Last fall, a corn and soybean grower in central Iowa mentioned to his agronomist, almost as an aside, that he'd been no-till on 800 acres for six years and had started splitting his nitrogen into three passes because it saved him money on fertilizer, not because anyone asked him to. He wasn't chasing a carbon program. He was just farming the way that made sense for his soil and his bottom line.

It turns out that offhand comment could be worth real dollars under a federal tax credit called Section 45Z, if anyone ever wrote it down. Nobody had.

That gap, between what farmers are already doing and what gets documented anywhere, is the whole story behind 45Z. Here's what the credit actually is, what changed recently, and why the paperwork you've been putting off might be worth revisiting.

What Section 45Z actually pays for

The 45Z Clean Fuel Production Credit is a federal tax credit paid to biofuel producers, not directly to farmers. It rewards ethanol plants, biodiesel refiners, and sustainable aviation fuel producers for making transportation fuel with a lower carbon intensity, or CI, score. The lower the CI score of the fuel, the bigger the credit the producer can claim.

Section 45Z was created by the Inflation Reduction Act (IRA) back in 2022 and took effect in January 2025, replacing a patchwork of older biofuel tax credits. Producers of non-SAF transportation fuel, like ethanol, biodiesel, and renewable diesel, can earn a base rate of $0.20 per gallon, rising to $1.00 per gallon if the facility meets prevailing wage and apprenticeship requirements. Sustainable aviation fuel follows the same structure, with the same prevailing wage bonus available to qualifying facilities. Under the earlier rules, SAF carried a higher ceiling, but the One Big Beautiful Bill Act aligned that rate with other transportation fuel starting in 2026.

Here's the part that matters for anyone growing corn, soybeans, or sorghum: producers can only earn that bigger credit if they can prove the CI score of their fuel is actually low, and feedstock production accounts for somewhere between 40 and 60 percent of a biofuel's total lifecycle greenhouse gas emissions. In plain terms, what happens in the field before the truck ever shows up at the elevator is often the single biggest lever on the fuel's final score.

How carbon intensity gets calculated

Emissions rates under 45Z aren't estimated by guesswork. The IRS, through Notice 2025-11, directs producers to the 45ZCF-GREET model, a tool built by the Department of Energy to calculate lifecycle greenhouse gas emissions, to determine the emissions rate for ethanol, biodiesel, and other non-SAF fuels, measured in grams of CO2 equivalent per MMBtu of fuel energy. SAF producers can use the same GREET model or an approved international methodology instead.

The GREET model looks at everything from fertilizer use to transportation to figure out an emissions factor for the finished fuel. But it can also credit lower-carbon practices further upstream, on the farms actually growing the feedstock, if that data exists and can be verified. Practices like no-till, reduced till, cover crops, nitrification inhibitors, and split or spring-only fertilizer applications are the ones currently recognized as pulling a CI score down.

That's a meaningful shift from how ethanol producers thought about carbon intensity a few years ago, when a bushel of corn was treated more or less the same regardless of how it was grown. Now the practices happening in a specific field can translate into a specific number, and that number can translate into money.

What changed with the One Big Beautiful Bill Act

The One Big Beautiful Bill Act, signed into law in the summer of 2025, made two changes that matter a lot to row crop farmers. First, it extended 45Z through the end of 2029, two years longer than originally planned, which gives everyone more runway to actually build the documentation habits this credit rewards.

Second, and more significantly for corn and soybean growers, OBBBA directed Treasury to remove indirect land use change from the emissions calculation entirely. Indirect land use change had been a stubborn, hard-to-verify penalty baked into earlier carbon models, one that made it difficult for grain and oilseed feedstocks to ever post a low enough carbon intensity score to matter. Taking it out of the equation opens the door much wider for domestic corn, soybeans, and sorghum to qualify for lower-carbon premiums.

OBBBA also limited eligible feedstocks to those grown in the United States, Canada, or Mexico, which effectively closes out a wave of imported used cooking oil that had been competing for the same credit. For biofuel producers sourcing from Midwest growers, that's one less headwind.

The missing piece is still recordkeeping

Here's where the story gets a little frustrating. USDA has been building a tool, the Feedstock Carbon Intensity Calculator, meant to turn a farmer's practice history into a verifiable report a fuel producer can actually use. As of mid-2026 it's still working through beta and peer review, which means the pipeline between "farmer plants a cover crop" and "ethanol plant claims a bigger 45Z tax credit" isn't fully built yet.

But farmers who wait for that pipeline to be perfect before they start documenting anything are starting from zero the day it opens. Recordkeeping doesn't have to mean a new spreadsheet nobody opens. It's the same information a farmer already hands their agronomist, a co-op, or an organic certifier: what got planted, when the field was worked, how fertilizer was split. The practices already qualify. The only thing usually missing is a record that a third party can verify.

Why this is worth doing now, not later

We hear a version of this same joke on nearly every farm visit: another acronym, another form, another thing to document before planting season eats the whole calendar. Fair enough. But 45Z is different from a lot of ag paperwork in one important way: it's asking farmers to document things they're mostly already doing anyway, whether that's no-till, cover crops, or a fertilizer plan built around efficiency rather than habit.

An agronomist who is already walking those fields and writing prescriptions is the natural person to capture that record, once, at the same visit they were already going to make. That single scouting trip can then support a 45Z case, an organic certification renewal, a conservation program application, and a lender's request, instead of getting rebuilt from scratch every time a different program comes asking.

Ethanol producers and cooperatives have real financial reasons to want that data. A verified emissions rate and a documented practice history give a co-op's grain marketing desk something concrete to bring to a biofuel producer, and it strengthens the case for passing a feedstock premium back down to members. None of that works, though, if the underlying farm data only exists in someone's memory or a stack of field notebooks.

The 45Z tax credit rewards a carbon intensity score, but the raw material behind that score is boots-on-the-ground documentation. The farmers, agronomists, and cooperatives who start capturing that record now, even informally, will be the ones ready to prove it the moment USDA's calculator and the broader 45Z framework catch up.

You were probably going to no-till that field anyway. Writing it down is the only step left.

Download the 45Z Clean Fuel Credit Farm Readiness Checklist to get started today.