Par. 2. Sections 1.45Z-1 through 1.45Z-2 are added to read as follows:
(a) Overview. For purposes of section 38 of the Code, the section 45Z clean fuel production credit is determined under section 45Z of the Code and the section 45Z regulations. This section provides an overview and definitions that apply for purposes of section 45Z and the section 45Z regulations. Section 1.45Z-2 provides general rules for determining the amount and timing of the section 45Z credit, including rules on the emissions factor and the emissions rate for transportation fuels. Section 1.45Z-3 provides rules relating to the increased credit amount for satisfying prevailing wage and apprenticeship (PWA) requirements. Section 1.45Z-4 provides rules on required registration (under section 4101 of the Code and § 1.4101-1), anti-stacking, anti-abuse, production attribution, facility ownership, foreign feedstock and prohibited foreign entity restrictions, and recordkeeping and substantiation. Section 1.45Z-5 provides procedures for the certification of emissions rates. Section 1.45Z-6 provides procedures for filing a claim for the section 45Z credit. Section 1.4101-1 provides the rules for registration under section 4101.
(b) Definitions. The definitions in this section apply for purposes of section 45Z and the section 45Z regulations.
(1) 45ZCF-GREET model. The term 45ZCF-GREET model means the model by that name developed by the Argonne National Laboratory (ANL) and published by the U.S. Department of Energy (DOE) for use in determining the amount of lifecycle greenhouse gas (GHG) emissions for purposes of section 45Z. Additional information about the 45ZCF-GREET model is available at https://www.energy.gov/eere/greet.
(2) Applicable amount. The term applicable amount means the applicable amount as described in section 45Z(a) and § 1.45Z-2(a)(4).
(3) Applicable material. The term applicable material means, pursuant to section 45Z(d)(5)(B)(i)—
(i) Monoglycerides, diglycerides, and triglycerides;
(ii) Free fatty acids; and
(iii) Fatty acid esters.
(4) ASTM. The term ASTM means the standards published by ASTM International, formerly known as the American Society for Testing and Materials. Additional information about ASTM International is available at https://www.astm.org/.
(5) Biomass. The term biomass means, pursuant to sections 45Z(d)(5)(B)(ii) and 45K(c)(3), any organic material other than—
(i) Oil and natural gas (or any product thereof); and
(ii) Coal (including lignite) or any product thereof.
(6) Calculated emissions value letter (CEVL). The term calculated emissions value letter or CEVL means the letter issued by the DOE to an emissions value (EV) applicant. A CEVL includes the EV that the DOE determined with respect to the fuel that is the subject of the EV applicant's emissions value request (EVR) and the control number that the DOE assigned to the EV applicant's EVR.
(7) Claim; Form 7218 —(i) Claim. The term claim means a completed Form 7218, Clean Fuel Production Credit, including all information and documentation that the form instructions and the section 45Z regulations require, 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. The term includes the making of an election under section 6417 or section 6418 and the regulations thereunder, as applicable, by an applicable entity or eligible taxpayer.
(ii) Form 7218. The term Form 7218 means Form 7218, Clean Fuel Production Credit, and any successor form(s). See § 601.602 of this chapter.
(8) CO2e. The term CO2e means, with respect to any GHG, the equivalent carbon dioxide (as determined based on relative global warming potential). See section 45Z(d)(2).
(9) Code. The term Code means the Internal Revenue Code.
(10) CORSIA methodologies —(i) In general. The term CORSIA methodologies means the fuel lifecycle methodologies used under Volume IV of Annex 16 to the Chicago Convention, Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which has been adopted by the International Civil Aviation Organization (ICAO) with the agreement of the United States. See section 45Z(b)(1)(B)(iii)(I). Additional information about CORSIA is available at https://www.icao.int/environmental-protection/CORSIA/Pages/default.aspx as of February 4, 2026.
