In Notice 2026-53 (Notice) (issued September 8, 2026), the IRS provided guidance on emissions rates for the IRC Section 45Z clean fuel production credit, applying several amendments from the One Big Beautiful Bill Act (OBBBA) to the provision. The Notice focuses on fuels derived from animal manure and regenerative agricultural practices used to produce feedstocks. It applies in conjunction with proposed regulations under IRC Section 45Z and the calendar-year 2026 emissions-rate table included in its appendix.

Background

IRC Section 45Z provides a tax credit for qualifying clean transportation fuel produced domestically after December 31, 2024, and sold before January 1, 2030. To qualify, transportation fuel generally must satisfy emissions-rate requirements and other statutory conditions. A fuel qualifies only if its emissions rate of lifecycle greenhouse gas (GHG) does not exceed a certain baseline; the amount of the credit depends in part on the fuel's emissions factor, which measures the reduction in emissions relative to this statutory baseline.

Under IRC Section 45Z, taxpayers generally determine emissions rates using an annual emissions-rate table published by Treasury. Taxpayers producing fuels not included in the table may request a provisional emissions rate (PER). The annual table identifies fuel pathways, feedstocks and methodologies that taxpayers must use in calculating emissions rates.

The OBBBA revised several key elements of IRC Section 45Z, beginning with fuel produced after December 31, 2025. Among other changes, the legislation:

• Requires elimination of emissions attributed to indirect-land-use change (ILUC) from emissions-rate calculations
• Establishes special rules for transportation fuels derived from animal manure
• Generally prohibits negative emissions rates (except for transportation fuel derived from animal manure)
• Limits eligible feedstocks to those produced or grown in the United States, Canada or Mexico

Proposed regulations for IRC Section 45Z, which were released in February 2026, would define the rules for determining eligibility, computing credit amounts, verifying lifecycle GHG emissions and documenting qualified sales (see Tax Alert 2026-0411).

Notice 2026-53

Calendar-year 2026 emissions-rate table

The Notice publishes the annual emissions-rate table for calendar year 2026 and confirms that taxpayers generally must determine emissions rates using the most recent version of the 45ZCF-GREET model for non-sustainable aviation fuel pathways. Sustainable aviation fuel (SAF) producers may use the 45ZCF-GREET model or qualifying CORSIA methodologies, depending on the applicable pathway.

The appendix to the Notice identifies numerous covered fuel categories and feedstocks, including ethanol, renewable diesel, renewable natural gas, and SAF and hydrogen pathways. It also incorporates Canadian and Mexican feedstocks for certain pathways, consistent with OBBBA sourcing rules.

EY observes: Taxpayers using versions of the 45ZCF-GREET model released before June 12, 2026, must generate separate emissions-rate calculations: one for fuel produced on or before December 31, 2025, and another for fuel produced after that date. Taxpayers should evaluate whether adopting the June 2026 or later model version simplifies compliance.

Regenerative agriculture safe harbor

The Notice allows taxpayers producing fuel in 2025 to use the forthcoming 2026 version of the 45ZCF Feedstock Carbon Intensity Calculator (FD-CIC) to determine emissions associated with feedstocks produced using specified low-carbon agricultural practices. Taxpayers relying on this relief must comply with applicable USDA technical guidelines, chain-of-custody requirements, and audit and verification standards.

Recognizing that many feedstocks used in 2025 and 2026 were planted before publication of final USDA guidance, the Notice provides transition relief by deeming certain nutrient-budget requirements satisfied for those years. Taxpayers nevertheless must maintain documentation sufficient to substantiate nutrient applications and other data inputs used in emissions calculations and must retain records supporting any IRC Section 45Z credit claim.

EY observes: Allowing the 2026 version of 45ZCF FD-CIC to be used retroactively for fuel produced in 2025, and deeming the pre-application nutrient budget requirement to be satisfied for fuel produced in 2025 and 2026, reduce the possibility that taxpayers will be disadvantaged by timing mismatches between fuel production activities and the release of final government guidance. Additionally, these provisions give more certainty to taxpayers seeking to claim the IRC Section 45Z credit. Taxpayers must still substantiate, however, nutrient applications and other data inputs.

Distinct emissions rates for animal manure feedstocks

The Notice implements statutory requirements for distinct emissions rates for transportation fuel derived from animal manure. Treasury and the IRS anticipate that updated versions of the 45ZCF-GREET model will include dairy manure and swine manure as separate feedstocks. These feedstocks are included as primary feedstocks in the 2026 emissions-rate table. Producers using other manure feedstocks generally may seek a PER, although Treasury indicated that poultry manure and beef manure pathways are expected to be added in future model updates. Producers are encouraged to wait for the update and not submit PER petitions for these fuels.

EY observes: Taxpayers producing clean transportation fuel during the 2026 calendar year should confirm that their fuel type, pathway and feedstock are included in the newly published emissions-rate table. Taxpayers whose feedstocks (other than poultry and beef manure) are not included in the table should evaluate whether to submit a PER petition. The Notice also allows taxpayers producing transportation fuel from animal manure to determine emissions rates using prior farm-specific manure-management practices. Depending on the facts, taxpayers may calculate avoided emissions based on historical manure-management techniques such as uncovered lagoons, deep pits, liquid-slurry systems, pasture-based management, dry lots or solid storage. To use these adjustments, taxpayers must substantiate the underlying farm-specific data.

For farms that begin operations after September 8, 2026, the Notice clarifies that the 45ZCF-GREET model will not provide a farm-specific alternative fate until the Treasury and IRS issue further guidance (an alternative fate refers to what would likely have happened to a feedstock if it had not been used to produce a transportation fuel). Treasury expressed concern that new operations could otherwise artificially increase future credits by selecting high-emissions baseline practices.

EY observes: Taxpayers planning to use the farm-specific alternative fate should prioritize gathering and preserving the manure-management practices at the farm level. A taxpayer that cannot substantiate the prior farm-specific manure-management practices of a given farm will not have avoided emissions included in the 45ZCF-GREET model for that farm's portion of the taxpayer's manure inputs.

Transition guidance for OBBBA amendments

The Notice provides extensive transition rules for taxpayers using versions of emissions methodologies that do not yet reflect OBBBA amendments. For transportation fuel produced after December 31, 2025, taxpayers generally must adjust emissions calculations to remove ILUC emissions. Taxpayers using earlier versions of the 45ZCF-GREET model (before the latest June 12, 2026 release) must separately calculate post-2025 emissions rates reflecting the statutory changes.

The Notice also clarifies the operation of the new feedstock-sourcing restrictions. Transportation fuels produced after December 31, 2025, generally are ineligible for the credit if produced using feedstocks sourced outside the United States, Canada or Mexico. The guidance pays particular attention to used cooking oil, reflecting Treasury's continuing concern about substantiation and traceability. Taxpayers producing fuel from imported non-Canadian/Mexican used cooking oil before December 31, 2025, however, must use the applicable pathway in a forthcoming version of the 45ZCF-GREET model.

Finally, the Notice confirms that negative emissions rates generally are prohibited for transportation fuel produced after December 31, 2025, unless the fuel is derived from animal manure. Taxpayers using older versions of emissions models must adjust any negative emissions rate to zero unless an exception applies.