45Z Registration Requirements Offer Insight into Clean Fuel Production Credit Qualifications

The IRS issued guidance on the registration requirements for producers under the Clean Fuel Production Credit in IRC § 45Z, which begins on January 1, 2025. Notice 2024-49 states that producers must be registered on or before January 1, 2025, to be eligible to claim the credit beginning on that date. The IRS urges producers to apply for registration as soon as possible, noting that the IRS “intends to process completed applications for registration received by July 15, 2024, such that an eligible taxpayer can receive its letter of registration by January 1, 2025.”

A taxpayer is registered only if the IRS has issued a registration letter to the taxpayer and the registration has not been revoked or suspended. A taxpayer must be registered at the time of production to claim the credit. A taxpayer cannot claim the § 45Z credit for any transportation fuel produced and sold by the taxpayer before the date of the registration letter, even if all other statutory requirements for the credit are satisfied prior to that date.  Additionally, a registration letter is not an IRS determination that the registrant may claim the § 45Z credit.

While the Notice is focused primarily on registration requirements, it offers some insight into the feedstocks and finished fuels that may (qualifier used throughout the Notice) qualify for the credit. Included in this list is low-GHG ethanol defined as a “transportation fuel”, answering the outstanding question of whether ethanol might qualify for a credit in its own right.  Also, hidden away in the Appendix which provides primary feedstocks used to make transportation fuels that may be eligible for the credit for purposes of applications for registration, is a reference to renewable natural gas (RNG), suggesting that product may also qualify as a transportation fuel.

Registration Procedures

The IRS has designated eligible transportation fuels as either sustainable aviation fuel (SAF) or non-SAF. Taxpayers producing both fuels should apply for both designations. Producers apply for registration using Form 637, “Application for Registration (for Certain Excise Tax Activities).” The IRS is revising Form 637 to add Activity Letters “CN” for a producer of non-SAF transportation fuel and “CA” for a producer of SAF. Until the IRS releases the revised Form 637, applicants may use the current Form 637 by writing in the relevant Activity Letters and including the required additional information.

Non-SAF Producers

Applicants producing non-SAF transportation fuel eligible for the § 45Z credit must provide the following information:

• Each type of non-SAF transportation fuel and the annual volume of each type of non-SAF transportation fuel the applicant produces. If a type of non-SAF transportation fuel the applicant produces is not described in the guidance, state “Other” and provide a description of the fuel;
• The feedstock(s) and country of origin of each feedstock used to produce each type of non-SAF transportation fuel the applicant produces;
• The location(s) and a description of the applicant’s production facilities;
• Each production facility’s annual fuel production capacity, and whether the applicant’s production facilities are operational and currently producing volumes of non-SAF transportation fuel
• The names and addresses of any person(s) acting for the applicant as an agent or broker in buying, selling, or transporting any non-SAF transportation fuel;
• The business entities to which the applicant sells non-SAF transportation fuel;
• The business entities from or with which the applicant buys, trades, transfers, or exchanges any non-SAF transportation fuel;
• The annual volume of non-SAF transportation fuel the applicant buys, sells, trades, transfers, or exchanges; and
• A statement indicating under which ASTM standard(s), SAE standard(s), or both, the applicant produces non-SAF transportation fuel.

SAF Producers

Applicants producing SAF transportation fuel eligible for the § 45Z credit must provide the following information:

• A statement indicating whether the applicant produces SAF under an ASTM D7566 Annex or ASTM D1655 Annex A1, and if applicable, the specific ASTM D7566 Annex under which the SAF synthetic blending component is produced;
• The feedstock(s) and country of origin of each feedstock used to produce the SAF the applicant produces;
• The annual volume of SAF the applicant produces;
• The location(s) and a description of the applicant’s production facilities;
• Each production facility’s annual fuel production capacity, and whether the applicant’s production facilities are operational and currently producing volumes of SAF;
• The names and addresses of any person(s) acting for the applicant as an agent or broker in buying, selling, or transporting any SAF;
• The business entities to which the applicant sells SAF;
• The business entities from or with which the applicant buys, trades, transfers, or exchanges any SAF; and
• The annual volume of SAF the applicant buys, sells, trades, transfers, or exchanges.

Additional IRS Determination

The IRS will register an applicant with the relevant Activity Letter only if it concludes that the applicant is engaged as a producer of the relevant transportation fuel that may be eligible for the § 45Z credit or is likely to become engaged within a reasonable time after being registered. Also, the IRS must be satisfied with the filing, deposit, payment, reporting, and claim history for all federal taxes of the applicant and any related person.

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