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TUESDAY, SEPTEMBER 8, 2026   |   SPECIAL REPORT & ANALYSIS

POLICY ANALYSIS  |  45Z CLEAN FUEL CREDIT

IRS Opens New 45Z Opportunities for Agriculture, With Key Rules Still Pending

Crop practices and manure gain clearer paths to credits; farm premiums vary

Analysis  ·  September 8, 2026

The IRS on Sept. 8 issued guidance that could strengthen the connection between farm management, livestock manure and the value of federal biofuel tax credits, while giving producers a way to recognize qualifying agricultural practices in fuel manufactured as far back as 2025.

Notice 2026-53 supplies the 2026 emissions-rate table for the Section 45Z Clean Fuel Production Credit, establishes a safe harbor for certain crop-production practices and outlines how manure-based fuels can receive emissions scores reflecting individual farms’ previous manure-management systems.

The agricultural significance is substantial: documented farm practices can help create additional value at a biofuel plant. Whether that value reaches farmers will depend on purchasing contracts, verification costs and competition for qualifying feedstocks. The notice does not establish a farmer payment rate or require fuel producers to share a specified portion of their credits.

IRS Chief Executive Officer Frank J. Bisignano said the guidance “helps unlock billions of dollars for America’s agricultural producers.” That is the administration’s assessment; the notice does not provide a corresponding estimate of additional farm income. IRS announcement

The annual table identifies eligible fuel, feedstock and production-pathway combinations and the methodologies used to calculate their emissions. It does not assign every corn ethanol plant, soybean-oil processor or digester a single guaranteed credit rate.

The guidance also leaves implementation work unfinished. Treasury’s broader 45Z regulations remain under final consideration, and the notice identifies several Department of Energy modeling updates as forthcoming.

Table 1. Notice 2026-53 is additional guidance for agriculture, not the final 45Z rule. Source: IRS Notice 2026-53; Treasury/IRS proposed regulations (91 FR 5160).

Figure 1. Key 45Z dates for agriculture. The Sept. 8 notice sits between the June model and USDA releases and the still-pending final regulations. Source: IRS Notice 2026-53; OBBBA (P.L. 119-21); USDA final rule (91 FR 39334).

Crop practices: a safe harbor that reaches back to 2025

The largest immediate crop provision reaches back to 2025. Fuel producers may use the forthcoming 2026 version of the 45Z-specific Feedstock Carbon Intensity Calculator to determine emissions associated with qualifying low-carbon agricultural feedstocks used in fuel produced in 2025.

This addresses a timing problem: farmers planted crops and fuel plants operated before the government completed the relevant agricultural standards and modeling tools. The safe harbor provides a route to recognize qualifying practices despite that delay.

It is conditional. Taxpayers must satisfy USDA’s technical guidelines, including chain-of-custody requirements and audit and verification standards. A fuel producer cannot simply assign a lower emissions score because its supplier describes a crop as regenerative.

USDA’s underlying framework covers field corn, soybeans, sorghum and spring canola. It accounts for nutrient management, with or without qualifying no-till, reduced-tillage or cover-crop practices, and calculates crop carbon intensity at the field or management-unit level. Those agricultural scores are inputs to the fuel calculation; they are not themselves a final 45Z credit determination. USDA final rule

For farmers and their buyers, the opportunity is to identify past production with adequate supporting records. Retroactive permission cannot recreate missing evidence, and it does not automatically reopen contracts under which crops were already sold.

The nutrient-budget relief is narrow but valuable. For fuel produced in 2025 and 2026, the IRS deems satisfied USDA’s requirement to develop a nutrient budget before nutrients were applied.

That prevents the absence of a plan prepared before the final standards were available from becoming an automatic obstacle. However, taxpayers must still substantiate nutrient applications and the measurable nutrient sources and removals entered into the calculator.

Consequently, fertilizer records, manure-application information and supporting production data retain economic importance. The notice relaxes the timing requirement for the budget; it preserves the obligation to support the calculation. It does not extend that transition relief to fuel produced in 2027.

The relief is tied to the year of fuel production, a distinction that matters when crops are harvested, stored and processed in different calendar years. Notice, Section 3.01

Figure 2. Crop-practice transition relief depends on the year the fuel was produced, not the crop year. Source: IRS Notice 2026-53, Section 3.01.

Why the emissions score is worth money

The credit’s structure explains why lower emissions scores matter. Section 45Z generally multiplies an applicable dollar amount per gallon or gallon equivalent by an emissions factor. That factor is calculated as 50 minus the fuel’s emissions rate, divided by 50; the emissions rate is expressed in kilograms of carbon dioxide equivalent per million British thermal units.

For illustration, using the $1 applicable amount before inflation adjustment and assuming qualification for the increased rate, a fuel scoring 40 generates a 20-cent credit, while one scoring 30 generates 40 cents. Actual calculations must follow statutory rounding rules, and eligibility for the increased applicable amount depends on prevailing-wage and apprenticeship provisions. Treasury and IRS proposed regulations

These are fuel-level examples, not promised corn or soybean premiums. A buyer must translate a crop’s verified contribution into the finished fuel’s emissions score and credit value before negotiating compensation.

