45Z Tax Credit Offers Opportunities for Farmers with Low-Carbon Practices

For farmers who grow corn and soybeans, adopting practices like no-till and cover crops can increase the value of their crops in the biofuel industry. The Iowa Soybean Association recently hosted a webinar to explain how the 45Z Clean Fuel Production Credit works and what opportunities exist for farmers.

The tax credit rewards the production of fuels with lower carbon footprints, but it goes directly to the fuel producer, not the farmer. However, if a farmer implements eligible practices that lower the carbon intensity of their crops, they may be able to increase the value of the tax credit available to the producer, which can then offer farmers an incentive for providing the lower-CI feedstock.

But there's no guarantee that all the tax credit value created by a farmer's practices will come back to the farm. According to Kriss Nelson, 'The tax credit goes to the fuel producer,' Kiel says. 'What ultimately goes to the farmer is going to be up to the fuel producer.'

Adam Kiel, executive vice president of AgOutcomes, cautions farmers not to assume a practice will qualify simply because they consider themselves no-till or use another conservation practice. Details matter. Planter configuration, manure application, tillage and fertilizer use can all affect how a farm is classified and its resulting CI score.