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US Treasury, IRS Issue New Guidance on SAF Tax Credit

by Mia Yao
US Treasury, IRS Issue New Guidance on SAF Tax Credit

The United States Treasury Department and Internal Revenue Service issued a notice this month detailing the requirements for Sustainable Aviation Fuel (SAF) tax credit.

The new guidance, which is under review for more public comments and additional information, also lists steps that SAF sellers and users can take to claim the credit, including through the excise tax system or a general business credit system.

With the aviation industry striving to meet the net-zero target by 2050, the introduction of the tax credit has been regarded as an important approach to encourage investment in SAF production and bring down the price of SAF.

The document Notice 2023-06, as a result of the Inflation Reduction Act of 2022 passed by US President Joe Biden in August, will apply to a qualified fuel mixture containing SAF for certain sales or uses in calendar years 2023 and 2024.

Qualified SAF that can reduce 50% of lifecycle greenhouse gas emissions will be eligible for a credit of US$1.25 for each gallon, with supplemental credit of one cent for each percent that the reduction exceeds 50%.

In a similar move earlier in July, the European Parliament approved the “ReFuelEU Aviation” standards that require 2% of SAF usage in the sector by 2025, with a further target of 63% by 2050.

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