The IRS has issued more guidance on the new Sustainable Aviation Fuel credit. The SAF credit applies to qualified fuel mixtures containing sustainable aviation fuel for certain sales or uses in calendar years 2023 and 2024. (IR 2023-240, 12/15/2023; Notice 2024-6, 2024-2 IRB)
Sustainable Aviation Fuel Credit.
The Sustainable Aviation Fuel Credit (SAF) was part of the Inflation Reduction Act of 2022. The SAF credit is $1.25 for each gallon of sustainable aviation fuel in a qualified mixture. To qualify for the credit, the sustainable aviation fuel must reduce lifecycle greenhouse gas emissions (LGGE) by at least 50%. There is a supplemental credit of one cent for each percentage point reduction in LGGE over 50% for a maximum credit of $1.75 per gallon.
Lifecycle greenhouse gas emissions.
Under the IRA, taxpayers can use various methods to determine the percentage reduction in lifecycle greenhouse gas emissions (emissions reduction percentage), including,
- The Carbon Offsetting method,
- The Reduction Scheme for International Aviation (CORSIA) method, or
- any similar method that meets certain requirements of the Clean Air Act (CAA).
Note. Certain aspects of each method must be certified by an unrelated party.
Safe harbor methods.
In Notice 2024-6, the IRS provides additional safe harbor methods for determining the emissions reduction percentage. These safe harbors can be used to calculate the emissions reduction percentage and for the unrelated party certification.
The guidance also explains that Argonne National Laboratory’s current Greenhouse gases, Regulated Emissions, and Energy use in Transportation (GREET) method and other GREET-based methods currently don’t satisfy the applicable statutory requirements for the SAF credits. However, the Energy Department and other federal agencies are working to develop a modified version of the GREET method that would satisfy the requirements for the SAF credit. The agencies anticipate that the new method will be available in early 2024.
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