SEC. 70521. Extension and modification of clean fuel production credit.
(a) Prohibition on foreign feedstocks.—
(1) IN GENERAL.—Section 45Z(f)(1)(A) is amended—
(A) in clause (i)(II)(bb), by striking “and” at the end,
(B) in clause (ii), by striking the period at the end and inserting “, and”, and
(C) by adding at the end the following new clause:
“(iii) such fuel is exclusively derived from a feedstock which was produced or grown in the United States, Mexico, or Canada.”.
(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to transportation fuel produced after December 31, 2025.
(b) Prohibition on negative emission rates.—
(1) IN GENERAL.—Section 45Z(b)(1) is amended—
(A) by striking subparagraph (C) and inserting the following:
“(C) ROUNDING OF EMISSIONS RATE.—The Secretary may round the emissions rates under subparagraph (B) to the nearest multiple of 5 kilograms of CO2e per mmBTU.”, and
(B) by adding at the end the following new subparagraph:
“(E) PROHIBITION ON NEGATIVE EMISSION RATES.—For purposes of this section, the emissions rate for a transportation fuel may not be less than zero.”.
(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to emissions rates published for transportation fuel produced after December 31, 2025.
(c) Determination of emissions rate.—
(1) IN GENERAL.—Section 45Z(b)(1)(B) is amended by adding at the end the following new clauses:
“(iv) EXCLUSION OF INDIRECT LAND USE CHANGES.—Notwithstanding clauses (i), (ii), and (iii), the emissions rate shall be adjusted as necessary to exclude any emissions attributed to indirect land use change. Any such adjustment shall be based on regulations or methodologies determined by the Secretary.
“(v) ANIMAL MANURES.—With respect to any transportation fuel which is derived from animal manure, the Secretary—
“(I) shall provide a distinct emissions rate with respect to such fuel based on the specific animal manure feedstock, which may include dairy manure, swine manure, poultry manure, or any other sources as are determined appropriate by the Secretary, and
“(II) notwithstanding subparagraph (E), may provide an emissions rate that is less than zero.”.
(2) CONFORMING AMENDMENT.—Section 45Z(b)(1)(B)(i) is amended by striking “clauses (ii) and (iii)” and inserting “clauses (ii), (iii), (iv), and (v)”.
(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to emissions rates published for transportation fuel produced after December 31, 2025.
(d) Extension of clean fuel production credit.—Section 45Z(g) is amended by striking “December 31, 2027” and inserting “December 31, 2029”.
(e) Preventing double credit.—Section 45Z(d)(5) is amended—
(1) in subparagraph (A)—
(A) in clause (ii), by striking “and” at the end,
(B) in clause (iii), by striking the period at the end and inserting “, and”, and
(C) by adding at the end the following new clause:
“(iv) is not produced from a fuel for which a credit under this section is allowable.”, and
(2) by adding at the end the following new subparagraph:
“(C) REGULATIONS AND GUIDANCE.—The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of subparagraph (A)(iv).”.
(f) Sales to unrelated persons.—Section 45Z(f)(3) is amended by adding at the end the following: “The Secretary may prescribe additional related person rules similar to the rule described in the preceding sentence for entities which are not described in such sentence, including rules for related persons with respect to which the taxpayer has reason to believe will sell fuel to an unrelated person in a manner described in subsection (a)(4).”.
(g) Treatment of sustainable aviation fuel.—
(1) COORDINATION OF CREDITS.—
(A) IN GENERAL.—Section 6426(k) is amended by adding at the end the following new paragraph:
“(4) COORDINATION OF CREDITS.—With respect to any gallon of sustainable aviation fuel in a qualified mixture, this subsection shall not apply to any such gallon for which a credit under section 45Z is allowable (as determined without regard to subsection (a)(1)(A) of such section).”.
(B) EFFECTIVE DATE.—The amendment made by this paragraph shall apply to—
(i) fuel sold or used on or after the date of the enactment of this Act, and
(ii) fuel sold or used before the date of enactment of this Act, but only to the extent that claims for the credit under section 6426(k) of the Internal Revenue Code of 1986 with respect to such sale or use have not been paid or allowed as of such date.
