3)(ii) would
require a taxpayer to use the first version
of an allowed methodology that is publicly available in the taxable year of production and that includes the type and category of the taxpayer’s fuel. However, if
Bulletin No. 2026–9
an updated version of an allowed methodology becomes publicly available after the
first day of the taxable year of production
(but still within such taxable year), then
the taxpayer could choose to treat such
updated version as the most recent version
of such methodology. This choice would
give a taxpayer the flexibility to choose
the version of an allowed methodology to
use with respect to taxable years for which
an updated version of a methodology may
be published during a taxpayer’s taxable
year of production. This would generally
ensure that a taxpayer uses the latest modeling and benefits from favorable updates
to a methodology, but would not penalize
a taxpayer if a methodology is updated
unfavorably during the taxable year.
The proposed regulations would
address the requirement in section 45Z(b)
(1)(B)(i) that the emissions rate table be
published “[s]ubject to” the requirements
in section 45Z(b)(1)(B)(ii) through (v).
Proposed § 1.45Z-2(e)(3)(iv) and (v)
would identify the allowed methodologies
for determining emissions rates for purposes of the emissions rate table described
in section 45Z(b)(1)(B)(i). If the applicable emissions rate table establishes the
emissions rate for a non-SAF transportation fuel, a taxpayer producing such fuel
would determine the fuel’s emissions
rate using the 45ZCF-GREET model, as
directed by the applicable emissions rate
table. If the applicable emissions rate table
establishes the emissions rate for a SAF
transportation fuel, a taxpayer producing
such fuel would determine the fuel’s emissions rate using the most recent version of
the CORSIA Default Life Cycle Emissions Values for CORSIA Eligible Fuels
lifecycle approach (CORSIA Default) or
the CORSIA Methodology for Calculating Actual Life Cycle Emissions Values
lifecycle approach (CORSIA Actual),
with the agreement of the United States,
or the 45ZCF-GREET model, as directed
by the applicable emissions rate table. The
proposed regulations would also clarify
that, for a given type and category of SAF
transportation fuel, a taxpayer must use
the same methodology to calculate lifecycle GHG emissions associated with all
stages of fuel feedstock production and
distribution.
Section 45Z(b)(1)(B)(i) requires the
emissions rate table to be based on the
591
amount of lifecycle GHG emissions (as
described in section 211(o)(1)(H) of the
CAA-2022) for such fuels. Section 211(o)
(1)(H) of the CAA-2022 defines lifecycle
GHG emissions as the aggregate emissions from all stages of the fuel’s production and use, including feedstock production and transportation, fuel production
and distribution, and use of the finished
fuel. This type of lifecycle analysis is
referred to as “well-to-wheel” emissions
analysis. As a result, for each type and category of transportation fuel, the 45ZCFGREET model also uses “well-to-wheel”
emissions to calculate lifecycle GHG
emissions for all stages of fuel production,
as well as emissions resulting from use of
the fuel in transportation.
Section 70521(c)(1) of the OBBBA
provides that for fuel produced after
December 31, 2025, notwithstanding the
CAA reference in section 45Z(b)(1)(B)
(i), the emissions rate of a transportation
fuel shall exclude any emissions attributed
to indirect land use change. See section
45Z(b)(1)(B)(iv).
3. 45ZCF-GREET Model
a. In General
Section 45Z(b)(1)(B)(ii) provides that
in the case of non-SAF transportation fuel,
the lifecycle GHG emissions of such fuel
must be based on the most recent determinations under the Greenhouse gases,
Regulated Emissions, and Energy use in
Transportation model developed by the
ANL, or a successor model (as determined
by the Secretary). The DOE changed the
name of the “Greenhouse gases, Regulated Emissions, and Energy use in Transportation” model to “Greenhouse gases,
Regulated Emissions, and Energy use in
Technologies” in 2020 and it is now generally referred to as the “GREET” model.
The GREET model refers to a suite
of models, the first version of which was
released in 1995 and is now called the
Research & Development Greenhouse
gases, Regulated Emissions, and Energy
use in Technologies (R&D GREET)
model. Since 1995, the DOE maintained
the GREET model to enable research
regarding lifecycle analyses of hundreds of different methods of producing,
delivering, and using energy. The R&D
February 23, 2026
GREET model was not designed to be
used for determining emissions rates for
tax credits, including the section 45Z
credit, but the current suite of GREET
models includes different versions, some
of which are designed to facilitate particular regulatory regimes.
As of February 4, 2026, the DOE’s
GREET website lists the following different versions of the GREET model:
R&D GREET, 40BSAF-GREET, 45VH2GREET, 45ZCF-GREET, CA-GREET4.0,
and ICAO-GREET. See https://energy.
gov/eere/greet. For purposes of the section
45Z credit, the phrase “most recent determinations under the Greenhouse gases,
Regulated Emissions, and Energy use in
Transportation model” in section 45Z(b)
(1)(B)(ii) is best understood as referring
to the most recent determinations under
the 45ZCF-GREET model. As discussed
in Part III.E.3.b. of this Explanation of
provisions, the proposed regulations
would also designate the 45ZCF-GREET
as a successor model to the GREET model
under section 45Z(b)(1)(B)(ii).
Some stakeholders have suggested that
the R&D GREET model should be used
for the section 45Z credit. However, the
45ZCF-GREET model is the only appropriate GREET model to use for purposes
of the section 45Z credit because the R&D
GREET model is not limited to transportation fuels and includes information that
is based on preliminary analyses (that is,
analyses that are not yet complete, have
significant technical uncertainties, or are
still being reviewed by laboratory staff,
the DOE staff, or independent experts).
See generally GREET, Office of Energy
Efficiency & Renewable Energy, DOE,
available at https://www.energy.gov/eere/
greet.
