The House Ways and Means Committee on May 14 advanced its portion of President Trump’s “big, beautiful” tax bill. The draft legislation amends and extends the 45Z clean fuel production credit but repeals several other clean energy tax credits. 

The existing 45Z tax credit, established by the Inflation Reduction Act of 2022, provides a tax credit for the production and sale of low-emission transformation fuels. The credit starts at 20 cents per gallon for non-aviation fuels and 35 cents per gallon for sustainable aviation fuel (SAF). For facilities that satisfy the prevailing wage and apprenticeship requirements, the value of the tax credit is up to $1 per gallon for non-aviation fuels and $1.75 per gallon for SAF. The tax credit is currently in place for 2025, 2026 and 2027. 

Section 111112 of the draft legislation aims to limit availability of the 45Z credit to fuels produced from feedstocks produced or grown in the U.S. It also aims to exclude indirect land use change (ILUC) from being used to calculate the lifecycle greenhouse gas (GHG) emissions of eligible fuel and directs the U.S. Treasury Department to establish distinct emissions rates for specific manure feedstocks. 

The draft bill would extend the 45Z credit through Dec. 31, 2031. Additional changes to the 45Z credit aim to eliminate transferability of the credit for fuel produced after Dec. 31, 2027, and restrict access to the credit for certain prohibited foreign entities. 

The draft bill leaves the 45Q credit for carbon sequestration largely intact but aims to enact restrictions on transferability. Specifically, the legislation would repeal transferability for carbon capture equipment where construction begins two years after the bill’s date of enactment. It also restricts access to the credit for certain prohibited foreign entities. 

While the draft bill updates and extends the 45Z tax credit and leaves the 45Q credit mostly unchanged, it also aims to repeal and scale back numerous other clean energy tax credits, including the clean hydrogen tax credit and the alternative fuel vehicle refueling property credit. 

The alternative fuel vehicle refueling property credit allows taxpayers to claim a tax credit for advanced refueling property placed in service during a give tax year, including property used to dispense E85, biodiesel blends of B20 or greater, natural gas, hydrogen, propane, and electricity. The credit value is 30% of the cost of the property, up to $100,000. The credit is currently scheduled to retire on Dec. 31, 2032. The draft bill would accelerate the sunset date of the credit to Dec. 31, 2025.

The bill also aims to terminate the clean hydrogen production tax credit, which was established by the IRA and allows taxpayers to claim a credit per kilogram of qualified clean hydrogen produced for sale or use. The credit is based on GHG emission ate of the production process, with a value of up to 60 cents per kilogram. The clean hydrogen tax credit is currently available for facilities that commence construction before Jan. 1, 2033. The draft bill would accelerate the expiration of the credit to Dec. 31, 2025. 

Another section of the draft bill aims to phase-out a credit that supports the installation of residential wood heating appliances. The legislation would terminate the energy efficient home improvement credit, which currently allows taxpayers to claim a tax credit for household energy efficiency improvements. The value of the credit is 30% of qualified expenses, up to $1,200 annually, or $2,000 for heat pumps and biomass stoves. The credit is currently set to expire on Dec. 31, 2032. The draft bill would accelerate the expiration to Dec. 31, 2025.

In addition, the draft bill seeks to phase out the production tax credit (PTC) and investment tax credit (ITC) for clean electricity. The credits are not currently set to expire. The draft bill, however, aims to phase out the credit by reducing the value of the credit by 20% for facilities placed into service after 2029, by 40% for facilities placed into service in 2030, and 60% for facilities placed into service 2031. No credit would be available for facilities placed into service after 2031. Bill provisions also eliminate transferability of the credit and restrict access to the credit for certain prohibited foreign entities. 

The Sustainable Aviation Fuel (SAC) Coalition has spoken out in support of the bill’s 45Z provisions. “Sustainable aviation fuel (SAF) is a key solution for strengthening U.S. energy dominance, driving investment in rural economies and positioning the United States as a global leader in SAF production,” said Alison Graab, executive director of the SAF Coalition.

 “The SAF Coalition is grateful to the Ways & Means Committee for supporting the extension of the Clean Fuel Production Credit (45Z) through 2031,” Graab continued. “This critical legislation provides long-term certainty for SAF producers, incentivizes private sector investment, and builds out a robust domestic supply chain. The bill ensures that 45Z delivers direct benefits to U.S. farmers and rural economies.   

“We urge Congress to pass this extension to reinforce our energy dominance and unleash the full economic potential of America’s heartland.”

The American Biogas Council is also applauding extension of the 45Z credit.  “The American Biogas Council applauds the House Ways and Means Committee for extending the 45Z Clean Fuel Production Tax Credit in its reconciliation bill,” said Patrick Serfass, executive director of the ABC. “This is a critical step toward supporting reliable renewable fuels like biogas that reduce air and water pollution, create American-made energy, and drive rural economic development. The extension of 45Z ensures continued momentum for investment in biogas systems that turn organic waste into clean energy—benefiting communities, farmers, and rural economies.”

Additional information, including a bill summary, is available on the House Ways and Means Committee website.