(ii) CORSIA Default; CORSIA Actual. The term CORSIA Default means determinations from fuel pathways approved under the CORSIA Default Life Cycle Emissions Values for CORSIA Eligible Fuels lifecycle approach (CORSIA Default) with the agreement of the United States. The term CORSIA Actual means determinations from fuel pathways approved under the CORSIA Methodology for Calculating Actual Life Cycle Emissions Values lifecycle approach (CORSIA Actual) with the agreement of the United States. Additional information about CORSIA Default and CORSIA Actual is available at https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-Eligible-Fuels.aspx.
(iii) Agreement of the United States required. The terms CORSIA methodologies, CORSIA Default, and CORSIA Actual do not include any portion of or any approach within such methodologies to which the United States has not agreed. See section 45Z(b)(1)(B)(iii)(I).
(11) DOE. The term DOE means the United States Department of Energy.
(12) Eligible fuel —(i) In general. The term eligible fuel, for purposes of the provisional emissions rate procedures described in section 45Z(b)(1)(D) and § 1.45Z-2(f) and the associated definitions in this paragraph (b), means a fuel that, for the taxable year during which such fuel is produced, is either—
(A) A type of fuel not included in the applicable emissions rate table (as described in § 1.45Z-2(e)(2)); or
(B) If the type of fuel is included in the applicable emissions rate table, such fuel's category is not included in the applicable emissions rate table.
(ii) Other requirements. An eligible fuel must also meet the requirements of section 45Z(d)(5)(A)(i), (iii), and (iv).
(13) Emissions factor. The term emissions factor means the emissions factor as described in section 45Z(b)(1)(A) and § 1.45Z-2(c)(1).
(14) Emissions rate. The term emissions rate means the emissions rate for a transportation fuel as described in section 45Z(b)(1)(B) and (D) and § 1.45Z-2(d).
(15) Emissions value (EV). The term emissions value or EV means the value obtained from the DOE setting forth the DOE's analytical assessment of the lifecycle GHG emissions associated with the production of an eligible fuel using a particular primary feedstock and pathway.
(16) EPA. The term EPA means the United States Environmental Protection Agency.
(17) EV applicant. The term EV applicant means a taxpayer submitting a request to the DOE for an emissions value for an eligible fuel for purposes of obtaining a provisional emissions rate (PER) determination as provided in section 45Z(b)(1)(D) and § 1.45Z-2(f).
(18) Facility —(i) In general. For purposes of the definition of qualified facility in section 45Z(d)(4) and paragraph (b)(28) of this section, the term facility means a single production line that produces a transportation fuel. For this purpose, a single production line includes all components that function interdependently to produce a transportation fuel through a process that results in the lifecycle GHG emissions rate used to determine the credit. Components function interdependently to produce a transportation fuel if the use of each component is dependent upon the use of each of the other components to produce a transportation fuel. A component that functions interdependently with other components to produce a transportation fuel need not be located in the same building as, or within a certain geographic proximity to, the other components. A facility includes carbon capture equipment if such carbon capture equipment contributes to the lifecycle GHG emissions rate of the transportation fuel for which the credit is determined. A single production line includes all steps of the production process from the processing of feedstock through to the transportation fuel that the taxpayer sells in a qualified sale.
(ii) Certain indirect production and post-production equipment. The term facility does not include—
(A) Equipment that is used to condition, such as equipment used to blend transportation fuel into a fuel mixture, pressurize a fuel for use in transportation, or transport a transportation fuel beyond the point of production; or
(B) Notwithstanding paragraph (b)(18)(iii) of this section, feedstock-related equipment (including production, purification, recovery, transportation, or transmission equipment) or electricity production equipment used to power the transportation fuel production process, including any carbon capture equipment associated with the electricity production process.
(iii) Multipurpose components. Components that have a purpose in addition to the production of a transportation fuel may be part of a facility if such components function interdependently with other components to produce a transportation fuel.
(iv) Examples. The following examples illustrate the definition of the term facility.
