Earlier this month, the Treasury Department and IRS released Notice 2026-53, providing updated guidance on the Section 45Z Clean Fuel Production Tax Credit. This notice addresses several changes affecting emissions-rate calculation, animal-manure pathways, feedstock sourcing, and low-carbon agricultural practices. Following the release of the Notice, DOE released the September 2026 version of 45ZCF-GREET, incorporating several of the technical changes addressed in the Notice.
Brief Background on 45Z
The Inflation Reduction Act introduced the Section 45Z credit, also known as the Clean Fuel Production Tax Credit, in 2022. The One Big Beautiful Bill (OBBBA), signed July 4, 2025, amended the credit rules; however, most of those amendments apply only to fuel produced after December 31, 2025, which is why many of the rules below differ for 2025 versus 2026 production.
This credit applies specifically to transportation fuel domestically produced after December 31, 2024 and sold by December 31, 2029. To qualify as transportation fuel, the fuel must meet several statutory requirements, including:
- being suitable for fuel in a highway vehicle or aircraft;
- having an emissions rate at or below 50 kg CO2 per mmBTU;
- no co-processing (where fats or oils are refined alongside fossil fuels); and,
- Not being produced from another fuel for which a Section 45Z credit is allowable.
The amount of the credit depends on, in part, the fuel’s lifecycle greenhouse gas emissions (emissions rate), rewarding fuel that is “cleaner” with a higher amount. The credit is calculated as:
Tax Credit Amount ($) = Base Rate ($/gal) x Emissions Factor x Production Amount (gal)
The base rate is $0.20 per gallon (or gallon equivalent, for fuels such as renewable natural gas), or $1.00 per gallon (subject to inflation adjustments) if the facility meets prevailing wage and apprenticeship requirements.
The emissions factor measures the reduction in the fuel’s emissions rate relative to the baseline of 50 kg CO2 per mmBTU. Generally, producers determine the emissions rate using the applicable annual emissions rate table and the methodology specified for that fuel pathway.
For most fuels, the methodology is the Department of Energy’s (DOE) 45ZCF Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) Model. Producers enter facility and feedstock specific inputs into the model to calculate their fuel’s emissions rate.
Though this credit took effect for fuel produced on or after January 1, 2025, the proposed regulations were not issued until February 2026. Additionally, the first version of the 45ZCF-GREET model reflecting those amendments wasn’t released until June 2026. Together, these changes provided greater certainty for 45Z transactions, despite some pending guidance. Notice 2026-53 and the September 2026 updated GREET model fill many of these additional gaps.
Top 3 Things Producers Should Know
1. New Manure Pathways and Farm-Specific Baselines
One of the most significant developments in Notice 2026-53 relates to transportation fuel produced from animal manure.
The 2026 Emissions Rate table now includes dairy and swine manure as distinct feedstock pathways.
For animal-manure credits, the calculation can now incorporate the farm’s prior manure-management practices through what the notice calls an “alternative fate.” This allows the model to account for avoided emissions associated with the way manure would otherwise have been managed.
Developers will need documentation supporting those historical practices. The relevant prior manure management practice is the way the farm previously handled the manure before the earlier of:
- The commencement of the anaerobic digester operation; or
- September 8, 2026, the day the notice was published.
If a taxpayer cannot substantiate the applicable farm-specific prior practice, it will not be able to use the corresponding farm-specific avoided-emissions treatment in its emissions rate calculation.
The notice also suspends the use of farm-specific alternative fates for newly established farms: manure from a farm that begins operations after September 8, 2026 will not receive a farm-specific alternative fate until Treasury and IRS issue further guidance. Additionally, Treasury and the IRS expect the GREET model to be updated later in the year to add poultry and beef manure pathways, and the notice encourages those producers to wait for that update rather than petition Treasury for a provisional emissions rate.
2. Feedstock Sourcing Requirements and Used Cooking Oil Clarifications
Under the OBBBA, the feedstock used in transportation fuel produced after December 31, 2025 must be sourced exclusively from the United States, Canada, or Mexico. Consistent with the proposed regulations in February, this notice confirms that fuel produced from feedstock originating from a source, or purchased from an aggregator, outside those countries is not eligible for a tax credit.
Notice 2026-53 provides additional guidance on how this rule applies to used cooking oil (UCO). The June 2026 version of the 45ZCF-GREET model added Canadian and Mexican UCO as primary feedstocks for pathways that previously had only included American-sourced UCO. Those pathways are also included in the 2026 Emissions Rate Table.
For UCO imported from countries other than Canada and Mexico, if the resulting fuel was produced after December 31, 2025, then it is not eligible for a Clean Fuel Production Tax Credit. For fuel produced in 2025 derived from UCO imported from countries other than Canada and Mexico, producers should rely on the pathway in the September 2026 45ZCF-GREET model. As with manure, documentation will be paramount to demonstrating country of origin and eligibility for the credit.
3. Regenerative Agriculture Practices Clarifications
Notice 2026-53 clarifies how low carbon agricultural practices can affect the emissions associated with agriculture feedstocks. This is related to the United States Department of Agriculture (USDA) publishing an updated version of its Feedstock Carbon Intensity Calculator (FD-CIC) in June 2026, along with the technical guidelines for producing regenerative agricultural biofuel feedstocks. The September 2026 GREET model now incorporates a 45Z-specific version of that calculator, allowing producers to reflect practices such as cover crops or reduced tillage in their emissions rate.
The notice also provides a safe harbor for 2025 production: producers may use the 2026 version of the 45Z-specific calculator for fuel produced in 2025 from regenerative agriculture feedstock, so long as they satisfy all of the USDA’s requirements for those practices, including audit and verification standards.
Treasury and the IRS recognized that crops used to produce fuel in 2025 and 2026 were likely planted prior to the publication of the final guidelines. Therefore, for fuel produced in 2025 and 2026, the requirement to develop a nutrient budget before nutrient application to the soil is treated as satisfied for 45Z eligibility purposes.
Once again, the clarifications surrounding requirements for the edge cases do not eliminate the need for documentation. Producers must be able to substantiate the nutrients they actually applied, the measurable sources and removals entered into the calculator, and other records supporting their 45Z claim.
Other Changes Worth Knowing
First, Notice 2026-53 builds upon guidance in the OBBBA surrounding emissions attributed to indirect land-use change (ILUC), which must be excluded when calculating the emissions rate of fuel produced after 2025. The notice lays out how producers should apply this information in their calculations when using a pre-June 2026 version of the 45ZCF-GREET model; the June and September 2026 versions exclude ILUC automatically for post-2025 production.
Next, the DOE released an updated GREET model in September 2026. You can find the model and relevant updates on the DOE website.
Transportation fuel produced after December 31st, 2025 is no longer eligible for a negative emissions rate, unless the feedstock is animal manure.
Conclusion
Notice 2026-53 provides clarity to those claiming Section 45Z Clean Fuel Production Tax Credits. Producers that begin evaluating Section 45Z qualifying factors early, and keep sufficient documentation throughout the process, will be in the best position as they claim and monetize their credits.
If you have questions or need support with clean energy project financing or tax credit transferability, contact us here. The Concentro team is here to help you navigate these opportunities.
