Biodiesel Tax Credit Extension Act of 2025
The Biodiesel Tax Credit Extension Act of 2025 would amend the Internal Revenue Code to extend two existing biodiesel-related tax incentives through 2026 (biodiesel fuels credit under Section 40A and the biodiesel mixture credit under Section 6426/6427) and to extend certain related credits for second-generation biofuels through 2027, while tightening how these credits interact with the Clean Fuel Production Credit (Section 45Z). Specifically, the bill lengthens the availability of the biodiesel fuels credit and the biodiesel mixture credit, adds a “no double benefit” rule so that a fuel receiving the 45Z credit cannot also receive 40A or 6426/6427 credits for the same fuel, and coordinates (no credit under 40(b)) with fuels that receive 45Z credits. It also extends the second-generation biofuel production credit and its coordination with 45Z to 2027. The effective dates indicate these extensions apply to fuels sold or used after December 31, 2024 (and to qualifying second-generation biofuel production occurring after that date).
Key Points
- 1Extension of biodiesel credits through 2026: The biodiesel fuels credit (Section 40A(g)) and the biodiesel mixture credit (Sections 6426(c)(6) and 6427(e)(6)) are extended from 2024 to 2026.
- 2Denial of double benefit: A fuel that earns a credit under Section 45Z(a) cannot also receive the biodiesel credits (40A or 6426/6427) in the same year.
- 3Coordination with the Clean Fuel Production Credit: No credit under Section 40(b) (including the second-generation biofuel credit) shall be determined for fuels that have a 45Z(a) credit.
- 4Extension for second-generation biofuels: The second-generation biofuel production credit (40(b)) is extended, with the related provision (40(b)(7)(J)(i)) moving from January 1, 2025 to January 1, 2027.
- 5Effective dates and scope: The biodiesel-related amendments apply to fuels sold or used after December 31, 2024; second-generation biofuel production amendments apply to production occurring after December 31, 2024.