(A) Example 1. Effect of geographic proximity; carbon capture equipment. Z produces a transportation fuel at a facility that is equipped with carbon capture equipment (as defined in § 1.45Q-2(c)), as distinguished from the carbon capture equipment described in paragraph (b)(18)(ii)(B) of this section. One purpose of the equipment is to capture carbon oxides. Without the carbon capture equipment, the facility could not produce a fuel that has an emissions rate that would qualify for the section 45Z credit. Because the carbon capture equipment functions interdependently with other components to produce the transportation fuel, the carbon capture equipment is part of the facility under paragraph (b)(18)(i) of this section. The analysis in this example is the same regardless of the geographic distance between the carbon capture equipment and the rest of the components comprising the facility.
(B) Example 2. Single production line with components functioning interdependently; sustainable aviation fuel (SAF) transportation fuel. X produces SAF transportation fuel that is a synthetic blending component that meets the requirements of ASTM D7566, Annex A2. X sells the SAF transportation fuel to Y, an unrelated person. Y blends the SAF transportation fuel with kerosene to create a fuel mixture that qualifies as jet fuel under ASTM D7566. X uses equipment and components that function interdependently to produce the SAF transportation fuel that is sold to Y. X's equipment and components constitute a facility for section 45Z purposes. As described in paragraph (b)(18)(ii)(A) of this section, Y's equipment and components used to make a transportation fuel mixture are blending equipment and are not a facility for section 45Z purposes.
(19) Fuel. The term fuel means any liquid or gaseous substance that can be consumed to supply heat or power. Therefore, for purposes of section 45Z, the term fuel does not include electricity.
(20) Gallon equivalent —(i) In general. For purposes of section 45Z(a)(1)(A), the term gallon equivalent means, 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 British thermal unit (Btu) content of 116,090 (lower heating value).
(ii) Non-liquid fuel. 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.
(iii) Calculation —(A) In general. For any non-liquid fuel, the gallon equivalent of such fuel is equal to that fuel's lower heating value divided by the lower heating value of a gallon of gasoline. Expressed mathematically: Gallon equivalent = lower heating value of the fuel (measured in Btu) ÷ lower heating value of a gallon of gasoline (116,090 Btu).
(B) Rounding. The gallon equivalent determined under paragraph (b)(20)(iii)(A) of this section must be rounded to 5 decimal places.
(iv) Certain lower heating values. This paragraph (b)(20)(iv) provides the lower heating values of some non-liquid fuels.
(A) The lower heating value of low-GHG compressed conventional or alternative natural gas (CANG) is 20,267 Btu per pound.
(B) The lower heating value of low-GHG dimethyl ether is 12,417 Btu per pound.
(C) The lower heating value of low-GHG hydrogen is 51,585 Btu per pound.
(D) The lower heating value of low-GHG liquefied CANG is 20,908 Btu per pound. For this purpose, low-GHG liquefied CANG is a non-liquid fuel at ambient pressure and temperature of 1 atmosphere and 60 degrees Fahrenheit.
(E) The lower heating value of low-GHG liquefied petroleum gas (LPG) (other than propane from hydroprocessed esters and fatty acids (HEFA)) is 19,873 Btu per pound. For this purpose, low-GHG LPG (other than propane from HEFA) is a non-liquid fuel at ambient pressure and temperature of 1 atmosphere and 60 degrees Fahrenheit.
(F) The lower heating value of low-GHG LPG (propane from HEFA) is 18,568 Btu per pound. For this purpose, low-GHG LPG (propane from HEFA) is a non-liquid fuel at ambient pressure and temperature of 1 atmosphere and 60 degrees Fahrenheit.
(v) Example. X produced 100,000 pounds of low-GHG compressed CANG. To determine the number of gallon equivalents of low-GHG compressed CANG that X produced, X must divide the lower heating value of low-GHG compressed CANG (20,267 Btu per pound), by the lower heating value of a gallon of gasoline (116,090 Btu). Rounded to 5 decimal places, on an energy equivalent basis, each pound of low-GHG compressed CANG is equal to 0.17458 gallon equivalents (20,267 Btu per lb. ÷ 116,090 Btu). Thus, X produced 17,458 gallon equivalents (0.17458 gallon equivalents × 100,000 lbs.) of low-GHG compressed CANG.
