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Treasury, IRS Publish Sustainable Aviation Fuel Credit Guidance

The Treasury Department and the IRS published Notice 2024-74 for the Sustainable Aviation Fuel (SAF) credit established under the Inflation Reduction Act on Oct. 21. The guidance in this notice is effective Oct. 18.

The IRS said this credit ranges from $1.25 to $1.75 for each gallon of sustainable aviation fuel in a qualified mixture. To qualify for the credit, sustainable aviation fuel must reduce lifecycle greenhouse gas emissions by at least 50%.

According to CPA Practice Advisor, the guidance in Notice 2024-74 offers added information to taxpayers utilizing the safe harbors found in IRS Notice 2024-37 published last April. These safe harbors protect SAF makers from penalties, including an IRS audit when qualifying for the tax credit.

The agencies have issued several notices regarding the SAF credit, which includes Notice 2024-37, which lets an SAF producer utilize the 40BSAF-GREET 2024 model, to calculate the greenhouse gas emissions reduction percentage for purposes of the SAF credits. It can also be used to determine the corresponding unrelated party certification for the SAF credit, the IRS said in April, the CPA Practice Advisor reported.

Safe harbors under the 40BSAF-GREET 2024 model also include specifications for and limitations on taxpayer inputs and background inputs to the model, the CPA Practice Advisor reported. The agencies developed the guidance in this notice in consultation with the Department of Energy (DOE).

In October 2024, the DOE issued an updated version of the 40BSAF-GREET 2024 and accompanying user manual that tackles a calculation issue related to catalyst inputs for the Alcohol to Jet SAF pathways.

Notice 2024-74 says that a taxpayer who uses a 40BSAF-GREET 2024 safe harbor to determine its emissions reduction percentage concerning claims that relate to the sale or use of an SAF-qualified mixture after the effective date must use the October 2024 version of the 40BSAF-GREET 2024 model.

The CPA Practice Advisor reported that federal tax breaks are meant to lower the price sufficiently so that firms can invest in fuels to boost production, lessen emissions from commercial airplanes and meet climate goals.

Treasury Department guidelines would allow tax credits for corn-based ethanol if producers follow “climate-smart agriculture practices," such as using certain fertilizers and farming methods.

To qualify, SAF must cut greenhouse gas emissions by at least half compared to conventional jet fuel made from oil. Congress approved the credits under the Inflation Reduction Act.

However, according to the CPA Practice Advisor, some in the ethanol sector are not too happy that producers are required to follow certain agricultural practices to qualify for this tax credit.