Figure 3. Illustrative 45Z credit per gallon at the $1 applicable amount (before inflation adjustment, assuming prevailing-wage qualification). Only manure-derived fuel may score below zero for post-2025 production. Source: Section 45Z(a) and (b); IRS Notice 2026-53.

An illustrative 20-cent-per-gallon improvement across 100 million qualifying gallons would create $20 million in additional gross credit value. That arithmetic shows why processors care about emissions accounting; it does not establish the share available to farmers after other costs and commercial arrangements.

Figure 4. Gross credit value created by lower emissions scores at three plant sizes. Illustrative; before verification costs and before any sharing with feedstock suppliers. Source: Ag Policy & Markets Daily calculations from the Section 45Z formula.

Manure: farm history becomes a bankable input

For livestock operations, documented manure history becomes particularly important. The notice provides for separate emissions treatment of dairy and swine manure, replacing the generic national-average approach for manure-derived fuel produced after 2025.

It allows a fuel producer to use an alternative fate reflecting a supplying farm’s previous manure-management practices. In plain language, the model can recognize emissions avoided when manure is sent to a digester instead of continuing through the farm’s prior management system.

Relevant practices can include uncovered lagoons, deep pits, liquid or slurry storage, dry lots, solid storage and pasture systems. Their treatment will depend on the approved model and supporting data.

The reference point is the management system in place immediately before the earlier of the digester’s commencement date or Sept. 8, 2026. For manure sent to an off-farm digester, the relevant commencement date is when the farm first began that diversion.

Fuel produced in 2025 remains subject to the national-average manure-management approach, including when that fuel is sold in 2026.

This gives established livestock operations an incentive to preserve records describing animal numbers, manure handling and the share of manure managed through each system. Without substantiation, the model will not include avoided emissions for that farm’s portion of the manure inputs. That is a potentially significant loss of credit value, although it is not a blanket declaration that the fuel is ineligible. Notice, Section 3.02

Figure 5. How a supplying farm’s prior manure-management practice enters the 45ZCF-GREET calculation. Source: IRS Notice 2026-53, Section 3.02.

The notice also draws a consequential line around new farms. An operation beginning after Sept. 8, 2026, will not receive a farm-specific alternative fate until Treasury and IRS issue further guidance.

The agencies explain that a new operation has no established manure-management history and could otherwise be encouraged to start with a high-emitting system to inflate subsequent avoided emissions. This restriction concerns new farms; an existing farm considering a new digester presents a different situation.

Manure retains an advantage unavailable to other feedstocks: negative emissions scores. For fuel produced after Dec. 31, 2025, the law generally prevents the emissions rate from falling below zero, with an exception for fuel derived from animal manure.

A negative score reflects modeled avoided emissions exceeding the emissions assigned to the fuel’s lifecycle. Because of the credit formula, it can produce a credit greater than the applicable dollar amount per gallon equivalent. For example, an illustrative emissions rate of minus 50 yields an emissions factor of 2.0. At a $1 applicable amount before inflation adjustment, that would generate $2 per gallon equivalent. The notice does not promise that score to any particular operation.

The commercial implication is that manure-supply agreements and digester ownership arrangements could determine how a valuable tax benefit is divided among livestock producers, project developers and fuel marketers. Negotiations will depend on each farm’s documented contribution and project economics.

Dairy and swine manure appear separately in the 2026 table, but corresponding model updates remain forthcoming in the notice. Treasury and IRS anticipate adding poultry and beef manure later in 2026 and encourage producers using those feedstocks to await that update before submitting provisional-emissions-rate petitions.

Poultry and beef producers therefore have a stated route toward inclusion, but the notice does not deliver a completed modeling pathway for them.

Table 2. Manure provisions by production year and farm situation. Source: IRS Notice 2026-53, Sections 3.02 and 4.02(3)-(4).

North American feedstocks and the ILUC change

The feedstock preference is North American. For fuel produced after Dec. 31, 2025, eligible feedstocks must be produced or grown exclusively in the United States, Canada or Mexico. The fuel itself must meet domestic-production requirements.

That can strengthen the competitive position of U.S. soybean oil and other eligible agricultural feedstocks against materials sourced outside North America. But Canadian and Mexican supplies remain eligible competitors; the policy does not reserve the market for U.S. farmers.

The used-cooking-oil provisions illustrate the distinction. Canadian and Mexican used cooking oil have recognized pathways in the June 2026 model, with the first emissions rate relating back to fuel produced since Jan. 1, 2025. For used cooking oil from outside those three countries, the notice anticipates a forthcoming pathway applicable only to fuel produced in 2025. Such feedstock is ineligible for credits on fuel produced after 2025.

The appendix must therefore be read with its footnotes. Some foreign-feedstock entries remain in the “2026” table specifically for earlier production; their appearance does not reopen eligibility for 2026 fuel. Nor is the exclusion from 45Z itself an import ban. Notice, Section 4 and appendix

Figure 6. Feedstock-origin test for fuel produced after Dec. 31, 2025. Canadian and Mexican supplies remain eligible competitors for U.S. crops. Source: Section 45Z(f)(1)(A)(iii); IRS Notice 2026-53, Section 4.02(2).