(21) Greenhouse gas (GHG). The term greenhouse gas, or GHG, has the same meaning given that term under section 211(o)(1)(G) of the Clean Air Act (CAA) (42 U.S.C. 7545(o)(1)(G)), as in effect on August 16, 2022. See section 45Z(d)(3).
(22) Lifecycle GHG emissions. The term lifecycle GHG emissions means the lifecycle GHG emissions as described in section 211(o)(1)(H) of the CAA (42 U.S.C. 7545(o)(1)(H)), as in effect on August 16, 2022. See section 45Z(b)(1)(B)(i).
(23) mmBTU. The term mmBTU means 1,000,000 British thermal units. See section 45Z(d)(1).
(24) Non-SAF transportation fuel —(i) In general. The term non-SAF transportation fuel means any transportation fuel that is not a SAF transportation fuel.
(ii) Low-GHG non-SAF fuels. This paragraph (b)(24)(ii) provides a non-exclusive list of fuels that are not sustainable aviation fuel (non-SAF fuels) that may qualify as a transportation fuel, as well as descriptions of such fuels. A listed non-SAF fuel that meets the applicable description in this paragraph (b)(24)(ii) must also meet all the other applicable requirements under section 45Z and the section 45Z regulations to qualify as a transportation fuel.
(A) Low-GHG biodiesel. The term low-GHG biodiesel means the monoalkyl esters of long chain fatty acids that meet the specifications of ASTM D6751 and that have an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU.
(B) Low-GHG butanol. The term low-GHG butanol means any mixture of n-butyl, sec-butyl, and iso-butyl alcohols that meets the specifications of ASTM D7862 and that has an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU.
(C) Low-GHG diesel fuel. The term low-GHG diesel fuel means liquid fuel, including renewable diesel, that meets the specifications of ASTM D975 and that has an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU.
(D) Low-GHG dimethyl ether. The term low-GHG dimethyl ether, which includes renewable dimethyl ether, means a gaseous fuel that meets the specifications of ASTM D7901 and that has an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU.
(E) Low-GHG ethanol. The term low-GHG ethanol means ethyl alcohol that is a liquid fuel that meets the specifications of ASTM D4806 for denatured fuel ethanol or ASTM D8651 for undenatured fuel ethanol for blending with gasoline and that has an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU.
(F) Low-GHG gasoline. The term low-GHG gasoline, which includes renewable gasoline, means liquid fuel that meets the specifications of ASTM D4814 and that has an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU.
(G) Low-GHG hydrogen. The term low-GHG hydrogen means any gaseous or liquid fuel that meets the requirements of the Society of Automotive Engineers (SAE) J2719 standard and that has an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU. Information about SAE standards is available at https://www.sae.org/standards.
(H) Low-GHG liquefied petroleum gas (LPG). The term low-GHG LPG, which includes low-GHG propane, means liquefied gases that meet the specifications of ASTM D1835 and that have an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU.
(I) Low-GHG methanol. The term low-GHG methanol means a methyl alcohol that is a liquid fuel that meets the specifications of ASTM D1152 or ASTM D5797 and that has an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU.
(J) Low-GHG conventional or alternative natural gas (CANG). The term low-GHG CANG, which includes renewable natural gas (RNG), means a pipeline-quality compressed or liquefied gas that is interchangeable with fossil natural gas, requires only minimal processing (for example, further compression or liquefaction), to meet the specifications of ASTM D8080, and that has an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU.
(25) Prevailing wage and apprenticeship requirements (PWA requirements). The term prevailing wage and apprenticeship requirements or PWA requirements means the requirements described in section 45Z(f)(6) and (7) and § 1.45Z-3.
(26) Producer —(i) In general. Except as provided in paragraph (b)(26)(ii) of this section, the term producer means the person that engages in the production of a transportation fuel.
(ii) Alternative natural gas. With respect to alternative natural gas, including RNG, the term producer means the person that processes the untreated sources of alternative natural gas to remove water, carbon dioxide, and other impurities such that it is interchangeable with fossil natural gas.
