Biofuel producers and lawmakers from biofuel-heavy districts are counting on getting enough bipartisan support to preserve the 45Z tax credit in the next Congress, despite President-elect Donald Trump's pledge to roll back the Biden administration's clean energy agenda.
Congress is due to deal with expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) next year and could reform the tax code more broadly.
Through this process, the Republican-controlled House and Senate could alter some of the tax credits enacted in the 2022 Inflation Reduction Act. The law includes the Clean Fuel Production Credit, known as 45Z, that is designed to propel the biofuel and sustainable aviation fuel industries.
Leaders of each chamber’s revenue committee would not comment on the potential fate of individual credits but both say members plan to take a broad look at tax policy..
“We're just looking through the entire tax code and everything to see what's good, what could be worked on, what could be improved, what should lapse,” said House Ways and Means Committee Chair Jason Smith, R-Mo.
The Senate Finance Committee 's GOP staff noted previous comments made by incoming Chairman Mike Crapo, R-Idaho.
“We’re doing a deep dive into the entire TCJA, and many other pieces of the tax code that are not technically part of the TCJA and proposals that are out there,” Crapo told Bloomberg. “We’re just evaluating what the scores are, how those could work into a different type of plan.”
During his campaign, Trump derided the IRA and other administration climate policies as the “green new scam” and vowed to rescind many parts of the landmark bill.
(AP Photo/Patrick Semansky)Trump would need Congress to revise certain provisions of the IRA, and some GOP lawmakers have noted the innovation, investment and jobs spurred in their districts by IRA and clean energy credits.
House Speaker Mike Johnson, R-La., has also pledged to scale back large portions of the IRA if his party retains control in the next Congress. However, he’s also suggested taking a more surgical approach and has said he does not intend to cut all clean energy tax credits in the law.
“You’ve got to use a scalpel and not a sledgehammer,” Johnson told CNBC in September. “Because there’s a few provisions in there that have helped overall.”
Given the investments associated with the biofuel industry, credits like 45Z could be preserved.
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Rep. Randy Feenstra, R-Iowa, noted that biofuels have become a major industry in his district and 45Z is key to supporting producers and farmers. Feenstra, who sits on the Ways and Means Committee, suggested revisiting 45Z could come up during the budget reconciliation process.
“You have to look at the ag sector right now. I mean, commodity prices are in the tank. Our farmers are really struggling right now, and 45Z gives them a lifeline,” Feenstra said. “That's why it's so important that we look at it. Obviously, we got to modify it. We got to rewrite the language. But that's what we're looking at.”
Another Ways and Means member, Adrian Smith, R-Neb., emphasized the importance of biofuels, adding that there's “a lot of interest in energy innovation,” when asked about the credit.
“I don't see battery-powered airplanes on the near horizon. So we need liquid fuels, and this is a great example,” Smith said.
Sen. Chuck Grassley, R-Iowa, a member of the Senate Finance Committee, has spoken in support of 45Z. However, he told Agri-Pulse that Congress will need to rewrite the credit so it does not subsidize imported products over domestic products.
This echoes calls from oilseed producers and others in the biofuel industry for 45Z to be limited to domestic feedstocks. They argue that current policies like the Renewable Fuel Standard offer more for feedstocks such as used cooking oil or tallow that have a lower carbon intensity. This has led to a surge in imported cooking oil to the detriment of domestic soybean oil.
“I would expect it's going to be tackled, but I'm also afraid that there's going to be some industries in the United States are getting used to a subsidy on an import that it's going to muddy the waters for getting a clean thing,” Grassley said.
Grassley said he would assume his colleagues in the Midwest and agricultural regions of the country would agree with him on preserving but modifying 45Z, but did not know with certainty. 
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“We’ll find out,” said Sen. Deb Fischer, R-Neb., when asked about the likelihood that 45Z will be preserved.
Mitchell Hora, CEO of Continuum Ag, a consulting firm, said he believes 45Z has enough bipartisan support and will be maintained even if other aspects of the IRA are reversed. He said lawmakers understand the implications of the credit and “want to fight for it.”
“I think we're seeing good movement already where the Ways and Means Committee understands how big of a deal it is,” Hora said of 45Z.
“It’s a tax credit and it’s policy. Stroke of a pen and things change, but I do think 45Z does a lot of good. It is bipartisan, it does a lot for both sides, and I think there’s enough understanding to fight to protect it,” Hora said. “But we’re going to find out.”
He pointed to a recent request for information released by members of the Ways and Means Committee regarding 45Z as a promising sign that the committee understands the importance of the credit.
Hora said some lawmakers are not clear what changes may be possible. He said that may come into better focus after the Biden administration releases proposed guidance for using the credit.
The proposed guidance is expected to be released by the time President Joe Biden leaves office Jan. 20, but the incoming Trump administration would still need to finalize the guidance. Feenstra said there’s a “great opportunity” for the Trump administration to “write the rules and write them correctly.”
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