While the R&D GREET model is a
valuable tool for characterizing the benefits and impacts of energy technologies
in a directional manner and testing new
and updated data and parameters, it is
designed to provide flexibility in user-defined parameters and methodological
choices for a wide variety of research purposes and thus not appropriate for use in
policy applications without modifications.
Because the R&D GREET model offers
users many choices regarding analysis
methodology (for example, co-product
accounting method and global warm-
February 23, 2026
ing potential values), different users can
calculate different emissions rates with
respect to the same fuel. Many of these
choices would not be appropriate for the
specific context of the section 45Z credit
given the potentially preliminary nature
of much of the information represented in
R&D GREET and given that specific representations of activities, and their emissions, are needed in a specific fashion (for
example, to comply with the requirements
of section 45Z). Given the limitations of
some of the data underlying aspects of
the R&D GREET model and the fact that
the model does not predetermine for the
user the methodologies and accounting
parameters that are appropriate for compliance with the requirements of section
45Z, R&D GREET does not provide the
analytical and methodological specificity
necessary to meet the specific objectives
or statutory requirements of the section
45Z credit.
ANL developed, and the DOE published, the 45ZCF-GREET model as a
specific version of the GREET model to
determine emissions rates that also meets
three key parameters: (i) user-friendliness
and consistency, (ii) technical robustness
of the pathways represented, and (iii) consistency with the requirements of section
45Z. The 45ZCF-GREET model and the
45ZCF-GREET User Manual are available at https://www.energy.gov/eere/greet.
The first version of the 45ZCF-GREET
model, released on January 15, 2025,
included the most commonly used types
and categories of fuel that are anticipated
to meet the eligibility requirements to
claim the section 45Z credit. The 45ZCFGREET model and the 45ZCF-GREET
User Manual were updated in May 2025;
such updates included adding pathways
for alternative natural gas from coal mine
methane capture and ethanol from U.S.
corn wet mills. Additional types and categories of fuel may be added in future versions of the 45ZCF-GREET model.
Implementation of the section 45Z
credit requires that data used to calculate
emissions rates reflect a given taxpayer’s
specific operations and that such data be
independently verifiable to the extent
possible. Use of facility-specific verifiable data ensures that the section 45Z
credit is available only to those fuels that
meet statutory requirements. For certain
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parameters, bespoke inputs are unlikely
to be easily measured by taxpayers and/
or independently verifiable with high
fidelity, given the current status of verification mechanisms. Thus, certain parameters in the 45ZCF-GREET model are
fixed assumptions, referred to as “background data,” that are based on the best
available data and may not be changed by
users. Alternatively, the “foreground data”
in the 45ZCF-GREET model are parameters that must be input by the user. The
45ZCF-GREET User Manual contains
further details on background and foreground data.
b. 45ZCF-GREET as a Successor Model
The Treasury Department and the IRS
recognize that the continued existence
of the R&D GREET model and periodic
updates to both the 45ZCF-GREET model
and the R&D GREET model may create
uncertainty about which GREET model to
use. To address any potential uncertainty,
the proposed regulations would invoke the
Secretary’s express delegation of authority in section 45Z(b)(1)(B)(ii) to require
use of the 45ZCF-GREET model as a successor model.
In drafting the proposed regulations,
the Treasury Department and the IRS considered the statutory definition of the term
“lifecycle greenhouse gas emissions” in
section 211(o)(1)(H) of the CAA-2022
and the specific objectives of section 45Z.
The Treasury Department and the IRS also
consulted with the DOE. Accordingly, the
proposed regulations would reflect that
the 45ZCF-GREET model is a model
specifically developed by the ANL as a
derivative of and successor to the R&D
GREET model to meet the requirements
and objectives of section 45Z.
c. Most Recent Determinations Under
GREET
Regardless of any determination by the
Secretary of a successor model, the phrase
“most recent determinations under the
Greenhouse gases, Regulated Emissions,
and Energy use in Transportation model”
in section 45Z(b)(1)(B)(ii) can be understood to refer to determinations under the
most recent version of the 45ZCF-GREET
model.
Bulletin No. 2026–9
As discussed in Part III.E.3.a. of this
Explanation of Provisions, the 45ZCFGREET model is tailored to the administration of the section 45Z credit and
includes features that make it easy for
taxpayers to use. Use of the most recent
version of the 45ZCF-GREET model
would also ensure that the pathways and
approaches provided for determining
“well-to-wheel” emissions for various
fuel production processes are of sufficient
methodological certainty to be appropriate
for determining eligibility for a tax credit.
d. SAF Portion of 45ZCF-GREET Model
as a Similar Methodology
The proposed regulations would allow
taxpayers to use the 45ZCF-GREET
model to determine emissions rates for
SAF transportation fuel (SAF portion of
45ZCF-GREET model). The SAF portion
of the 45ZCF-GREET model is a “similar methodology” to CORSIA under section 45Z(b)(1)(B)(iii)(II) because, like
the CORSIA fuel lifecycle methodologies, it evaluates the full fuel lifecycle,
including all stages of fuel and feedstock
production through to the end use of the
finished fuel. The DOE worked with the
Treasury Department and other Federal
agencies to develop the 45ZCF-GREET
model, including specifications for and
limitations on background and foreground
data, to satisfy the statutory requirements
of section 45Z. Additionally, in the context of whether the R&D GREET model
could be used to determine lifecycle GHG
emissions for purposes of section 40B(e)
(2),5 the EPA identified certain necessary components of a lifecycle GHG
analysis consistent with section 211(o)
(1)(H) of the CAA-2022 that the R&D
GREET model lacked. The EPA subsequently determined that the new 40BSAFGREET 2024 model, created in 2024 for
the now-expired SAF credit under section
40B, included the previously identified
absent categories of emissions.6 Similarly,
the EPA found that the 45ZCF-GREET
model includes the categories of emissions it previously identified as missing
from the R&D GREET model, the lack of
which made R&D GREET insufficient for
calculating lifecycle GHG emissions for
purposes of section 211(o)(1)(H) of the
CAA-2022.7
The 45ZCF-GREET model contains
certain necessary components of a lifecycle GHG analysis consistent with section
211(o)(1)(H) of the CAA-2022 as applied
for purposes of the section 45Z regulations.8
The 45ZCF-GREET model is consistent
with the requirements of section 45Z(b)(1)
(B)(iii). Therefore, emissions rates for SAF
transportation fuels calculated using the
45ZCF-GREET model would also be consistent with those requirements as applied
for purposes of the section 45Z regulations.