(2) ELIMINATION OF SPECIAL RATE.—
(A) IN GENERAL.—Paragraph (3) of section 45Z(a) is amended to read as follows:
“(3) DEFINITION OF SUSTAINABLE AVIATION FUEL.—For purposes of this section, the term ‘sustainable aviation fuel’ means liquid fuel, the portion of which is not kerosene, which is sold for use in an aircraft and which—
“(A) meets the requirements of—
“(i) ASTM International Standard D7566, or
“(ii) the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1, and
“(B) is not derived from palm fatty acid distillates or petroleum.”.
(B) CONFORMING AMENDMENT.—Section 45Z(c)(1) is amended by striking “, the $1.00 amount in subsection (a)(2)(B), the 35 cent amount in subsection (a)(3)(A)(i), and the $1.75 amount in subsection (a)(3)(A)(ii)” and inserting “and the $1.00 amount in subsection (a)(2)(B)”.
(C) EFFECTIVE DATE.—The amendments made by this paragraph shall apply to fuel produced after December 31, 2025.
(h) Sustainable aviation fuel credit.—Section 6426(k), as amended by the preceding provisions of this Act, is amended by adding at the end the following new paragraph:
“(5) TERMINATION.—This subsection shall not apply to any sale or use for any period after September 30, 2025.”.
(i) Registration of producers of fuel eligible for clean fuel production credit.—
(1) IN GENERAL.—Section 13704(b)(5) of Public Law 117–169 is amended by striking “after ‘section 6426(k)(3)),’” and inserting “after ‘section 40B),’”.
(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to transportation fuel produced after December 31, 2024.
(j) Extension and modification of small agri-biodiesel producer credit.—
(1) IN GENERAL.—Section 40A is amended—
(A) in subsection (b)(4)—
(i) in subparagraph (A), by striking “10 cents” and inserting “20 cents”,
(ii) in subparagraph (B), by inserting “in a manner which complies with the requirements under section 45Z(f)(1)(A)(iii)” after “produced by an eligible small agri-biodiesel producer”, and
(iii) by adding at the end the following new subparagraph:
“(D) COORDINATION WITH CLEAN FUEL PRODUCTION CREDIT.—The credit determined under this paragraph with respect to any gallon of fuel shall be in addition to any credit determined under section 45Z with respect to such gallon of fuel.”, and
(B) in subsection (g), by inserting “(or, in the case of the small agri-biodiesel producer credit, any sale or use after December 31, 2026)” after “December 31, 2024”.
(2) TRANSFER OF CREDIT.—Section 6418(f)(1)(A) is amended by adding at the end the following new clause:
“(xii) So much of the biodiesel fuels credit determined under section 40A which consists of the small agri-biodiesel producer credit determined under subsection (b)(4) of such section.”.
(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to fuel sold or used after June 30, 2025.
(k) Restrictions relating to prohibited foreign entities.—
(1) IN GENERAL.—Section 45Z(f) is amended by adding at the end the following new paragraph:
“(8) RESTRICTIONS RELATING TO PROHIBITED FOREIGN ENTITIES.—
“(A) IN GENERAL.—No credit shall be determined under subsection (a) for any taxable year beginning after the date of enactment of this paragraph if the taxpayer is a specified foreign entity (as defined in section 7701(a)(51)(B)).
“(B) OTHER PROHIBITED FOREIGN ENTITIES.—No credit shall be determined under subsection (a) for any taxable year beginning after the date which is 2 years after the date of enactment of this paragraph if the taxpayer is a foreign-influenced entity (as defined in section 7701(a)(51)(D), without regard to clause (i)(II) thereof).”.
(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to taxable years beginning after the date of enactment of this Act.
SEC. 70522. Restrictions on carbon oxide sequestration credit.