(iii) Examples. The following examples illustrate the definition of the term producer.
(A) Example 1. SAF producer. X uses vegetable oil to make 10,000 gallons of a synthetic blending component via a HEFA production pathway described in ASTM D7566, Annex A2, that qualifies as a SAF transportation fuel. X sells the synthetic blending component to Y, a blender that makes a 20,000-gallon SAF blend, consisting of 50 percent synthetic blending component and 50 percent petroleum-based kerosene, that meets the requirements of ASTM D7566. X and Y are unrelated. X is the producer of the 10,000 gallons of synthetic blending component that it sold to Y. Y is not the producer of any of the 20,000 gallons of fuel that it blended because blending is not production.
(B) Example 2. RNG producer. X collects biogas from an anaerobic digester and processes it into RNG that qualifies as a transportation fuel. X sells 10,000 gallon equivalents of RNG to Y, a RNG wholesaler and distributer. X injects the 10,000 gallon equivalents of RNG into a pipeline. Y removes 10,000 gallon equivalents of CANG from the pipeline, further compresses it, and sells it to a municipality that uses it to fuel compressed natural gas buses. X and Y are unrelated. X is the producer of the 10,000 gallon equivalents of RNG. Y is not the producer because Y merely took a post-production transportation fuel and further compressed it.
(27) Production —(i) In general. The term production (except for purposes of section 45Z(a)(4)(A) and paragraph (b)(29)(i)(A) of this section) means all steps and processes used to make a transportation fuel. Production begins with the processing of primary feedstock(s) and ends with a transportation fuel ready to be sold in a qualified sale. Production must involve substantial processing by the producer to create a transportation fuel. Production does not include instances in which a person engages in minimal processing, such as creating a fuel mixture or, except as provided for CANG in this paragraph (b)(27)(i), otherwise engaging in activities that do not result in a chemical transformation. In the case of CANG, production includes the act of processing the 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 does not include compressing CANG that is already interchangeable with fossil natural gas to a higher pressure. Production does 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. Production must occur in the United States, which includes any territory of the United States.
(ii) Examples. The following examples illustrate the definition of the term production.
(A) Example 1. Minimal processing for stabilizing biodiesel; production in the United States. X, a domestic corporation, imports fatty acid methyl ester (FAME) from Canada that does not meet the ASTM D6751 specifications for biodiesel. After importation into the United States, X adds a stabilizing additive so that the FAME meets the specifications of ASTM D6751. The resulting fuel is ASTM-compliant biodiesel that qualifies as a transportation fuel. X has not produced the ASTM-compliant biodiesel, as X merely engaged in minimal processing by adding an additive to the imported FAME. Further, X did not produce the ASTM-compliant biodiesel in the United States, as X did not engage in substantial processing in the United States. Substantial processing, and thus production, occurred before X imported the FAME into the United States.
(B) Example 2. Minimal processing for dehydrating hydrous ethanol; production in the United States. Y, a domestic corporation, imports hydrous ethanol from Mexico into the United States. The hydrous ethanol has excessive water content and does not meet the ASTM D4806 specifications for ethanol. After importation into the United States, Y reduces the water content of the hydrous ethanol. The resulting fuel is ASTM-compliant anhydrous ethanol that qualifies as a transportation fuel. Y has not produced the ASTM-compliant anhydrous ethanol, as Y merely engaged in minimal processing by dehydrating the imported hydrous ethanol. Further, Y did not produce the ASTM-compliant anhydrous ethanol in the United States, as Y did not engage in substantial processing in the United States. Substantial processing, and thus production, occurred before Y imported the hydrous ethanol into the United States.
(C) Example 3. Minimal processing for blending ethanol and gasoline. Z, a domestic corporation, buys ethanol that qualifies as a transportation fuel and blends the ethanol with gasoline. Z has not produced a transportation fuel, as Z merely engaged in minimal processing by blending the ethanol with gasoline to create a fuel mixture.
