Motor Fuels Tax Minute, Episode 12

Provisions in the Inflation Reduction Act are the topics for this week’s Motor Fuels Tax Minute. Join our hosts for an overview of the new credit for sustainable aviation fuel.

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Detailed Transcription of Weaver’s Motor Fuels Tax Minute, Episode 12

00:00:00

Emilda: Welcome to Weaver’s Motor Fuels Tax Minute, where we talk all things motor fuels. This week we are talking about the provisions in the Inflation Reduction Act related to a new credit for sustainable aviation fuel.

The statute established a new nonrefundable income tax credit under Section 40B and an excise tax credit under Section 6426 and 6427 for sustainable aviation fuel mixtures sold, or used, from January 1, 2023 through December 31, 2024.

00:00:34

Leanne: The credit is a $1.25 per gallon of sustainable aviation fuel used in a qualified mixture, plus an applicable supplementary amount of a penny for each percentage point that the fuel reduces the lifecycle greenhouse gas emissions by more than compared to petroleum based fuel. The maximum supplementary amount is $0.50, putting the total possible credit at $1.75 per gallon and tying the availability of the credit very closely to the greenhouse gas emissions reduction factor.

00:01:08

Emilda: In order to claim the credit, sustainable aviation fuel must meet the ASTM international standards, be derived from biomass, waste streams, renewable energy sources or gaseous carbon oxides, and not be derived from palm oil and must also reduce life cycle emissions by 50%.

A qualified mixture under a credit is a mixture of sustainable aviation fuel and kerosene produced by the taxpayer in the United States. It must be used by the taxpayer in an aircraft or sold for use in an aircraft, in the ordinary course of business. Additionally, the fueling must occur in the United States.

00:01:52

Leanne: That’s right. And that is one small distinction from the biodiesel and renewable diesel credits that don’t require all sales and uses to be in the United States, just those that relate to a biofuel that was imported from outside of the United States.

That’s this week’s Motor Fuels Tax Minute. Stay tuned next week when we’ll be discussing the biofuel production credits that were enacted as part of the Inflation Reduction Act.

Thank you.