The Internal Revenue Service has issued guidance on the new Sustainable Aviation Fuel Credit.

aeroplane landing in a city

The Internal Revenue Service has issued guidance on the new Sustainable Aviation Fuel Credit.

It covers fuel mixtures with sustainable aviation fuel that are sold or used in the years 2023 and 2024.

The Sustainable Aviation Fuel (SAF) credit is a new tax incentive introduced by the Inflation Reduction Act of 2022. On December 19, the Treasury Department and the IRS released guidance for the credit.

For certain sales or uses in the years 2023 and 2024, it applies to a qualified fuel mixture containing sustainable aviation fuel.

Notice 2023-06 details the prerequisites for fuel to qualify for the SAF credit, the various ways a claimant may submit a claim, and which parties are required to register for the various steps in the procedure. The notice also solicits public feedback on various aspects of the statute, which will aid the Treasury and the IRS in developing additional guidance.

Each gallon of environmentally friendly aviation fuel in an approved mixture is worth $1.25 in SAF credits. The lifecycle greenhouse gas emissions of sustainable aviation fuel must be reduced by at least 50% to be eligible for the credit. In addition, there is a one-cent credit for every percentage point above 50% that the reduction exceeds. The notice offers a safe harbor for computing the percentage reduction in lifecycle greenhouse gas emissions.

The notice also mentions that a claimant has a choice in how they submit their SAF credit claim. The excise tax system is the first method. The second is a nonrefundable general business credit that must be included in income. Additionally, Notice 2023-06 defines what qualifies as a qualified mixture and sustainable aviation fuel.

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[…] It covers fuel mixtures with sustainable aviation fuel that are sold or used in the years 2023 and 2024. The Sustainable Aviation Fuel (SAF) credit is a new tax incentive introduced by the Inflation Reduction Act of 2022. O  […]

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