(D) Example 4. Production and subsequent blending by same person. Z, a domestic corporation, produces ethanol that qualifies as a transportation fuel and then blends the ethanol with gasoline. Z has engaged in production of a transportation fuel with respect to the ethanol, notwithstanding Z's subsequent blending of the ethanol with gasoline. However, Z's blending, alone, does not constitute production, as Z engaged in minimal processing by blending the ethanol with gasoline to create a fuel mixture.
(28) Qualified facility —(i) In general. The term qualified facility means a facility (as defined in paragraph (b)(18) of this section) used to produce transportation fuel and excludes any facility for which an anti-stacking credit is allowed under section 38 for the taxable year. See section 45Z(d)(4). For more information on the application of the anti-stacking rules, see § 1.45Z-4(b).
(ii) Anti-stacking credit. The term anti-stacking credit means any one of the following credits listed in section 45Z(d)(4)(B):
(A) The credit for production of clean hydrogen under section 45V (section 45V credit).
(B) The credit determined under section 46 to the extent that such credit is attributable to the energy credit determined under section 48 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).
(C) The credit for carbon oxide sequestration under section 45Q (section 45Q credit).
(29) Qualified sale —(i) In general. The term qualified sale means a sale of transportation fuel in a manner described in section 45Z(a)(4). The term refers to a sale of transportation fuel by the taxpayer to an unrelated person if—
(A) The fuel is sold for use in the production of a fuel mixture by such person;
(B) The fuel is sold for use in a trade or business by such person; or
(C) Such person sells such fuel at retail to another person and places such fuel in the fuel tank of such other person.
(ii) Sold for use in a trade or business. The term sold for use in a trade or business means sold for use in a trade or business, with trade or business having the same meaning as in section 162 of the Code. The term sold for use in a trade or business includes fuel sold to an unrelated person that subsequently resells the fuel in its trade or business. The term does not include a sale for blending or a sale to a purchaser that sells the fuel at retail to another person and places the fuel in the fuel tank of such other person.
(iii) Sale by another member of a consolidated group. In the case of a corporation that is a member of an affiliated group of corporations filing a consolidated return (that is, a member of a consolidated group (as defined in § 1.1502-1(b) and (h), respectively)), that corporation will be treated as selling fuel to an unrelated person if that fuel is sold to the unrelated person by another member of that consolidated group. See section 45Z(f)(3).
(iv) Sale by related person (other than another member of a consolidated group). Except in the case of a taxpayer described in paragraph (b)(29)(iii) of this section, and in accordance with section 45Z(f)(3), a taxpayer will be treated as selling fuel to an unrelated person if such fuel is sold to the unrelated person by a related person (within the meaning of section 45Z(f)(3) and paragraph (b)(36) of this section).
(v) Examples. The following examples illustrate the definition of the term qualified sale.
(A) Example 1. Qualified sale for use in a trade or business; ethanol to SAF. X produces ethanol and sells the ethanol to Y, an unrelated person. As part of its trade or business, Y uses the ethanol to produce a synthetic blending component under ASTM D7566, Annex A5 (ATJ-SPK). Y then blends the synthetic blending component with petroleum-based kerosene to make a sustainable aviation fuel mixture. X has made a qualified sale of the ethanol to Y under paragraphs (b)(29)(i)(B) and (b)(29)(ii) of this section because X sold the ethanol for use in Y's trade or business. See paragraphs (b)(34)(iii) and (b)(34)(iv)(B) of this section regarding the application of the definition of transportation fuel to Y's synthetic blending component.
(B) Example 2. Qualified sale for use in a trade or business; RNG. X produces RNG that qualifies as a transportation fuel and sells the RNG to Y, an unrelated intermediary wholesaler and distributor. X injects the RNG into a pipeline for resale and distribution by Y. Y's business consists of purchasing RNG from different producers, distributing it through a pipeline, and reselling it to customers who may be dealers, distributors, retailers, or end users of fuel. Y subsequently resells X's RNG as part of Y's business. X has made a qualified sale of the RNG to Y under paragraphs (b)(29)(i)(B) and (b)(29)(ii) of this section because X sold the RNG for use in Y's trade or business.
