The Treasury Department and the Internal Revenue Service (IRS) have recently issued Notice 2024-06, providing guidance on the new Sustainable Aviation Fuel (SAF) credit. This tax incentive was established by the Inflation Reduction Act of 2022 to encourage the use of sustainable aviation fuels and reduce greenhouse gas emissions.
The SAF credit applies to qualifying fuel mixtures containing sustainable aviation fuel used or sold during the calendar years 2023 and 2024. Each gallon of sustainable aviation fuel in a qualified mixture can earn a credit of $1.25. To be eligible for the credit, the sustainable aviation fuel must achieve a minimum reduction of 50% in lifecycle greenhouse gas emissions. An additional credit of one cent is available for each percent that the reduction exceeds 50%, up to a maximum increase of $0.50.
The Inflation Reduction Act provides two methods to determine the lifecycle greenhouse gas emissions reduction percentage that can qualify for the credit. The first is the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) method. The second is any similar method that meets certain requirements of the Clean Air Act. Both methods require certification by an unrelated party.
The notice introduces additional safe harbors using the Environmental Protection Agency’s Renewable Fuel Standard (RFS) program and related guidance. The RFS program’s methodology aligns closely with CORSIA and meets the Clean Air Act’s requirements. The safe harbors provided in this notice can be used to calculate the emissions reduction percentage and for the corresponding unrelated party certification for the SAF credit.
However, the notice clarifies that the current Greenhouse gases, Regulated Emissions, and Energy use in Transportation (GREET) model from the Argonne National Laboratory and other GREET-based models do not currently meet the statutory requirements for the SAF credit.
In response, the Department of Energy is partnering with other federal agencies to develop a modified version of the GREET model that would satisfy the statutory requirements for the SAF credit. The release of this updated model is anticipated in early 2024.
This notice follows IRS Notice 2023-06, which outlined the requirements for fuel eligibility for the SAF credit, including safe harbors for the CORSIA method and the corresponding unrelated party certification. It also clarified the registration requirements for different entities involved in the process.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and MSN.