Table 3. Agricultural feedstocks in the calendar-year 2026 emissions-rate table. Source: IRS Notice 2026-53, Appendix.

Removing indirect land-use-change emissions can improve crop-based fuels’ tax treatment. For post-2025 production, the law requires emissions calculations to exclude those modeled effects, which concern land-use changes attributed indirectly to feedstock demand.

The notice explains how producers using older models should remove the relevant component. Where that component is positive, its removal lowers the calculated emissions rate and can increase the credit, subject to rounding and other requirements.

This is an accounting change mandated by Congress. The resulting improvement in a credit score does not, by itself, demonstrate that a plant or supplying farm changed its physical operations.

There is also an important interaction with farm premiums. If broader modeling changes move a non-manure fuel to the zero-emissions floor, further reductions cannot increase its 45Z emissions factor. Buyers’ willingness to pay for additional agricultural improvements will therefore depend on how much credit value those improvements actually create.

Table 4. One Big Beautiful Bill Act changes that the notice implements for post-2025 fuel. Source: IRS Notice 2026-53, Section 2.03; Section 70521 of P.L. 119-21.

Market access, contracts and what the notice does not do

Market access and contracts will determine participation. USDA retained a mass-balance traceability system, allowing qualifying and conventional material to be mixed subject to accounting controls. It did not adopt unrestricted trading of agricultural carbon attributes independently of physical feedstock supply chains. That makes participating elevators, processors and fuel plants important intermediaries. USDA traceability provisions

Farmers considering an agreement have several commercial questions to resolve: how the premium is calculated, who pays verification costs, when payment occurs, who controls the associated environmental attributes and how a later adjustment to the fuel producer’s credit affects compensation.

Table 5. Commercial questions for farm supply agreements. Source: Ag Policy & Markets Daily analysis of IRS Notice 2026-53 and USDA technical guidelines (7 CFR part 2100).

The likely early advantage belongs to supply chains that already have reliable records, participating buyers and workable verification arrangements. Smaller operations may need aggregation to spread fixed costs across more bushels or manure volume.

The notice improves investment visibility, while several determinants of demand remain outside its scope. More predictable credits can improve fuel-production margins and support investment, potentially strengthening demand for corn, vegetable oils and manure-derived gas. The degree of additional production will depend on processing capacity, feedstock costs, financing and fuel buyers.

Sustainable aviation fuel also faces a separate constraint: the 2025 law removed its higher $1.75 applicable amount for fuel produced after 2025, bringing it onto the same $1 increased applicable amount as other fuels before inflation adjustment. That limits how much improved emissions accounting alone can do for aviation-fuel economics. 45Z credit-rate provisions

The notice does not itself increase Renewable Fuel Standard blending obligations, expand E15 market access or guarantee sustainable aviation fuel purchases. Likewise, the administration’s expectation of lower consumer fuel costs depends on how added supply and tax benefits move through the market; the notice establishes no required reduction in diesel or gasoline prices.

Section 45Z extends to qualifying sales through Dec. 31, 2029, but delayed model releases and final regulations still matter for investment decisions. Near-term milestones include the 45Z-specific agricultural calculator, completed manure pathways and final sourcing and substantiation rules.

Industry reaction

Growth Energy, the ethanol trade association, was first out with a statement on Sept. 8, commending the IRS for guidance it said was released in conjunction with a related 45ZCF-GREET model update that “clears a path for farmers and biofuel producers to further enhance the value” of the credit. The group highlighted two elements: that qualifying low-carbon agricultural practices consistent with USDA’s technical guidelines can now be used in calculating the credit, and that the transition rules require emissions rates to exclude what it called “flawed, outdated, and inaccurate” indirect land-use-change calculations.

“Farmers and biofuel producers asked and the Trump administration has delivered,” said Growth Energy CEO Emily Skor. “The 45Z tax credit is already driving significant investments in rural communities across the U.S., but this guidance is the key to ensuring farmers reap the benefits of the credit.” She thanked USDA, DOE and Treasury “for decisively tying qualifying farm practices to 45Z and providing important clarification on ILUC.” Growth Energy statement

Skor’s framing that the guidance is “the key to ensuring farmers reap the benefits” is an advocacy claim; as noted above, the notice sets no farmer payment rate and leaves the division of credit value to contracts. As of publication, the Renewable Fuels Association, Clean Fuels Alliance America, the American Soybean Association, the National Corn Growers Association and the American Biogas Council had not posted statements on the notice; RFA, Clean Fuels and the Iowa Renewable Fuels Association welcomed the June 12 45ZCF-GREET update when it was released. This section will be updated as reactions arrive.

Bottom line

For agriculture, the decisive measure will be the appearance of enforceable premiums and manure contracts that leave producers with meaningful returns after compliance costs. The Sept. 8 notice makes those arrangements more feasible; the next test is whether the tax value translates into additional farm income.

AG POLICY & MARKETS DAILY   |   POLICY ANALYSIS  |  45Z CLEAN FUEL CREDIT — TUESDAY, SEPTEMBER 8, 2026