IRS Announces Release of Additional Aviation Fuel Credit Guidance

Treasury, IRS issue guidance on new Sustainable Aviation Fuel Credit

Dec. 15, 2023

WASHINGTON — The Treasury Department and Internal Revenue Service today issued Notice 2024-06 for the new Sustainable Aviation Fuel (SAF) credit created by the Inflation Reduction Act of 2022.

The SAF credit applies to a qualified fuel mixture containing sustainable aviation fuel for certain sales or uses in calendar years 2023 and 2024.

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 have a minimum reduction of 50% in lifecycle greenhouse gas emissions. Additionally, there is a supplemental credit of one cent for each percent that the reduction exceeds 50%, for a maximum increase of $0.50.

The IRA provides two methods to determine the lifecycle greenhouse gas emissions reduction percentage (emissions reduction percentage) that can be used to qualify for and calculate the credit. These are the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) method and any similar method that meets certain requirements of the Clean Air Act (CAA). Additionally, the IRA requires certain aspects of each method to be certified by an unrelated party.

Today's notice provides additional safe harbors using the Environmental Protection Agency's Renewable Fuel Standard (RFS) program and related guidance. The RFS program uses a methodology similar to CORSIA and meets the requirements of the CAA, and the safe harbors in this notice can be used to calculate the emissions reduction percentage and for the corresponding unrelated party certification for the SAF credit.

Further, this notice explains that the current Greenhouse gases, Regulated Emissions, and Energy use in Transportation (GREET) model of the Argonne National Laboratory and other GREET-based models do not currently satisfy the applicable statutory requirements for the SAF credit.

Finally, this notice announces that the Department of Energy is collaborating with other federal agencies to develop a modified version of the GREET model that would satisfy the statutory requirements for the SAF credit. The agencies developing this modified GREET model currently anticipate its release in early 2024.

Previously, the IRS issued Notice 2023-06, which explains the requirements for the fuel to be eligible for the SAF credit, including safe harbors for the CORSIA method and the corresponding unrelated party certification, and explained which parties must be registered for the different activities in the process.