See section 45Z(b)(1)(B)(i).
e. Other Aspects of 45ZCF-GREET
Model
In the 45ZCF-GREET model, for purposes of accounting for emissions associated with hydrogen (as a production
input), natural gas alternatives (as a production input or as the transportation fuel
produced), electricity, and carbon capture
and sequestration, rules similar to the rules
under section 45V would apply unless otherwise specified by the 45ZCF-GREET
model with respect to technical modeling
issues or other technical differences. The
proposed regulations would also clarify
the similar rule for incrementality with
respect to the use of energy attribute certificates in the 45ZCF-GREET model. See
also § 1.45V-4(d).
In January 2025, the United States
Department of Agriculture (USDA) published a beta version of the USDA Feedstock Carbon Intensity Calculator (USDA
FD-CIC). The beta version of the USDA
FD-CIC is undergoing testing, peer
review, and public comment in preparation for the publication of a final version
of USDA FD-CIC. Following publication
of the final version of USDA FD-CIC, the
Treasury Department and the IRS anticipate that a section 45Z-specific version of
the Feedstock Carbon Intensity Calculator
(FD-CIC) module will be included as an
input to the DOE’s 45ZCF-GREET model
(45ZCF FD-CIC) used for calculating
carbon intensity adjustments under section 45Z for feedstocks that are produced
using certain agricultural practices. Such
practices may include no till, reduced
till, cover crops, and nutrient management. 45ZCF FD-CIC may undergo periodic updates, including incorporation of
new data and methodologies from other
FD-CIC versions (for example, USDA
FD-CIC, R&D GREET FD-CIC (R&D
FD-CIC)), to incorporate more recent data
or new data sources, types of practices,
feedstock types, or changes to geographic
specificity. The results of the 45ZCF
FD-CIC are expected to inform the emissions rates calculated under the 45ZCFGREET model. The Treasury Department
and the IRS anticipate that 45ZCF FD-CIC
may be used for fuel produced and sold in
2025 even though 45ZCF FD-CIC likely
will be published in 2026.
The Treasury Department and the IRS
anticipate that adoption of 45ZCF FD-CIC
would entail additional requirements
particular to its use, such as agricultural
practice implementation, recordkeeping,
and verification, which may include rules
similar to those provided in the USDA’s
technical guidelines for crops used as biofuel feedstocks in 7 CFR 2100, subparts
D, E, and F. The Treasury Department and
the IRS anticipate publishing additional
guidance on these requirements in coordination with the publication of 45ZCF
FD-CIC.
As in section 45Z(b)(1)(B)(iii)(II), section 40B(e)(2) requires that a methodology similar to CORSIA must also satisfy the criteria under section 211(o)(1)(H) of the CAA-2022. See also
Notice 2024-37, 2024-21 I.R.B. 1191.
6
See Letter from Joseph Goffman, Principal Deputy Assistant Administrator for the Office of Air and Radiation, U.S. Environmental Protection Agency, to Lily Batchelder, Assistant Secretary
for Tax Policy, U.S. Department of Treasury (December 13, 2023) (EPA December 2023 Letter), available at https://home.treasury.gov/system/files/136/Final-EPA-letter-to-UST-on-SAFsigned.pdf.
7
See Letter from Joseph Goffman, Assistant Administrator for the Office of Air and Radiation, U.S. Environmental Protection Agency, to Aviva Aron-Dine, Deputy Assistant Secretary for
Tax Policy, U.S. Department of Treasury (January 8, 2025) (EPA January 2025 Letter), available at https://home.treasury.gov/system/files/136/January-2025-EPA-letter-to-UST-on-45zcfGREET-signed.pdf.
8
The 45ZCF-GREET model includes significant indirect emissions from land use, crop production, and livestock. Due to the OBBBA, indirect emissions from land use, also known as
induced or indirect land use change, will be excluded for purposes of transportation fuel produced after December 31, 2025. See section 45Z(b)(1)(B)(iv); section 70521(c) of the OBBBA.
5
Bulletin No. 2026–9
593
February 23, 2026
F. Provisional Emissions Rate (PER)
1. In General
Many stakeholders have expressed the
urgent need for guidance to clarify the
scope and mechanics of the PER process
referenced in section 45Z(b)(1)(D), which
provides that if the emissions rate table
does not establish an emissions rate for a
transportation fuel, a taxpayer producing
such fuel may file a petition with the Secretary for determination of the emissions
rate with respect to such fuel, known as
a “PER.”
Proposed § 1.45Z-2(f)(1) would establish the procedures a taxpayer must follow to request a PER determination. The
proposed regulations would require a taxpayer to submit an emissions value request
(EVR) to the DOE and obtain a calculated
emissions value letter (CEVL) from the
DOE, prior to filing a PER petition.
2. PER Terminology
Proposed § 1.45Z-1(b) would define
terms associated with the PER procedures
set out in proposed § 1.45Z-2(f). Proposed
§ 1.45Z-1(b)(12) would define “eligible
fuel,” for purposes of the PER procedures
in proposed § 1.45Z-2(f) and the associated definitions in proposed § 1.45Z-1(b),
as either a type of fuel not included in the
applicable emissions rate table, or a type
of fuel included in the applicable emissions rate table but whose category is not
included in the applicable emissions rate
table.
