The Inflation Reduction Act of 2022 established sustainable aviation fuel (SAF) tax credits to benefit United States producers and importers of certain fuel mixtures containing SAF. On December 15, 2023, the Internal Revenue Service issued IRS Notice 2024-6 (Notice), which provides additional guidance on how producers and importers may qualify for and calculate the SAF credit.

The SAF credit applies to SAF sold or used in 2023 or 2024. Taxpayers may claim an SAF credit either under Section 40B of the Internal Revenue Code as a nonrefundable general business income tax credit, or under Section 6426(k) as an excise tax credit that is refundable to the extent it exceeds excise tax liability.

The SAF credit is $1.25 per gallon of SAF in a qualified mixture, plus the “applicable supplementary amount” per gallon with respect to such SAF. In general, the applicable supplementary amount increases the $1.25 base credit by $0.01 for each percentage point by which the emissions reduction percentage of the SAF exceeds 50 percent (see below for an example of this calculation).

Among a number of requirements, SAF must be certified to have a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent. The term “lifecycle greenhouse gas emissions reduction percentage” (emissions reduction percentage) is defined to mean, with respect to any SAF, the percentage reduction in lifecycle greenhouse gas emissions achieved by such SAF, as compared with petroleum-based jet fuel.

An applicant may calculate the SAF credit using the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)¹ method which was adopted by the International Civil Aviation Organization or any similar method that meets certain requirements of the Clean Air Act (CAA). A producer or importer of SAF must provide certification from an unrelated party to demonstrate compliance with (i) any general requirements, supply chain traceability requirements, and information transmission requirements established under CORSIA, or (ii) in the case of any similar methodology. The Notice further provides that the Environmental Protection Agency’s (EPA) Renewable Fuel Standard (RFS) program was specifically designed to satisfy the requirements of the CAA and has a methodology similar to that of CORSIA.

The Notice includes a safe harbor that taxpayers can use to calculate the emissions reduction percentage and for the corresponding unrelated party certification for the SAF credit. The safe harbor utilizes the EPA’s RFS program and related guidance. More specifically, the safe harbor relies on the renewable identification number (RIN) assigned under the EPA’s RFS program and validated under a quality assurance plan (QAP). A Q-RIN is a RIN verified by a registered independent third-party auditor using a QAP that has been approved under EPA regulations. The Notice advises that the IRS will consider a producer of a SAF synthetic blending component to meet the certification of sustainability requirements if the synthetic blending component has generated a Q-RIN with an eligible code. The producer must record a valid Q-RIN on the required certificate for that particular volume of fuel. For any SAF qualified mixture, the IRS will accept an emissions reduction percentage of the synthetic blending component for a jet fuel that qualifies as renewable fuel under the RFS program. The IRS will assign a 50 percent rating for fuels satisfying the Q-RINs for biomass-based diesel or advanced biofuel, and a 60 percent rating for fuels satisfying the Q-RINs for cellulosic biofuel or cellulosic diesel.

The Notice advises that the EPA has published specific lifecycle analysis point estimates to support its determinations under the RFS program. Those point estimates are used only to determine whether a particular fuel meets either the 50 percent threshold or the 60 percent threshold under the RFS program. According to the Notice, using those point estimates to calculate an emissions reduction percentage beyond 50 percent or 60 percent would exceed the estimates' intended uses. Therefore, the Notice concludes that emissions reduction percentages other than 50 percent or 60 percent described in the safe harbor will not be accepted.

Finally, the Notice includes a Model Certificate for SAF Synthetic Blending Component that a producer or importer must file for SAF credit claims filed after December 15, 2023. The certificate provided in the Notice replaces the certificate included in Notice 2023-6.

Calculation Example

The Notice includes the following example illustrating the safe harbor: A blender used 100,000 gallons of a SAF synthetic blending component to produce a SAF qualified mixture. The SAF synthetic blending component has generated cellulosic diesel RINs under the EPA’s RFS program, and these RINs were validated under a QAP. Under the EPA’s RFS program, the jet fuel’s emissions reduction percentage compared to the baseline is 64 percent. However, for purposes of calculating the applicable supplementary amount under Section 40B, the emissions reduction percentage will be deemed to be 60 percent.

The per-gallon amount of the SAF credit with respect to the SAF qualified mixture described above is calculated by adding $1.25 and the applicable supplementary amount, if any, with respect to the SAF synthetic blending component used to produce the SAF qualified mixture. Here, the SAF synthetic blending component qualifies for the applicable supplementary amount, because the emissions reduction percentage is deemed to be 60 percent. The applicable supplementary amount is calculated by subtracting 50 from the emissions reduction percentage (60), and then multiplying by the applicable rate ($0.01): (60 – 50) × $0.01 = $0.10 per gallon.

The total amount of the SAF credit is calculated as follows: 100,000 gallons × ($1.25 + $0.10) = $135,000.00.

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_{1. In 2016, the International Civil Aviation Organization adopted CORSIA to address CO2 emissions}

_{from international aviation. CORSIA is a global offsetting scheme, whereby airlines and other aircraft}

_{operators will offset any growth in CO2 emissions above 2020 levels. CORSIA includes uniform}

_{requirements for the monitoring, reporting and verification of emissions. See Aviation Benefits}

_{Beyond Borders, CORSIA Explained, AVIATIONBENEFITS.ORG, (last visited Dec. 29, 2023).}

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