Coalition Opposes Misguided Senate Expansion of 45Z Clean Fuel Production Tax Credit

June 25, 2025

Dear Senator,

The undersigned groups strongly urge you to reconsider the proposed expansion of the Clean Fuel Production Credit (45Z) within the Senate’s FY25 budget reconciliation package. The bill text proposes to modify the tax credit in environmentally and fiscally irresponsible ways that amount to extraneous spending on mature industries.

The Senate reconciliation package proposes to eliminate consideration of indirect land use change (ILUC) currently tied to 45Z tax credit eligibility. Eliminating widely-accepted and longstanding ILUC provisions, which ensure accurate accounting of environmental impacts, would significantly expand the tax credit’s scope and cost. Without ILUC eligibility requirements, 45Z would further subsidize conventional biofuels such as corn ethanol and soy-based biodiesel and renewable diesel, which would already be produced without the new, duplicative federal subsidies of the modified 45Z. The proposal would heavily subsidize existing, on-road biofuels already mandated through the federal Renewable Fuel Standard while sustainable aviation fuels would receive a lower tax credit.

The most recent estimate from the Joint Committee on Taxation (JCT) projects that the Senate’s expansion and extension of 45Z will result in an additional $57.1 billion in lost revenue from FY25-34, on top of the $8.4 billion from the current policy. When the Inflation Reduction Act was enacted in 2022, JCT estimated the clean fuel credit – targeted at next-generation fuels – would cost taxpayers $3 billion over ten years. An expansion to $57.1 billion would spend approximately 20 times as much to subsidize legacy fuels that have in part received federal taxpayer support since the 1970s.

We look forward to working with you to chart a better path forward for 45Z and U.S. biofuels policy.

Sincerely,

Clean Air Task Force Action

National Taxpayers Union

Taxpayers for Common Sense

Environment America

R Street Institute

U.S. PIRG

Friends of the Earth US

National Wildlife Federation