Proposed § 1.45Z-1(b) would also
define terms related to requesting an
emissions value (EV) from the DOE,
which would be a prerequisite to filing
a PER petition. Proposed § 1.45Z-1(b)
(15) would define the term “emissions
value” or “EV” as the value setting forth
the DOE’s analytical assessment of the
lifecycle GHG emissions associated
with the fuel for which the EVR was
made. Proposed § 1.45Z-1(b)(17) would
define the term “EV applicant” as a taxpayer submitting an EVR for an eligible
fuel to the DOE. Proposed § 1.45Z-1(b)
(6) would define the term “calculated
emissions value letter” or “CEVL” as
the letter setting forth the emissions
value and DOE control number that the
February 23, 2026
DOE issues to an applicant whose EVR
is completed.
Proposed § 1.45Z-2(f)(2) would provide that the DOE and the IRS, respectively, will deny any EVR or PER petition
for a type and category of fuel included
in the applicable emissions rate table.
The proposed rule would provide that a
taxpayer may only request an emissions
value, and subsequently a PER determination, for an eligible fuel. Because the section 45Z credit is computed for a type and
category of fuel, the proposed rule would
also clarify that the DOE and the IRS,
respectively, will deny any EVR or PER
petition based on a facility rather than a
type or category of fuel.
the DOE stating the well-to-gate emissions value that the DOE determined with
respect to the facility’s hydrogen production pathway and the control number that
the DOE assigned to the section 45V EVR
Application. Once such applicant completes the section 45V EVR process and
submits its EVR for purposes of section
45Z, the DOE may issue a CEVL, which
would include an EV that fully accounts
for the well-to-wheel emissions of such
category of hydrogen.
The proposed rule would also clarify
that if the EV applicant produces such
category of hydrogen at multiple facilities, such applicant will need to provide
this information for each facility. See Part
IV.B. of this Explanation of Provisions
for a discussion of the anti-stacking rules
between section 45Z and section 45V.
4. Emissions Value Requests
5. Submitting a PER petition
Proposed § 1.45Z-2(f)(3) would
describe the rules for requesting an EV
from the DOE for an eligible fuel. Proposed § 1.45Z-2(f)(3)(i) would direct
applicants to follow the guidance and
procedures that the DOE will separately
publish for EVRs, including the section
45Z EVR process instructions (Instructions). Proposed § 1.45Z-2(f)(3)(i) would
also describe common assumptions for
EVRs, including the well-to-wheel system
boundary and certain accounting rules.
Proposed § 1.45Z-2(f)(3)(ii) would
describe the information required by the
DOE for an EVR. Proposed § 1.45Z-2(f)
(3)(ii)(A) would generally require that
an EV applicant provide all information required by the DOE’s Instructions,
including sections of a Class 3 Front-End
Engineering and Design (FEED) study
(or studies) or other indicator of project
maturity, as determined by the DOE, and
a completed Section 45Z EVR Form.
Proposed § 1.45Z-2(f)(3)(ii)(B) would
provide that for an EVR for an eligible
fuel that is a category of hydrogen, an
EV applicant must first submit a section
45V Emissions Value Request Application in accordance with the process for a
PER determination for the section 45V
credit, as described in § 1.45V-4(c). The
proposed rule would provide that the EV
applicant must submit the letter obtained
under the section 45V EVR process from
Proposed § 1.45Z-2(f)(4) would provide the exclusive procedures for requesting a PER determination. Proposed §
1.45Z-2(f)(4)(i) would clarify that a taxpayer requests a PER determination by filing a PER petition with the Form(s) 7218
included with the taxpayer’s timely filed
(including extensions) Federal income tax
return or Federal information return for
the first taxable year for which the taxpayer claims the section 45Z credit for
the eligible fuel to which the PER petition relates. Proposed § 1.45Z-2(f)(4)(ii)
would describe the required content of a
PER petition, which would consist of the
CEVL for each eligible fuel for which the
section 45Z credit is being claimed for a
given taxable year.
3. Threshold Requirements
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6. Determination of a PER
Proposed § 1.45Z-2(f)(5)(i) would provide that a properly filed PER petition is
deemed accepted by the IRS, and that the
deemed acceptance constitutes the Secretary’s determination of the PER. As such,
proposed § 1.45Z-2(f)(5)(ii) would clarify
that a taxpayer may rely on the EV the
DOE provides in a CEVL for purposes
of calculating and claiming the section
45Z credit, provided that all information,
representations, or other data the taxpayer
provided to the DOE in support of the taxpayer’s EVR are accurate.
Bulletin No. 2026–9
G. Relation back of Emissions Rates
(Including PER)
Proposed § 1.45Z-2(g) would provide that when an emissions rate is first
determined for a type and category of
fuel, whether established in an applicable
emissions rate table or by a PER determination, that emissions rate will relate
back to January 1, 2025. The proposed
rule would ensure that even if a taxpayer
cannot determine the emissions rate for
a type and category of fuel at the time of
production, either because such type and
category of fuel are not established in the
applicable emissions rate table or because
the Secretary has not determined a PER,
such taxpayer may utilize a later-determined emissions rate for such fuel as of
the date of production.
IV. Special Rules
Proposed § 1.45Z-4 would provide
special rules with respect to the determination of a section 45Z credit. Generally,
these rules would address the: (i) required
registration at the time of production; (ii)
anti-stacking rules; (iii) anti-abuse rules;
(iv) attribution of production; (v) lack of
ownership requirement; (v) foreign feedstocks and prohibited foreign entities; and
(vi) specific recordkeeping and substantiation requirements.
