The tax credit unlocks new value in your grain. But the ticket to entry is getting on-farm data ready to share
The One Big Beautiful Bill (OBBB) delivered additional surety for the 45Z biofuel blender tax credit.
After almost three years of talking about what could be spelled out by 45Z, Mitchell Hora says farmers can now get “locked in” to capitalize on the program.
“This 45z deal could be absolutely game changing for my family’s farm, and I think it will be game changing for other family farmers across the country,” Hora says. “It’s going to have a ripple effect that could change global agriculture. So that’s why I’m just so adamant that we have got to get this right, and we’ve got to hit the ground running.”
Hora, an Iowa farmer and founder of Continuum Ag, says there are five things every farmer should know about what the OBBB has laid out. He also says there are unanswered questions.
1. It’s happening.
“They [lawmakers] cut almost all of the other green funding programs within the Inflation Reduction Act. They cut a bunch of that old stuff, but they kept the 45Z program,” Hora says. “It’s alive, it’s locked in, it’s going to happen.”
What sets 45Z apart from previous biofuels tax provisions is how it measures the grain—the program uses a scorecard to assess every bushel (not acre) with a carbon intensity (CI). Any score under 50 points receives a tax credit to the biofuels producer.
“This program shows how you can score a farmer’s carbon footprint, how you can audit it, verify it, track it through the supply chain, and how to monetize it,” Hora says.
2. OBBB gave 45Z an extension
The 45Z program now has additional momentum behind it as the OBBB outlined an extension now into 2029.
“Now biofuels producers have more time to really capitalize on this,” Hora says.
The program is currently active for the 2025 tax year. This means farmers could be selling 2024 grain into the 2025 biofuels production year. And the program is available through 2029.
3. Only North American feedstocks are eligible.
Imported used cooking oil has become a focus for may who have critiqued previous blend credits as feedstocks from other countries were not limited.
Now, only feedstocks from North American sources can be used as part of this program. This includes corn, soybeans, used cooking oil, beef tallow, and canola.
“Without foreign feedstocks being included this drives more demand and more value for U.S. farmers,” Hora says.
4. Current language ignores indirect land use change.
“This single thing lowers everyone’s CI score across the board. It definitely helps corn and corn based ethanol and the soybean side as well,” Hora says.
5. Tax credits are transferrable.
Biofuels producers can take their tax credits and sell them to another buyer if they aren’t going to use them themselves.
Additionally, this makes it easier for farmer-owned co-op ethanol plants to process their taxes.
Additional considerations and unanswered questions.
• Farmer data is key to unlock the potential.
“The overall 45Z impact is ag data is extremely valuable. It’s setting a precedent as to the value for data,” Hora says. “Iin order for the ethanol plant to generate 45Z credit using your low carbon farming practices, they have to prove it in an audit, and likely an audit at every point of aggregation, so that farmer data is really the key to unlock value here.”
As for the monetary value of the CI score, Hora says after talking to hundreds of ethanol plants, the range of sharing the value of the credit varies between 30% to 50% of the value.
• This 45Z program update does effect sustainable aviation fuel—particularly alcohol to jet.
“Under the current version of 45z the alcohol to jet pathway not going to happen at any type of real pace, not at any type of accelerated rate of innovation. The math just doesn’t work out,” Hora says. “You’d be much better off under the current 45Z rules to just sell it as ethanol.”
• The Final IRS Guidance Matters
Forthcoming final rules from the IRS will set which of the two calculators will be used: GREET FD-CIC or USDA FD-CIC
Also, the IRS sets if the credits will be tracked with mass balance or book and claim method.
“Here’s the takeaway for farmers. You can continue to wait. But you’re money ahead to get your data organized,” he says.
• The money is flowing—yet.
“There may be small amounts, pennies on the dollar to get things started and get farmers enrolled. This didn’t unlock the flood gates. But it locked it in. It’s here to stay. They are going to get these rules out. We’ve got to get some movement on the work ahead to get the data and the people ready,” Hora says.
You may want to pump the brakes on signing up for a new private carbon program, Hora says. Because all previous guidance has not allowed for signing up an acre for one program and selling a bushel under 45Z from the same land.
• There will be ripple effects (and opportunities) for animal agriculture.
Hora says, “If you are in animal ag, talk to people in your supply chain. And talk about how to capitalize on this precedent setting program.”
Agweb