Sustainable aviation fuel credit

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 40A the following new section:

40B.

Sustainable aviation fuel credit

(a)

In general

(1)

Credit amount

For purposes of section 38, the sustainable aviation fuel credit for the taxable year is, with respect to each gallon of sustainable aviation fuel which is used by the taxpayer in the production of a qualified mixture— (A)a base credit amount of $1.50, plus (B)the applicable supplementary credit amount. (2)

Applicable supplementary credit amount

(A)

In general

For purposes of paragraph (1), the applicable supplementary credit amount is $0.01 for every percentage point above 50 percent for which the sustainable aviation fuel is certified under subsection (f) to reduce emissions in comparison with petroleum-based jet fuel as described in subsections (d)(2)(A) or (d)(2)(B). (B)

Maximum supplementary credit amount

For purposes of subparagraph (A), the maximum applicable supplementary credit amount allowable is $0.50. (3)

40A Exception

If the biodiesel fuels credit under section 40A is not in effect for a taxable year, paragraph (1)(A) shall by applied by substituting $1.15 for $1.50. (b)

Qualified mixture

For purposes of this section, the term qualified mixture means a mixture of sustainable aviation fuel and kerosene, which— (1)is sold by the taxpayer producing such mixture for use in an aircraft that has fuel uplift in the United States, or (2)is used— (A)by the taxpayer producing such mixture, and (B)in an aircraft that has fuel uplift in the United States. (c)

Sale or use must be in trade or business, etc

Sustainable aviation fuel used in the production of a qualified mixture shall be taken into account— (1)only if the sale or use described in subsection (b) is in a trade or business of the taxpayer, and (2)for the taxable year in which such sale or use occurs. (d)

Sustainable aviation fuel

For purposes of this section, the term sustainable aviation fuel means liquid fuel— (1)that— (A)consists of synthesized hydrocarbons, (B)meets the requirements of— (i)ASTM International Standard D7566, or (ii)the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1, (C)is derived from biomass (as such term is defined in section 45K(c)(3)), waste streams, renewable energy sources, or gaseous carbon oxides, and (D)is not derived from palm fatty acid distillates, and (2)that achieves at least a 50 percent lifecycle greenhouse gas emissions reduction in comparison with petroleum-based jet fuel, as determined by a test that shows— (A)the fuel production pathway achieves at least a 50 percent reduction of the aggregate attributional core lifecycle emissions and the positive induced land use change values under the lifecycle methodology for sustainable aviation fuels adopted by the International Civil Aviation Organization with the agreement of the United States, or (B)the fuel production pathway achieves at least a 50 percent reduction of the aggregate attributional core lifecycle greenhouse gas emissions values and the positive induced land use change values under another methodology that the Secretary, in consultation with the Administrator of the Environmental Protection Agency and the Secretary of Energy working jointly, determines is— (i)reflective of the latest scientific understanding of lifecycle greenhouse gas emissions, and (ii)as stringent as the requirement under subparagraph (A). (e)

Time limit for adoption of new sustainable aviation fuel emissions reduction test

For purposes of subparagraph (B) of subsection (d)(2), the Secretary, in consultation with the Administrator of the Environmental Protection Agency and the Secretary of Energy working jointly, shall, within 24 months after the date of the enactment of this section, adopt at least one methodology for testing lifecycle greenhouse gas emissions that meets the requirements of such subparagraph. (f)

Certification requirements

(1)

In general

No credit shall be allowed under subsection (a) unless the taxpayer meets certification requirements demonstrating the sustainable aviation fuel conforms with one of the lifecycle greenhouse gas emissions reduction tests under subsection (d)(2). (2)

Certification requirement for test in (d)(2)(A)

For purposes of paragraph (1), with respect to certifications based on the test under subparagraph (A) of subsection (d)(2), the taxpayer shall obtain from the fuel producer a certification from a sustainability certification scheme approved by the International Civil Aviation Organization demonstrating that the fuel conforms with the Carbon Offsetting and Reduction Scheme for International Aviation’s sustainability criteria and the traceability and information transmission requirements approved by the International Civil Aviation Organization with the agreement of the United States. (3)

Certification requirements for test in (d)(2)(B)

For purposes of paragraph (1), with respect to certifications based on the test under subparagraph (B) of subsection (d)(2)— (A)the taxpayer shall obtain from the fuel producer a certification that the fuel has been determined by the Environmental Protection Agency to qualify under the requirements of such subparagraph, and (B)the taxpayer shall obtain from the fuel producer an additional certification that the fuel conforms with the sustainability criteria and the traceability and information transmission requirements that the Secretary, in consultation with the Administrator of the Environmental Protection Agency and the Secretary of Energy working jointly, determines are equivalent with those necessary to claim emissions reductions from sustainable aviation fuel use under the Carbon Offsetting and Reduction Scheme for International Aviation adopted by the International Civil Aviation Organization with the agreement of the United States. (g)

Termination

This section shall not apply to any sale or use after December 31, 2031.

(b)

Credit made part of general business credit

Section 38(b) of the Internal Revenue Code of 1986 is amended by striking plus at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting , plus, and by inserting after paragraph (33) the following new paragraph:

(34)the sustainable aviation fuel credit determined under section 40B.

(c)

Conforming amendment

Section 40A(f) of such Code is amended by striking paragraph (4). (d)

Effective date

The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.