A. Only Registered Production in the
United States Taken into Account
As provided in section 45Z(f)(1), proposed § 1.45Z-4(a) would provide that
no section 45Z credit is determined with
respect to any transportation fuel unless
the taxpayer is registered as a producer
of clean fuel (within the meaning of section 4101) at the time of production and
the fuel is produced in the United States,
which includes any territory of the United
States. Proposed § 1.4101-1, which would
provide the registration rules under section 4101, is further discussed in Part VII.
of this Explanation of Provisions.
B. Anti-Stacking Rules
As previously discussed in Part II.G.2.
of this Explanation of Provisions, section 45Z(d)(4)(B) disallows a section
Bulletin No. 2026–9
45Z credit for fuel produced at a facility for which an anti-stacking credit (as
defined in proposed § 1.45Z-1(b)(28)(ii))
is allowed. Proposed § 1.45Z-4(b) would
provide anti-stacking rules that would
govern the interaction between different
credits if a facility both produces transportation fuel under section 45Z and engages
in other credit-eligible activity. The proposed rule also includes examples. To the
extent permitted by statute, the proposed
rule would generally preserve taxpayer
choice of which credit to claim—a section
45Z credit or an anti-stacking credit—for
a taxpayer engaging in multiple credit-eligible activities at the same facility in a
taxable year. For instance, a taxpayer producing hydrogen that qualifies for both
a section 45V credit and a section 45Z
credit can generally choose which credit
to claim.
In addition to general comments on the
proposed anti-stacking rules, the Treasury
Department and the IRS request specific
comments addressing situations in which
a facility either has multiple owners or in
which a taxpayer does not own the facility, including administrative and compliance issues arising under those scenarios.
Proposed § 1.45Z-4(b)(2) would provide that the determination of whether
a facility is a qualified facility is made
each taxable year. Therefore, under the
proposed rule, a facility may be a qualified facility in one taxable year but not in
another taxable year. Additionally, in the
case of a taxpayer producing transportation fuel at multiple facilities, the taxpayer
would separately determine for each facility whether the fuel was produced at a
qualified facility. The proposed rules are
consistent with the anti-stacking rules in
section 45Z(d)(4)(B), which are tied to the
taxable year.
Proposed § 1.45Z-4(b)(3) would provide examples illustrating the application
of the anti-stacking rules to section 45Z
for each of the anti-stacking credits. One
example would address situations in which
the person claiming an anti-stacking credit
for a facility has a different taxable year
than the taxpayer producing transportation
fuel at that facility. The examples would
also clarify that the anti-stacking rules
apply regardless of whether the taxpayer
or another person claims an anti-stacking
credit with respect to a facility.
595
C. Anti-Abuse Rules
As indicated in Notice 2025-10, the
Treasury Department and the IRS are cognizant of potential abuses of the section
45Z credit, including situations in which
a taxpayer produces and sells transportation fuel in a manner that is inconsistent
with Congressional intent in enacting section 45Z. The Treasury Department and
the IRS are also concerned about other
potential abuse, such as circular production, credit churning or wasteful production with no intended use, and abuse of the
anti-stacking rules.
Proposed § 1.45Z-4(c) would provide
that the rules of section 45Z and the section 45Z regulations must be applied in a
manner consistent with the purposes of
section 45Z and the section 45Z regulations (and the regulations in under sections 6417 and 6418 related to the section 45Z credit), including incentivizing
the domestic production and use of clean
transportation fuel and ensuring that taxpayers do not circumvent the feedstock
origin and anti-stacking rules. Therefore,
the proposed rule would provide that no
section 45Z credit is determined if the primary purpose of the production and sale
of clean transportation fuel is to obtain the
benefit of the section 45Z credit in a manner that is wasteful, such as discarding,
disposing of, or destroying the transportation fuel without putting it to a productive
use. The proposed rule would further provide that whether the production and sale
of transportation fuel is consistent with
the purposes of section 45Z and the section 45Z regulations (and the regulations
in this chapter under sections 6417 and
6418 related to the section 45Z credit) is
based on all facts and circumstances.
Section 45Z(e) delegates authority to
the Secretary to issue guidance regarding
implementation of section 45Z, including
the determination of section 45Z credits. Therefore, the proposed regulations
would provide general anti-abuse rules
that are consistent with the three prongs
of the section 45Z(a)(4) definition of
“sale” (referred to as a “qualified sale”
in these proposed regulations) that focus
on post-production uses of transportation
fuel.
The Treasury Department and the IRS
request comments on the need for these or
February 23, 2026
additional section 45Z anti-abuse rules.
The Treasury Department and the IRS
also request comments on the potentially
abusive scenarios that should be covered
by any anti-abuse rules.
D. Production Attributable to the
Taxpayer and Section 761(a) Elections
Consistent with section 45Z(f)(2), proposed § 1.45Z-4(d) would provide rules
for production attributable to the taxpayer. For a facility in which more than
one person has an ownership interest (and
the arrangement is not classified as a partnership for Federal tax purposes), proposed § 1.45Z-4(d)(1) would provide that
production from the facility is allocated
among those persons in proportion to their
respective ownership interests in the gross
sales from the facility. The proposed rule
would further provide that each owner’s
respective allocable share of the section
45Z credit is based on each owner’s allocable share of production, determined
pursuant to section 45Z and these proposed regulations. Proposed § 1.45Z-4(d)
(2) would provide an example of production attributable to the taxpayer. Proposed
§ 1.45Z-4(d)(3) would address instances
in which a facility is owned pursuant to a
valid section 761(a) election.
E. Facility Ownership Not Required
Credit eligibility under section 45Z is
tied to production of a transportation fuel
at a qualified facility and a subsequent
qualified sale of the fuel. There is no statutory requirement that the producer of the
transportation fuel own the qualified facility. Proposed § 1.45Z-4(e) would address
situations in which the producer does not
own the qualified facility at which it produces the transportation fuel, to ensure
that production is attributed fairly and
accurately in those situations.