(C) Example 3. Qualified sale made through another member of consolidated group. X, a fuel producer, and Y, an intermediary dealer, are members of an affiliated group of corporations filing a consolidated return. X produces transportation fuel and sells the fuel to Y. Y resells the fuel to Z, an unrelated person. Z then sells the fuel at retail to a customer and places the fuel in the customer's fuel tank. X is treated as selling the fuel to Z under paragraph (b)(29)(iii) of this section. X has made a qualified sale of the fuel to Z under paragraph (b)(29)(i)(C) of this section.
(D) Example 4. Qualified sale made through related person (other than another member of consolidated group). Same facts as in paragraph (b)(29)(v)(C) of this section ( Example 3 ), except that X and Y are non-corporate entities under common control and would be treated as a single employer under the regulations prescribed under section 52(b) of the Code. X and Y are thus related persons within the meaning of section 45Z(f)(3) and paragraph (b)(36) of this section. X is treated as selling the fuel to Z under paragraph (b)(29)(iv) of this section. X has made a qualified sale of the fuel to Z under paragraph (b)(29)(i)(C) of this section.
(E) Example 5. Qualified sale by taxpayer that produces and subsequently blends a fuel. X produces 9,000 gallons of renewable diesel that qualifies as a transportation fuel. After production, X blends the 9,000 gallons of renewable diesel with 1,000 gallons of petroleum-based diesel fuel that does not qualify as a transportation fuel. X sells the resulting 10,000-gallon fuel blend to an unrelated person for use in that person's trade or business. X has made a qualified sale of the 9,000 gallons of renewable diesel, as part of the fuel blend, under paragraphs (b)(29)(i)(B) and (b)(29)(ii) of this section.
(30) SAF transportation fuel —(i) In general. The term SAF transportation fuel means sustainable aviation fuel as defined in section 45Z(a)(3). That term means the non-kerosene portion of any liquid fuel that is a transportation fuel, is sold for use in an aircraft, and:
(A) Meets the requirements of—
( 1 ) ASTM D7566; or
( 2 ) The Fischer Tropsch (FT) provisions of ASTM D1655, Annex A1; and
(B) Is not derived from palm fatty acid distillates or petroleum.
(ii) Synthetic blending component. The term synthetic blending component means the SAF portion of a fuel mixture described in ASTM D7566 that meets the specifications of one of the ASTM D7566 Annexes and is not derived from palm fatty acid distillates or petroleum.
(iii) Sold for use in an aircraft. 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) and paragraph (b)(30)(i) of this section.
(iv) FT hydrocarbons. The term FT hydrocarbons means the FT hydrocarbons that are derived from biomass, used to produce jet fuel described in section A1.2.2.2 of ASTM D1655, Annex A1, and not derived from palm fatty acid distillates or petroleum.
(v) ASTM D7566 Annexes. The term ASTM D7566 Annexes means any of the annexes in ASTM D7566 that provide the specifications for a pathway to create a synthetic blending component that can be blended with ASTM D1655-compliant kerosene.
(vi) ASTM D1655, Annex A1. The term ASTM D1655, Annex A1 means the FT provisions of ASTM D1655, Annex A1 that are contained in section A1.2.2.2, which provides a pathway for coprocessing up to five percent of FT hydrocarbons with petroleum to make a liquid fuel that qualifies as jet fuel. For purposes of this definition, the term petroleum includes any conventionally sourced hydrocarbons permitted under ASTM D1655, Annex A1. Liquid fuel produced in accordance with section A1.2.2.1 of ASTM D1655, Annex A1 does not qualify for the section 45Z credit because section A1.2.2.1 defines a pathway for producing a liquid fuel from coprocessing an applicable material (or materials derived therefrom) with a non-biomass feedstock. See section 45Z(d)(5)(A)(iii).
(31) Secretary; IRS —(i) Secretary. The term Secretary means the Secretary of the Treasury or the Secretary's delegate. See section 7701(a)(11)(B).