(a) Restrictions relating to prohibited foreign entities.—Section 45Q(f) is amended by adding at the end the following new paragraph:
“(10) RESTRICTIONS RELATING TO PROHIBITED FOREIGN ENTITIES.—No credit shall be determined under subsection (a) for any taxable year beginning after the date of enactment of this paragraph if the taxpayer is—
“(A) a specified foreign entity (as defined in section 7701(a)(51)(B)), or
“(B) a foreign-influenced entity (as defined in section 7701(a)(51)(D), determined without regard to clause (i)(II) thereof).”.
(b) Parity for different uses and utilizations of qualified carbon oxide.—Section 45Q is amended—
(1) in subsection (a)—
(A) in paragraph (2)(B)(ii), by adding “and” at the end,
(B) in paragraph (3), by striking subparagraph (B) and inserting the following:
“(B) (i) disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in clause (ii) or (iii),
“(ii) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or
“(iii) utilized by the taxpayer in a manner described in subsection (f)(5).”, and
(C) by striking paragraph (4),
(2) in subsection (b)—
(A) in paragraph (1)—
(i) by striking subparagraph (A) and inserting the following:
“(A) IN GENERAL.—Except as provided in subparagraph (B) or (C), the applicable dollar amount shall be an amount equal to—
“(i) for any taxable year beginning in a calendar year after 2024 and before 2027, $17, and
“(ii) for any taxable year beginning in a calendar year after 2026, an amount equal to the product of $17 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting ‘2025’ for ‘1990’.”, and
(ii) in subparagraph (B), by striking “shall be applied” and all that follows through the period and inserting “shall be applied by substituting ‘$36’ for ‘$17’ each place it appears.”,
(B) in paragraph (2)(B), by striking “paragraphs (3)(A) and (4)(A)” and inserting “paragraph (3)(A)”, and
(C) in paragraph (3), by striking “the dollar amounts applicable under paragraph (3) or (4)” and inserting “the dollar amount applicable under paragraph (3)”,
(3) in subsection (f)—
(A) in paragraph (5)(B)(i), by striking “(4)(B)(ii)” and inserting “(3)(B)(iii)”, and
(B) in paragraph (9), by striking “paragraphs (3) and (4) of subsection (a)” and inserting “subsection (a)(3)”, and
(4) in subsection (h)(3)(A)(ii), by striking “paragraph (3)(A) or (4)(A) of subsection (a)” and inserting “subsection (a)(3)(A)”.
(c) Conforming amendment.—Section 6417(d)(3)(C)(i)(II)(bb) is amended by striking “paragraph (3)(A) or (4)(A) of section 45Q(a)” and inserting “section 45Q(a)(3)(A)”.
(d) Effective dates.—
(1) RESTRICTIONS RELATING TO PROHIBITED FOREIGN ENTITIES.—The amendment made by subsection (a) shall apply to taxable years beginning after the date of enactment of this Act.
(2) PARITY FOR DIFFERENT USES AND UTILIZATIONS OF QUALIFIED CARBON OXIDE.—The amendments made subsections (b) and (c) shall apply to facilities or equipment placed in service after the date of enactment of this Act.
SEC. 70523. Intangible drilling and development costs taken into account for purposes of computing adjusted financial statement income.
(a) In general.—Section 56A(c)(13) is amended—
(1) by striking subparagraph (A) and inserting the following:
“(A) reduced by—
“(i) depreciation deductions allowed under section 167 with respect to property to which section 168 applies to the extent of the amount allowed as deductions in computing taxable income for the year, and
“(ii) any deduction allowed for expenses under section 263(c) (including any deduction for such expenses under section 59(e) or 291(b)(2)) with respect to property described therein to the extent of the amount allowed as deductions in computing taxable income for the year, and”, and
(2) by striking subparagraph (B)(i) and inserting the following:
“(i) to disregard any amount of—
“(I) depreciation expense that is taken into account on the taxpayer’s applicable financial statement with respect to such property, and
“(II) depletion expense that is taken into account on the taxpayer’s applicable financial statement with respect to the intangible drilling and development costs of such property, and”.
(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.
