§40B — Title 26 Internal Revenue Code | U.S. Code

Summary

Gives a tax credit for each gallon of sustainable aviation fuel that is sold or used in aircraft during the tax year. The credit equals the number of gallons times ($1.25 plus an extra amount). The extra amount is $0.01 for every percentage point the fuel’s lifecycle greenhouse gas reduction is above 50%, up to $0.50. The fuel must be made in the United States, blended with kerosene, used or sold for use in aircraft in the normal course of business, and put into the aircraft’s fuel tank in the United States. “Sustainable aviation fuel” must be a non‑kerosene liquid that meets ASTM D7566 or the Fischer‑Tropsch part of ASTM D1655, not made by coprocessing with non‑biomass feedstocks, not from palm fatty acid distillates or petroleum, and certified to have at least a 50% lifecycle emissions reduction. The lifecycle reduction is measured using ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) or a similar method that meets Clean Air Act criteria. Producers or importers must be registered under section 4101 and provide independent certification and other information the IRS requires. The credit is reduced if the fuel gets benefits under sections 6426 or 6427(e). No credit applies to sales or uses after December 31, 2024.

Title 26, §40B

Internal Revenue Code — Source: USLM XML via OLRC

(a)For purposes of section 38, the sustainable aviation fuel credit determined under this section for the taxable year is, with respect to any sale or use of a qualified mixture which occurs during such taxable year, an amount equal to the product of—

(1)the number of gallons of sustainable aviation fuel in such mixture, multiplied by

(2)the sum of—

(A)$1.25, plus

(B)the applicable supplementary amount with respect to such sustainable aviation fuel.

(b)For purposes of this section, the term “applicable supplementary amount” means, with respect to any sustainable aviation fuel, an amount equal to $0.01 for each percentage point by which the lifecycle greenhouse gas emissions reduction percentage with respect to such fuel exceeds 50 percent. In no event shall the applicable supplementary amount determined under this subsection exceed $0.50.

(c)For purposes of this section, the term “qualified mixture” means a mixture of sustainable aviation fuel and kerosene if—

(1)such mixture is produced by the taxpayer in the United States,

(2)such mixture is used by the taxpayer (or sold by the taxpayer for use) in an aircraft,

(3)such sale or use is in the ordinary course of a trade or business of the taxpayer, and

(4)the transfer of such mixture to the fuel tank of such aircraft occurs in the United States.

(d)(1)For purposes of this section, the term “sustainable aviation fuel” means liquid fuel, the portion of which is not kerosene, which—

(A)meets the requirements of—

(i)ASTM International Standard D7566, or

(ii)the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1,

(B)is not derived from coprocessing an applicable material (or materials derived from an applicable material) with a feedstock which is not biomass,

(C)is not derived from palm fatty acid distillates or petroleum, and

(D)has been certified in accordance with subsection (e) as having a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent.

(2)In this subsection—

(A)The term “applicable material” means—

(i)monoglycerides, diglycerides, and triglycerides,

(ii)free fatty acids, and

(iii)fatty acid esters.

(B)The term “biomass” has the same meaning given such term in section 45K(c)(3).

(e)For purposes of this section, the term “lifecycle greenhouse gas emissions reduction percentage” means, with respect to any sustainable aviation fuel, the percentage reduction in lifecycle greenhouse gas emissions achieved by such fuel as compared with petroleum-based jet fuel, as defined in accordance with—

(1)the most recent Carbon Offsetting and Reduction Scheme for International Aviation which has been adopted by the International Civil Aviation Organization with the agreement of the United States, or

(2)any similar methodology which satisfies the criteria under section 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)), as in effect on the date of enactment of this section.

(f)No credit shall be allowed under this section with respect to any sustainable aviation fuel unless the producer or importer of such fuel—

(1)is registered with the Secretary under section 4101, and

(2)provides—

(A)certification (in such form and manner as the Secretary shall prescribe) from an unrelated party demonstrating compliance with—

(i)any general requirements, supply chain traceability requirements, and information transmission requirements established under the Carbon Offsetting and Reduction Scheme for International Aviation described in paragraph (1) of subsection (e), or

(ii)in the case of any methodology established under paragraph (2) of such subsection, requirements similar to the requirements described in clause (i), and

(B)such other information with respect to such fuel as the Secretary may require for purposes of carrying out this section.

(g)The amount of the credit determined under this section with respect to any sustainable aviation fuel shall, under rules prescribed by the Secretary, be properly reduced to take into account any benefit provided with respect to such sustainable aviation fuel solely by reason of the application of section 6426 or 6427(e).

(h)This section shall not apply to any sale or use after December 31, 2024.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The date of enactment of this section, referred to in subsec. (e)(2), is the date of enactment of Pub. L. 117–169, which was approved Aug. 16, 2022.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 117–169, title I, § 13203(f), Aug. 16, 2022, 136 Stat. 1935, provided that: “The

Amendments

made by this section [enacting this section and amending section 38, 40A, 87, 4101, 6426, and 6427 of this title] shall apply to fuel sold or used after December 31, 2022.”

§40B Sustainable Aviation Fuel Credit