Background
The SAF credits, under sections 40B and 6426(k) of the Code, provide an incentive for producing and using SAF mixtures that achieve a minimum 50% reduction in lifecycle greenhouse gas emissions compared to petroleum-based jet fuel. Notice 2024-37 (prior guidance) authorized the April 2024 version of the 40BSAF-GREET model to calculate emission reductions as a safe harbor.
The Department of Energy (DOE) identified inaccuracies in the April 2024 version. Specifically, the DOE addressed a calculation issue in the April 2024 version related to catalyst inputs for the alcohol to jet (ATJ) SAF pathways. This calculation issue relates to the proportion of catalyst used to produce certain amounts of SAF for which the April 2024 version did not account, resulting in inaccurate estimates of the emissions associated with the catalyst input. The updated 40BSAF-GREET 2024 model (October 2024 version) changes the calculation of the ATJ SAF pathways by lowering the emissions associated with the catalyst input.
The October 2024 version model must be used for all claims involving SAF qualified mixtures sold or used on or after Oct. 18, 2024. Any credits claimed after this date must follow the new model’s methodology to avoid compliance issues.
The updated 40BSAF-GREET model and an accompanying user manual, along with FAQs and a change log documenting updates, are available on the Department of Energy’s website. Taxpayers and SAF producers are encouraged to review the updated materials to ensure accurate reporting and compliance with the credit requirements. Using outdated models could lead to rejected claims or delays in processing SAF credits.
Washington National Tax takeaways
Notice 2024-74 announces the tax credit implications under section 40B resulting from the updates made to the Department of Energy to the 40BSAF-GREET model. These changes by the Department of Energy were made response to industry stakeholder comments.
While guidance on section 40B is welcome, it should be noted that this credit – which was added by the Inflation Reduction Act of 2022 – is set to expire at the end of the 2024. SAF producers will transition to claiming clean fuel production credits under IRC section 45Z in the new year. The biofuels industry is awaiting guidance on section 45Z from Treasury, as well as an expected Department of Energy update to the GREET model for section 45Z. Congress directed Treasury to provide guidance on section 45Z by Dec. 31, 2024.