Proposed § 1.45Z-4(e)(1) would clarify that a taxpayer is not required to own
the qualified facility at which it produces
transportation fuel for a section 45Z credit
to be determined with respect to such fuel.
If a taxpayer produces transportation fuel
at a qualified facility owned by another
person, proposed § 1.45Z-4(e)(2) would
attribute that production to the taxpayer
unless otherwise specified in the Code or
February 23, 2026
the section 45Z regulations. In the case
of a production arrangement under which
multiple taxpayers produce transportation
fuel at a facility that is not owned by all the
taxpayers, production would be allocated
among the taxpayers in proportion to their
respective interests in the gross sales from
that fuel, as determined under the applicable contract or other legal arrangement
with respect to the fuel.
F. Foreign Feedstock and Prohibited
Foreign Entity Restrictions
Consistent with section 45Z(f)(1)(A)
(iii), as added by section 70521(a) of the
OBBBA, proposed § 1.45Z-4(f)(1) would
provide that transportation fuel that is
produced after December 31, 2025, must
be exclusively derived from a feedstock
that was produced or grown in the United
States, Mexico, or Canada.
Consistent with section 45Z(f)(8), as
added by section 70521(k) of the OBBBA,
proposed § 1.45Z-4(f)(2) would prohibit
the determination of a section 45Z credit:
(i) for taxable years beginning after July 4,
2025, if the taxpayer is a specified foreign
entity; and (ii) for taxable years beginning
after July 4, 2027, if the taxpayer is a foreign-influenced entity (other than a foreign-influenced entity that made certain
payments to a specified foreign entity).
See section 7701(a)(51)(B) and (D) for
definitions of the terms specified foreign
entity and foreign-influenced entity.
G. Specific Recordkeeping and
Substantiation Requirements
In addition to the general recordkeeping requirements under section 6001 and
§ 1.6001-1, proposed § 1.45Z-4(g) would
require a taxpayer claiming the section
45Z credit to maintain records sufficient
to establish the taxpayer’s eligibility for
the section 45Z credit and the amount of
the credit claimed. It would also provide
two safe harbors: (i) for substantiating
emissions rates with respect to non-SAF
transportation fuel; and (ii) for substantiating qualified sales of transportation fuel.
The proposed recordkeeping and substantiation requirements are necessary to
ensure the accuracy of reported emissions
rates and because the amount of the section 45Z credit may depend on certain
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operational choices, such as use of certain
types of feedstocks or fuels, or engaging
in certain emissions-reduction practices
like carbon capture and sequestration
(which may vary from year to year).
1. In General
Proposed § 1.45Z-4(g)(1) would provide that at a minimum, sufficient records
include records: (i) establishing that each
fuel produced is a transportation fuel;
(ii) establishing any relevant information
relating to the primary feedstock(s) used
to produce each fuel; (iii) establishing that
each fuel meets any additional specifications for the type of fuel as described in
§ 1.45Z-1(b)(24) or (30); (iv) substantiating how the emissions rate for each fuel
was determined (including, if applicable,
the specific type(s) and category(ies)
under the applicable emissions rate table);
(v) relating to any fuel testing obtained by
the taxpayer; (vi) establishing that each
facility used to produce fuel is a qualified facility; (vii) establishing the date
each facility was placed in service; (viii)
establishing that each fuel was sold in a
qualified sale; and (ix) establishing any
certification from an unrelated person and
substantiating the information contained
therein. A taxpayer must also keep all
information, including raw data, used for
or related to any petition for a PER. If a
taxpayer is claiming an increased credit
amount by satisfying the PWA requirements, the taxpayer must also maintain the
records described in § 1.45Z-3 (referencing § 1.45-12).
Proposed § 1.45Z-4(g)(2) would provide a safe harbor for substantiating the
emissions rate for a non-SAF transportation fuel that was determined using
the 45ZCF-GREET model. A taxpayer
relying on this safe harbor would need
to obtain certification in substantially the
same form and manner described in proposed § 1.45Z-5 (related to certification
for a SAF transportation fuel) with respect
to that non-SAF transportation fuel. The
proposed § 1.45Z-5 certification requirements are discussed in Part V. of this
Explanation of Provisions.
Proposed § 1.45Z-4(g)(3)(i) would
provide a safe harbor for substantiating
whether the sale of a transportation fuel
is a qualified sale for purposes of section
Bulletin No. 2026–9
45Z. A taxpayer relying on this safe harbor
would need to obtain from the purchaser a
certificate prepared by the purchaser under
penalty of perjury in substantially the
same form and manner as that described
in proposed § 1.45Z-4(g)(3)(ii). Proposed
§ 1.45Z-4(g)(3)(ii) would include a model
certificate that a taxpayer may use for purposes of meeting this safe harbor. If the
certificate relates to a single purchase, the
taxpayer must obtain the certificate from
the purchaser prior to or at the time of
sale. If the certificate relates to purchases
made over a period of time, the taxpayer
must obtain the certificate from the purchaser prior to or at the same time as the
initial sale to which the certificate relates.
The safe harbor would require that a taxpayer have no reason to believe that any
information in the certificate regarding the
use of the transportation fuel is false. The
safe harbor would also require a taxpayer
to maintain the certificate with respect to
the sale of transportation fuel in its books
and records.
Additionally, the Treasury Department
and the IRS request comments on what
types of documentation or other substantiation a taxpayer should maintain to
establish: proper determination of a fuel’s
emissions rate, including the inputs into
CORSIA Default, CORSIA Actual, or the
45ZCF-GREET model; certification from
an unrelated person for non-SAF transportation fuel; existing systems, industry
standards, or customary practices that may
be used to substantiate emissions rate and
inputs into CORSIA Default, CORSIA
Actual, or the 45ZCF-GREET model (or
if there are none, how such tracking and
verification systems should be developed,
with potential timelines regarding development).
