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IRS to Fuel Producers: Apply Soon for 45Z Tax Credit

Fuel producers wanting to begin claiming the clean fuel production credit next year should register with the Internal Revenue Service by July 15, the agency said late last week (Law360, subscription).

What’s going on: “[T]he IRS plans to quickly process registration applications received by July 15 with the intention of issuing eligible taxpayers the letter of registration required to claim the credit by Jan. 1, when the credit becomes available.”

  • To qualify for the credit, taxpayers must be registered and have the signed letter at the time they produce the fuel for which they want to qualify.

Why it’s important: Those who apply after July 15 are “less likely” to receive registration by the start of 2025, the IRS said.

  • However, a registration letter “is not a determination by the agency that the taxpayer who registers can actually claim the credit,” the IRS clarified.
  • The agency is revising the application form for receiving the letter “to include activity letter designations for fuel producers.” The new designations are “CA” for sustainable aviation fuel producers and “CN” for non-sustainable aviation fuel producers.

The background: The Inflation Reduction Act of 2022 created the credit under Section 45Z of the Internal Revenue Code.

  • Next year 45Z will consolidate expiring credits for biodiesel, sustainable aviation fuel and other alternative transportation fuels.
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