By Ninna Rippa, Managing Director, Legal Affairs & Strategic Content, Renewable Credit Management | Published October 21, 2026
New §45Z guidance makes the seller’s records central to credit value. That makes diligence more important for buyers.
Key takeaways
IRS Notice 2026-53, released September 8, 2026, sets the 2026 emissions rates for the Section 45Z clean fuel production credit. It allows renewable natural gas (RNG) producers to score dairy and swine manure farm by farm and allows verified low carbon farming practices to lower the carbon intensity of crop-based fuels. For buyers of transferable 45Z credits, the credit amount now depends more on the seller's documentation.
On September 8, 2026, Treasury and the IRS released Notice 2026-53 (IR-2026-108), the 2026 emissions rate guidance for the §45Z Clean Fuel Production Credit. The Department of Energy released an updated version of its 45ZCF-GREET emissions model the same day. The notice was published in Internal Revenue Bulletin 2026-41 on October 5.
The IRS issued this guidance with the purpose of helping American farmers and fuel producers to access the domestic biofuels market in a way that makes the 45Z production tax credit work for them. The notice allows renewable natural gas (RNG) producers to score dairy and swine manure using each supplying farm's actual prior manure practices. It also lets farmers' low carbon field practices reduce the carbon intensity of corn, soybean, sorghum and canola feedstocks. And it tells producers how to apply the 2025 statutory changes when their modeling predates them.
For buyers, the effect is that the same gallon of fuel can now support a larger or smaller credit depending on the maintenance of proper records. This affects what a buyer needs to verify in the due diligence process before purchasing a credit.
§45Z is a production credit for clean transportation fuel made in the United States after 2024 and sold in a qualified sale. The One Big Beautiful Bill Act (OBBBA), which the IRS's announcement calls the Working Families Tax Cuts, extended the credit through fuel sold by December 31, 2029. It also reshaped how the credit is measured for fuel produced after December 31, 2025.
In simplified terms, the credit equals a per-gallon amount multiplied by an emissions factor. The amount is $0.20 per gallon, or $1.00 if prevailing wage and apprenticeship requirements are met, both adjusted for inflation. The emissions factor reflects how far a fuel's lifecycle emissions fall below a baseline of 50 kg CO2e per mmBTU. The cleaner the fuel, the larger the credit.
For fuel produced after 2025, four OBBBA rules apply:
OBBBA also ended the SAF premium for fuel produced after 2025, so SAF now earns the same base amount as other fuels. Prohibited foreign entity restrictions also now apply to SAF.
Treasury proposed comprehensive §45Z regulations on February 4, 2026. Those rules are not yet final. Notice 2026-53 fills in the emissions rate piece in the meantime.
For RNG produced after 2025, dairy and swine manure each have their own pathway in the 2026 emissions rate table. A producer can now enter the manure practices each supplying farm used before the digester: uncovered lagoon, deep pit, liquid or slurry storage, pasture, dry lot or solid storage. The baseline is locked at the practice in place just before the earlier of the date the digester began operating or September 8, 2026. For off-farm digesters, the relevant date is when the farm first began sending manure off-site.
The gain comes with conditions:
USDA finalized its technical guidelines for low carbon biofuel feedstocks on June 29, 2026 (7 CFR part 2100). The guidelines cover reduced or no tillage, cover crops, nutrient management and nitrification inhibitors on corn, soybeans, sorghum and spring canola. Qualifying practices can lower a feedstock's carbon intensity through a §45Z specific version of USDA's Feedstock Carbon Intensity Calculator, which is being built into 45ZCF-GREET.
Two transition rules matter here:
The June 12, 2026 version of 45ZCF-GREET was the first to reflect some of the OBBBA changes. Producers who modeled with an earlier version must run 2025 and post 2025 production separately. For post 2025 fuel, they must make three adjustments:
Mexican and Canadian used cooking oil were added in June, and those rates apply back to fuel produced on or after January 1, 2025. For 2025 fuel made from imported UCO from other countries, the notice points to a forthcoming model pathway. DOE's September release updated the imported UCO categories for 2025 fuel, and appears to be that version. Treasury says it remains concerned about virgin palm oil being passed off as UCO, so strict UCO records are required.