(ii) IRS. The term IRS means the Internal Revenue Service.
(32) Section 45Z credit. The term section 45Z credit means the clean fuel production credit determined under section 45Z of the Code and the section 45Z regulations.
(33) Section 45Z regulations. The term section 45Z regulations means the regulations in this section, §§ 1.45Z-2 through 1.45Z-6, and 1.4101-1.
(34) Transportation fuel —(i) In general. The term transportation fuel means, pursuant to section 45Z(d)(5)(A), a fuel that—
(A) Is suitable for use as a fuel in a highway vehicle or aircraft;
(B) Has an emissions rate that is not greater than 50 kilograms of CO 2 e per mmBTU;
(C) Is not derived from coprocessing an applicable material (or materials derived from an applicable material) with a feedstock that is not biomass; and
(D) Is not produced from a fuel for which a section 45Z credit is allowable.
(ii) Suitable for use as a fuel in a highway vehicle or aircraft (suitable for use) —
(A) In general. A fuel is suitable for use as a fuel in a highway vehicle or aircraft (suitable for use) if 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. A fuel may possess this practical and commercial fitness even though use in a highway vehicle or aircraft is not the fuel's predominant use. However, a fuel does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in a highway vehicle or aircraft. A fuel is suitable for use at the point at which no further production, refinement, or other step is necessary before the fuel may be sold in a qualified sale, except, as specified in paragraph (b)(34)(ii)(B) of this section, for CANG. To be considered suitable for use, a fuel need not actually be used as a fuel in a highway vehicle or aircraft.
(B) CANG. 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.
(C) Fuels not requiring further processing. 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.
(iii) Produced from a fuel for which a section 45Z credit is allowable. A fuel is produced from a fuel for which a section 45Z credit is allowable if a primary feedstock of the fuel meets the definition of a transportation fuel under paragraph (b)(34)(i) of this section, without regard to paragraph (b)(34)(i)(D) of this section.
(iv) Examples. The following examples illustrate the definition of the term transportation fuel.
(A) Example 1. Suitable for use. X produces diesel fuel that has practical and commercial fitness for use as a fuel in a highway vehicle or aircraft. The diesel fuel meets the description of low-GHG diesel fuel in paragraph (b)(24)(ii)(C) of this section, and no further production, refinement, or other step is necessary before the fuel may be sold in a qualified sale. X sells the diesel fuel to a purchaser that uses it as marine diesel fuel. X's diesel fuel satisfies the suitable for use standard under paragraph (b)(34)(ii) of this section, notwithstanding that the diesel fuel ultimately is not used in a highway vehicle or aircraft.
(B) Example 2. Produced from a fuel for which a section 45Z credit is allowable. Y buys ethanol and uses it as a primary feedstock to produce a synthetic blending component under ASTM D7566, Annex A5 (ATJ-SPK). The ethanol meets the definition of a transportation fuel under paragraph (b)(34)(i) of this section. Under paragraph (b)(34)(iii) of this section, Y has produced the synthetic blending component from a fuel for which a section 45Z credit is allowable. Y's synthetic blending component is not a transportation fuel for purposes of section 45Z.
(35) Types and categories of transportation fuel. As used in section 45Z(b)(1)(B)(i), the term type of transportation fuel refers to a particular kind of transportation fuel. For example, ethanol is one type of transportation fuel. As used in section 45Z(b)(1)(B)(i), the term category of transportation fuel means the unique primary feedstock and pathway (also known as production process) used to produce a type of transportation fuel. For example, fermentation of U.S. corn starch is one category of ethanol.
(36) Unrelated person. The term unrelated person means a person not related to the taxpayer. The term has the same meaning as the term unrelated party for purposes of the certification required by section 45Z(f)(1)(A)(i)(II)(aa). Persons are treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b) of the Code. See section 45Z(f)(3).
(c) Applicability date. This section applies to qualified sales occurring in taxable years ending on or after [date of publication of final regulations in the Federal Register ].