SEC. 70524. Income from hydrogen storage, carbon capture, advanced nuclear, hydropower, and geothermal energy added to qualifying income of certain publicly traded partnerships.
(a) In general.—Section 7704(d)(1)(E) is amended—
(1) by striking “income and gains derived from the exploration” and inserting the following: “income and gains derived from—
“(i) the exploration”.
(2) by inserting “or” before “industrial source”, and
(3) by striking “or the transportation or storage” and all that follows and inserting the following:
“(ii) the transportation or storage of—
“(I) any fuel described in subsection (b), (c), (d), (e), or (k) of section 6426, or any alcohol fuel defined in section 6426(b)(4)(A) or any biodiesel fuel as defined in section 40A(d)(1) or sustainable aviation fuel as defined in section 40B(d)(1), or
“(II) liquified hydrogen or compressed hydrogen,
“(iii) in the case of a qualified facility (as defined in section 45Q(d), without regard to any date by which construction of the facility or equipment is required to begin) not less than 50 percent of the total carbon oxide production of which is qualified carbon oxide (as defined in section 45Q(c))—
“(I) the generation, availability for such generation, or storage of electric power at such facility, or
“(II) the capture of carbon dioxide by such facility,
“(iv) the production of electricity from any advanced nuclear facility (as defined in section 45J(d)(2)),
“(v) the production of electricity or thermal energy exclusively using a qualified energy resource described in subparagraph (D) or (H) of section 45(c)(1), or
“(vi) the operation of energy property described in clause (iii) or (vii) of section 48(a)(3)(A) (determined without regard to any requirement under such section with respect to the date on which construction of property begins).”.
(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.
SEC. 70525. Allow for payments to certain individuals who dye fuel.
(a) In general.—Subchapter B of chapter 65, as amended by the preceding provisions of this Act, is amended by adding at the end the following new section:
“SEC. 6435. Dyed fuel.
“(a) In general.—If a person establishes to the satisfaction of the Secretary that such person meets the requirements of subsection (b) with respect to diesel fuel or kerosene, then the Secretary shall pay to such person an amount (without interest) equal to the tax described in subsection (b)(2)(A) with respect to such diesel fuel or kerosene.
“(b) Requirements.—
“(1) IN GENERAL.—A person meets the requirements of this subsection with respect to diesel fuel or kerosene if such person removes from a terminal eligible indelibly dyed diesel fuel or kerosene.
“(2) ELIGIBLE INDELIBLY DYED DIESEL FUEL OR KEROSENE DEFINED.—The term ‘eligible indelibly dyed diesel fuel or kerosene’ means diesel fuel or kerosene—
“(A) with respect to which a tax under section 4081 was previously paid (and not credited or refunded), and
“(B) which is exempt from taxation under section 4082(a).
“(c) Cross reference.—For civil penalty for excessive claims under this section, see section 6675.”.
(b) Conforming amendments.—
(1) Section 6206 is amended—
(A) by striking “or 6427” each place it appears and inserting “6427, or 6435”, and
(B) by striking “6420 and 6421” and inserting “6420, 6421, and 6435”.
(2) Section 6430 is amended—
(A) by striking “or” at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting “, or”, and by adding at the end the following new paragraph:
“(4) which are removed as eligible indelibly dyed diesel fuel or kerosene under section 6435.”.
(3) Section 6675 is amended—
(A) in subsection (a), by striking “or 6427 (relating to fuels not used for taxable purposes)” and inserting “6427 (relating to fuels not used for taxable purposes), or 6435 (relating to eligible indelibly dyed fuel)”, and
(B) in subsection (b)(1), by striking “6421, or 6427,” and inserting “6421, 6427, or 6435,”.
(4) The table of sections for subchapter B of chapter 65, as amended by the preceding provisions of this Act, is amended by adding at the end the following new item:
“Sec. 6435. Dyed fuel.”.
(c) Effective date.—The amendments made by this section shall apply to eligible indelibly dyed diesel fuel or kerosene removed on or after the date that is 180 days after the date of the enactment of this section.