Tax insight

Proposed rules provide clarity for clean fuel credits

Insight
5 minute read
February 13, 2026

What happened?

Treasury and the IRS issued proposed regulations on the Section 45Z clean fuel production credit that would implement changes made by the One Big Beautiful Bill Act (OBBBA), as well as feedback from public comments. The proposed regulations include rules on qualification, calculation, lifecycle emissions rate determination, and certification and registration requirements for domestic production and sales of transportation fuel through December 31, 2029.

Why is it important?

These rules address key inputs of Section 45Z models, address limitations on prohibited foreign entities, and establish anti-abuse restrictions and other filing obligations. If adopted, the proposed regulations would clarify core mechanics that drive credit value and eligibility, creating more certainty that investments in clean fuels would comply with feedstock sourcing and reporting requirements. Although most provisions of the proposed regulations are not effective until published as final regulations in the Federal Register, the emissions table is proposed to be effective for tax years ending on or after January 10, 2025.

Actions to consider

This voluminous package of regulations contains granular details that can be used to refine projections of current and proposed investments in clean fuel, and companies have the option of applying the proposed regulations in their entirety and in a consistent manner before publication of final regulations. As proposed rules, it is important to provide feedback to the government about concerns or issues raised by the proposed regulations or areas still needing clarity by submitting comments or requesting to speak by April 6, 2026, for a public hearing scheduled for May 28, 2026.