DOE's September 8 release of 45ZCF-GREET adds the farm-specific manure inputs, new RNG feedstocks (food scraps, corn stover, grain stillage and mixed organic wastes) and the regenerative-practice inputs. In October, DOE also announced its Emissions Value Request process. This is how producers whose fuel, feedstock or pathway is missing from the table can obtain a DOE emissions value and then petition Treasury for a provisional rate.
§45Z remains one of the cleaner credits to buy. It is a production credit with no five-year recapture period, and the sellers are generally established, operating producers. The risk sits in the emissions rate. Under §6418, if the IRS later finds that a transferred credit was overstated, the buyer owes the tax on the excess. A 20% penalty is added unless the buyer can show reasonable cause. After Notice 2026-53, more of that rate depends on documents held by the seller and its suppliers.
Confirm the model and the table. Ask which emissions rate table and which version of 45ZCF-GREET produced the rate. If a pre June 2026 version was used for 2026 fuel, confirm that ILUC was removed, that the 1.055 conversion was applied, and that any negative result was raised to zero.
Diligence manure RNG at the farm level. Farm specific baselines can improve dairy and swine scores meaningfully, but only farms with documented practices count. Ask for the farm list, each farm's baseline date and the supporting records. Confirm whether any supplying farm began operating after September 8, 2026.
Treat feedstock origin as a threshold item. For 2026 production, a single non North American input can disqualify the fuel. Expect clear representations and traceable records on origin, especially for UCO and other waste oils. For 2025 fuel made from imported UCO, confirm which pathway the rate relies on. Also ask how the seller handled its 2025 filing, because guidance on that pathway arrived after many 2025 returns were already in progress.
Check the paper behind regenerative ag claims. A carbon intensity reduction from farming practices rests on USDA third party verification and a chain of custody feedstock report that follows the grain to the refinery. If the rate depends on that reduction, those documents should be requested as part of due diligence.
Price in the open items. Poultry and beef rates are still coming, final regulations are pending, and new farm baselines remain unresolved. Agreements should address what happens if a rate is revised: true-up mechanics, indemnities, and insurance or a creditworthy guarantee where the size of the deal warrants it.
Our August Market Intelligence Report put indicative §45Z clearing levels at $0.87 to $0.92 per dollar of credit, with the small discount reflecting rules still in motion. We don't expect the notice to change §45Z pricing much on its own. Notice 2026-53 removes some of that uncertainty for manure RNG and crop-based fuels. It may also widen the gap between credits with clean, complete documentation and those without.
Several pieces are still outstanding:
Notice 2026-53 is good news for dairy and swine RNG and for crop-based fuels whose feedstock is grown with verified low carbon practices. It is also a reminder that a §45Z credit is only as good as the records behind its emissions rate. Buyers who ask the right questions about the model version, farm baselines, feedstock origin and verification, will be best placed to secure strong pricing on credits that hold up.
If you are evaluating a §45Z purchase or want to know how this guidance affects a position you already hold, speak with an RCM advisor.
Section 45Z is a federal production tax credit for clean transportation fuel made in the U.S. after 2024. It pays a per-gallon amount, up to $1.00 with prevailing wage and apprenticeship, scaled by how far the fuel's lifecycle emissions fall below 50 kg CO2e per mmBTU. It runs through fuel sold by December 31, 2029.
Yes. Section 45Z is one of the credits that can be transferred for cash under Section 6418. Corporate buyers purchase 45Z credits at a discount to face value and use them to reduce their federal income tax.
For RNG produced after 2025, dairy and swine manure can be scored using each supplying farm's actual prior manure practices. Farms without records lose the avoided-emissions benefit, and farms that began operating after September 8, 2026, get no farm-specific baseline for now.
No. Section 45Z is a production credit with no five-year recapture period. The main risk is an overstated emissions rate: if the IRS reduces the credit, the buyer owes tax on the excess plus a 20% penalty unless it can show reasonable cause.
Ask for the emissions rate table and 45ZCF-GREET version used, farm level manure records and baseline dates, feedstock origin records, and USDA verification and chain of custody reports for any regenerative agriculture reduction. Make sure the purchase agreement covers rate revisions.
Not much on its own. Marketplace data puts 45Z credits at about $0.87 to $0.92 per dollar. The notice may widen the price gap between well documented credits and the rest.
This article is market commentary and is not tax, legal, accounting or investment advice. Pricing references are indicative and do not constitute a published price index.