2. Foreign Feedstocks Including Used
Cooking Oil
As explained in Notice 2025-10, the
Treasury Department and the IRS remain
concerned about the ability to reliably distinguish between imported used cooking
oil (UCO) and palm oil, and the resulting
risk of crediting ineligible fuels. Furthermore, section 45Z(f)(1)(A)(ii) provides
that transportation fuel that is produced
after December 31, 2025, must be exclusively derived from a feedstock that was
Bulletin No. 2026–9
produced or grown in the United States,
Mexico, or Canada. As previously discussed in Part IV.F. of this Explanation
of Provisions, proposed § 1.45Z-4(f)(1)
would implement this statutory change.
Consistent with this approach, pathways that use foreign feedstocks (including UCO) for fuel produced after December 31, 2025, will not be available in the
45ZCF-GREET model until the Treasury
Department and the IRS publish further
guidance. A feedstock is considered a
foreign feedstock if it originates from a
source (for example, a farm, restaurant, or
food processor) and/or is purchased from
an aggregator located outside the United
States, Canada, or Mexico.
The Treasury Department and the IRS
are considering appropriate substantiation
and recordkeeping requirements for feedstocks imported from Canada and Mexico
(including UCO), and request comments
on possible approaches with respect to
substantiating that any imported feedstocks meet the statutory sourcing requirement. The Treasury Department and the
IRS are also interested in any industry
practices to track feedstock source(s) that
would mitigate potential taxpayer burden
while being administrable for the IRS. For
example, whether using specific existing business records, a taxpayer could
demonstrate that feedstocks exclusively
produced in Canada or Mexico did not
contain other feedstocks or additives that
originated outside of Canada or Mexico.
The Treasury Department and the IRS
also request comments on purchases from
aggregators of UCO and approaches to
determine the underlying source(s) of the
UCO that are administrable for taxpayers
and the IRS. The Treasury Department
and the IRS request comments on, for
instance, whether there are reliable methods that would indicate the geographic
location where seeds originated or crops
were grown as a precursor for use as cooking oil, which could be used to determine
whether the foreign feedstock limitation
in section 45Z(f)(1)(A)(iii) applies.
V. Procedures for Certification of
Lifecycle Greenhouse Gas Emissions
Rates
Proposed § 1.45Z-5 would provide
rules for certification from an unrelated
597
person of emissions rates for SAF transportation fuel (certification). The rules
would describe the content, form, and
manner of the required certification under
section 45Z(f)(1)(A)(i)(II). Proposed
§ 1.45Z-5(b) through (f) would provide
rules relating to the content of the certification. Proposed § 1.45Z-5(g) would
describe the requirements for timely certification. Proposed § 1.45Z-5(h) would
provide a model certification.
A. Requirements for Certifications
1. In General
In general, proposed § 1.45Z-5(b)(1)
would provide that for each taxable year
for which a taxpayer claims a section 45Z
credit for SAF transportation fuel, the taxpayer must obtain a certification from an
unrelated person and include such certification with the taxpayer’s Form 7218,
which is filed with the taxpayer’s Federal
income tax return or Federal information
return, for each qualified facility at which
the taxpayer produces SAF transportation
fuel.
Proposed § 1.45Z-5(b)(2) would provide that the certification described in proposed § 1.45Z-5(b)(1) must be prepared by
a qualified certifier (as defined in proposed
§ 1.45Z-5(b)(3)) and signed by the qualified
certifier under penalty of perjury. Proposed
§ 1.45Z-5(b)(2) would further provide that
the certification must include information
that is in substantially the same form as the
model certification provided in proposed
§ 1.45Z-5(h). Proposed § 1.45Z-5(b)(2)
(i) through (vi) would describe the following information that a certification must
contain: (i) a statement from the qualified
certifier regarding the production of SAF
transportation fuel (production statement);
(ii) a statement from the qualified certifier regarding conflicts of interest (conflict
statement); (iii) information regarding the
qualified certifier, including documentation
of the qualified certifier’s qualifications
(qualified certifier statement); (iv) certain
general information about the qualified
facility at which the SAF transportation
fuel production undergoing certification
occurred (qualified facility statement); (v)
any documentation necessary to substantiate the certification process given the
standards and best practices prescribed by
February 23, 2026
the qualified certifier’s accrediting body
as they apply to the circumstances of the
taxpayer and the qualified facility; and (vi)
any other information or documentation
required by applicable IRS tax forms or
form instructions.
2. Production Statement
Proposed § 1.45Z-5(c)(1) would provide that the production statement must
state that the qualified certifier performed
a certification sufficient for the IRS to
determine that any lifecycle GHG emissions data inputs and the operation, during
the applicable taxable year, of the qualified
facility that produced the SAF transportation fuel for which the section 45Z credit
is claimed are accurately reflected in: (i)
the number of gallons of SAF transportation fuel produced by the taxpayer that is
entered on the Form 7218 with which the
certification is included; and (ii) either the
data the taxpayer input into the allowed
methodology under proposed § 1.45Z2(e)(3), or the data the taxpayer submitted
in its PER petition and that was provided
to the DOE in support of the taxpayer’s
request for the emissions value provided
in the PER petition.
Proposed § 1.45Z-5(c)(2) would provide that, if a taxpayer submitted a PER
petition, then the production statement
must also specify the emissions value
received from the DOE that was calculated using the data provided in support
of the taxpayer’s emissions value request.
Proposed § 1.45Z-5(c)(3) would provide that the production statement must
specify the lifecycle GHG emissions rate
and the amount of SAF transportation fuel
produced by the taxpayer that are entered
on the Form 7218 with which the certification is included.
