EMA Submits Comments on IRS Proposed Regulations for Section 45Z Clean Fuel Production Credit

EMA Regulatory Counsel Contacts: Jeff Leiter and Jorge Roman

Monday, April 6, 2026 – EMA Submits Comments on IRS Proposed Regulations for Section 45Z Clean Fuel Production Credit

The Energy Marketers of America (EMA) today submitted formal comments to the Internal Revenue Service (IRS) on the proposed regulations implementing the Section 45Z Clean Fuel Production Credit. EMA strongly supported the IRS’s proposed “suitable for use” standard for determining credit eligibility and commended the agency for aligning the definition with longstanding excise-tax principles that are familiar to fuel producers, distributors, and retailers. At the same time, EMA urged the IRS to provide additional clarity by including a specific regulatory example confirming that renewable heating oil applications do not disqualify fuels from generating the Section 45Z credit. EMA further called on the IRS to maintain a broad interpretation of “qualified sales” that reflects the commercial realities of the fuels supply chain.

“EMA marketers distribute over 80 percent of all finished motor and heating fuel products into the U.S. market every day,” said Rob Underwood, President of the Energy Marketers of America. “For Section 45Z to achieve its full potential as a driver of low-carbon fuel adoption, the credit must be available across the entire supply chain—not just at the point of production. The IRS’s proposed ‘suitable for use’ standard is a smart, workable approach that promotes investment and market certainty. A simple regulatory example for renewable heating oil would eliminate any lingering doubt and ensure that this important pathway is fully recognized.”

Key Points:

1. Strong Support for the “Suitable for Use” Standard

Proposed Treasury regulations defines a fuel as “suitable for use” if it has “practical and commercial fitness for use as a fuel in a highway vehicle or aircraft or may be blended into a fuel mixture that has practical and commercial fitness for use as a fuel in a highway vehicle or aircraft.” EMA endorsed this definition because it: Is consistent with decades of established excise-tax guidance; decouples credit eligibility from actual end-use, avoiding an unworkable and unpredictable compliance regime; and maximizes the statute’s reach, encouraging a diverse array of low-carbon fuel pathways.

2. Request for Specific Regulatory Example on Renewable Heating Oil

Renewable heating oil—produced by blending conventional No. 2 heating oil with biomass-based diesel (such as biodiesel or renewable diesel derived from used cooking oil, tallow, soybean oil, and other feedstocks)—is chemically and functionally interchangeable with on-road and marine diesel fuels. While the proposed “suitable for use” standard already implies that heating-oil applications do not defeat eligibility, EMA recommended that the IRS add an the following illustrative example to the final regulations for maximum clarity. See details in the comments section link below.

3. Broad Construction of “Qualified Sales”

EMA applauded the IRS for removing the earlier “use as a fuel” limitation from the definition of “sold for use in a trade or business.” This change recognizes that finished fuels routinely move through multiple commercial hands—producer to terminal operator, terminal to jobber/distributor, distributor to retailer—before reaching the end user. EMA supported the clarification that sales to unrelated persons who subsequently resell the fuel in their own trade or business remain fully eligible for the credit. This approach ensures that independent fuel marketers and distributors—who serve tens of thousands of retail and commercial customers—can participate in the credit regime and help scale clean-fuel adoption nationwide.

The full text of EMA’s comments is available by clicking here. EMA plans to participate in the May 28, 2026 public hearing in order to finalize a practical, market-oriented guidance under Section 45Z.