45Z Information Is Out, Farmers Are In
- David Geiger
- 4 hours ago
- 3 min read
Excitement rippled across the agriculture community this week after the IRS released long-awaited proposed rules for the 45Z tax credit. “Oh, it’s a good day,” said Mitchell Hora, founder and CEO of Continuum Ag, in a news conference to respond to the announcement.
RELATED: Hora told American Farmland Owner last July that 45Z would lead to a surge in carbon awareness for landowners.
The Biden administration created the 45Z credit under the 2022 Inflation Reduction Act to encourage domestic production of low-emission fuels like ethanol. Although still being updated, it applied to fuel produced in 2025 through 2029 using the U.S. Department of Energy’s (DOE) 45ZCF-GREET Model.
This consolidates all greenhouse gas emissions of each step of the biofuel supply chain into a specific emission rate for a gallon of fuel. This emission rate becomes the carbon intensity (CI) score. The lower the score, the better the tax credit.
Farm and Feedstock Are In
Hora and many in the farm community were optimistic because the inclusion of farmer and feedstock CI scores were confirmed by the recent IRS rule.
“We have a seat at the table here, but we do not have the details yet,” said Hora. “We do not have the updated USDA guidelines, so we have to wait for that. But for today, we know that the farmers are in, and this is really critical.”
There was uncertainty before the update on what model might be used for farmer CI scores. Two primary suspects were the DOE or the USDA version of the Feedstock Carbon Intensity Calculator (FD-CIC).
Hora said, in a twist, the IRS announced a new FD-CIC created specifically for 45Z. “Very creative, right?” he said. “And basically, it's the updated USDA calculator from what it sounds like.”
Hora continued, “…but integrated and will continue to be updated utilizing the GREET research and development FD-CIC. So, that's good. Basically, points to some collaboration there between USDA and DOE.”
This move showed some intentionality, allowing for nuance in the measurement of farm-level emissions.
USDA Guidance Needed
Key details still depend on guidance from the U.S. Department of Agriculture. Farmers will need to know how best to keep records, what farming practices qualify, and whether the system will use book-and-claim or mass balance.
“Mass balance means you have to deliver your crop into that biofuel supply chain,” Hora said. “It could be you deliver your crop directly to a biofuel producer, or you deliver your crop to an elevator who delivers to a biofuel producer. But a mass balance approach has connectivity where your data and your crop stay together.”
Hora continued, “And you have to participate in a biofuel supply chain under mass balance. We don't like it because it'd be very disruptive. A lot of winners and losers in that, especially in the animal ag space.”
Instead, Hora advocated for the book-and-claim approach, where the crop and data are decoupled. That way farmers can sell the crops and their verified CI certificates to whomever they want.
Another area USDA guidance is needed, Hora believes, is the FD-CIC 45Z feedstock calculator. The IRS said fuel produced in 2025 was eligible.
Hora explained, “If fuel produced last year can utilize this feedstock calculator, that means the crop from 2024 would be at play in your farm practices and your CI.”
Good Progress but Patience Needed
Hora said this rule is good progress, but there aren’t any payouts on the horizon yet. “There's not going to be any money moving from the ethanol plants,” Hora said. “I don't think there will be. They need the clarity from the USDA rule before they can generate the credits.”
A public comment period on the rule will take place, ending on May 28th. Afterwards, the IRS will issue a final rule, and the USDA will issue its technical guidance. Then, ethanol plants will have to update their CI models.
Through all this, Hora believes farmers should be gathering their data. “As we're thinking about 2026 and going forward, gotta be looking at these practices, gotta keep good records, and gonna have to pass through these verifications,” he said.
Hora reminded everyone’s records will need to pass IRS audits.
RELATED: Landowners previously faced uncertainty about 45Z. American Farmland Owner detailed what remained unknown in this 2024 story.