3. Conflict Statement
Proposed § 1.45Z-5(d)(1) would provide that the conflict statement must state
that: (i) the qualified certifier has not
received a fee based to any extent on the
value of any section 45Z credit that has
been or is expected to be claimed by the
taxpayer, and no arrangement has been
made for such fee to be paid at any time
in the future; (ii) the qualified certifier has
not been a party to any transaction involv-
February 23, 2026
ing the sale of SAF transportation fuel the
taxpayer produced or in which the taxpayer purchased primary feedstocks for
the production of such SAF transportation
fuel; (iii) the qualified certifier is unrelated
to the taxpayer and is not an employee of
the taxpayer; and (iv) the qualified certifier is not married to anyone who is related
to, or an employee of, the taxpayer.
Proposed § 1.45Z-5(d)(2) would provide that if the qualified certifier is acting in
his or her capacity as a partner in a partnership, an employee of any person, whether
an individual, corporation, or partnership,
or an independent contractor engaged by
a person other than the taxpayer, the statements described in proposed § 1.45Z-5(d)
(1) must also be made with respect to the
partnership or the person that employs or
engages the qualified certifier.
4. Qualified Certifier Statement
Proposed § 1.45Z-5(e) would provide
that the qualified certifier statement must
include: (i) the qualified certifier’s name,
address, and certifier identification number;
(ii) the qualified certifier’s qualifications
to conduct the certification, including a
description of the certification the qualified
certifier received from the accrediting body;
(iii) if the qualified certifier is acting in his
or her capacity as a partner in a partnership, an employee of any person, whether
an individual, corporation, or partnership,
or an independent contractor engaged by a
person other than the taxpayer, the name,
address, and certifier identification number of the partnership or the person that
employs or engages the qualified certifier;
(iv) the signature of the qualified certifier
and the date of signature; and (v) a statement that the certification was conducted
for Federal tax purposes.
5. Information on Taxpayer’s Qualified
Facility
Proposed § 1.45Z-5(f) would provide that the certification must include:
(i) the location of the qualified facility;
(ii) a description of the qualified facility,
including its method of producing SAF
transportation fuel; (iii) the type(s) of primary feedstock(s) used by the qualified
facility to produce the SAF transportation
fuel during the taxable year of production;
598
(iv) the amount(s) of primary feedstock(s)
used by the qualified facility to produce
the SAF transportation fuel during the taxable year of production; (v) the location(s)
from which the qualified facility sourced
the primary feedstock(s) used to produce
the SAF transportation fuel during the taxable year of production; (vi) a list of the
metering devices used to record any data
used by the qualified certifier to support
the production statement under proposed
§ 1.45Z-5(c), along with a statement that
the qualified certifier has reason to believe
that the device(s) underwent industry-appropriate quality assurance and quality
control, and the accuracy and calibration
of the device has been tested in the year
prior to the time of observation; and (vii)
confirmation that the emissions rate of the
SAF transportation fuel produced during
the taxable year of production is accurate
to the higher of +/-5% or 2 kilograms of
CO2e per mmBTU.
B. Qualified Certifier
Proposed § 1.45Z-5(b)(3) would provide rules regarding qualified certifiers for
the allowed methodologies. A qualified
certifier would be required to have the relevant active accreditation as of the date it
provides a certification to a taxpayer.
1. CORSIA Methodologies
Proposed § 1.45Z-5(b)(3)(i) would
provide that, for taxpayers using CORSIA
Default or CORSIA Actual to determine
the emissions rate for SAF transportation
fuel, the term qualified certifier means any
individual or organization that is unrelated
to the taxpayer and is not an employee of
the taxpayer, and that has an active accreditation from International Sustainability
and Carbon Certification, Roundtable on
Sustainable Biomaterials, ClassNK, or
other sustainability certification scheme
approved by ICAO. Such individuals or
organizations are experienced and familiar with evaluating information regarding
CORSIA Default and CORSIA Actual.
2. 45ZCF-GREET Model
Proposed § 1.45Z-5(b)(3)(ii) would
provide that, for taxpayers using the
45ZCF-GREET model to determine the
Bulletin No. 2026–9
emissions for SAF transportation fuel, the
term qualified certifier means any individual or organization that is unrelated to the
taxpayer and is not an employee of the taxpayer, and that has an active accreditation
from: (i) the American National Standards
Institute National Accreditation Board
(ANAB) to conduct validation and verification in accordance with the requirements of International Organization for
Standardization (ISO) 14065; or (ii) as a
verifier, lead verifier, or verification body
under the California Air Resources Board
Low Carbon Fuel Standard (CARB LCFS)
program. Such ANAB and CARB LCFS
verifiers are experienced with evaluating
information similar to the information
included in the 45ZCF-GREET model.
C. Timely Certification Required
Proposed § 1.45Z-5(g) would provide that a certification that includes all
required information is valid with respect
to a particular claim only if it is signed
and dated by the qualified certifier no later
than: (i) the due date, including extensions, of the Federal income tax return or
Federal information return for the taxable
year during which the SAF transportation
fuel undergoing certification is sold in a
qualified sale; or (ii) in the case of a section 45Z credit first claimed for the taxable year on an amended return or administrative adjustment request (AAR), the
date on which the amended return or AAR
is filed.
VI. Procedures for Filing a Claim for
the Clean Fuel Production Credit
Proposed § 1.45Z-6 would describe the
time and manner of filing a claim for the
section 45Z credit and provide special rules
for cases in which the taxpayer claiming
the credit is not the registered producer of
a transportation fuel. Under the proposed
rule, a taxpayer claiming a section 45Z
credit would either be the person registered
as a producer of a transportation fuel at the
time of production, or a person that would
be treated as the registrant.
A. Time and Manner of Filing a Claim
In general, proposed § 1.45Z-6(a)
would provide that a taxpayer claims the
Bulletin No. 2026–9
section 45Z credit on a completed Form
7218 included with the taxpayer’s timely
filed (including extensions) Federal
income tax return or Federal information
return for the taxable year for which the
taxpayer claims the section 45Z credit.
Under proposed § 1.45Z-6
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