After months of speculation, the U.S. House of Representatives has unveiled a wide-ranging ‘proposed’ tax and spending package. The bill seeks to extend and enhance a number of business-friendly tax credits — particularly those tied to clean energy — while also locking in certain provisions from the 2017 Tax Cuts and Jobs Act.

 “Overall, this proposed bill seems to be a mixed bag for biofuels businesses,” says Donna Funk, lead biofuels advisor at Pinion.

“While the retention of the 45Z tax credit has been spared and its expiration potentially extended, the proposed elimination of transferability could sting many in the industry significantly.  The other business tax components of the bill all seem to be positive for the industry.”

Pinion tax advisors have analyzed the proposed tax legislation with a close eye on what it means for biofuel producers. Below is a breakdown of key elements:

Section 45Z Clean Fuel Production Tax Credit

  • Extension: The clean fuel production tax credit was originally set to expire after 2026. The House proposal would extend the credit through 2031.
  • Protecting American Growers: For fuel sold after December 31, 2025, the House proposal would permit the 45Z credit only for fuel derived from feedstock produced or grown in the United States, Mexico, or Canada.
  • Modifying Published Emissions Rates: The House bill would modify emission rates to exclude emissions attributable to indirect land-use changes, and requires regulations to list distinct emissions rates for specific manure types.

“Tax policy is one of the most powerful tools available to drive innovation and investment in the biofuels sector. Extending and enhancing credits like 45Z is not just good policy—it’s essential for the future of clean energy in America,” said Brian Kuehl, Director of Government and Public Affairs at Pinion.

Not All Good News for Biofuels

  • The proposal would terminate the credit for alternative fuel vehicle refueling property for property placed in service after December 31, 2025.
  • The House bill would also eliminate transferability of many environmental incentives – of particular note is the 45Q credit for carbon oxide sequestration. 45Q credits will be non-transferable for equipment whose construction begins two years after the bill is signed into law.
  • Ending Transferability: After December 31, 2027 the 45Z credit would be non-transferable.

Good News for Business Generally

Overall, the bill provides relief from sunsetting tax provisions, and makes many beneficial policies permanent.

The bill also provides some remarkable new benefits for American manufacturers, which Pinion advisors will be watching closely. Expanded availability of the cash method of accounting will provide significant tax accounting flexibility to manufacturers. For businesses looking to grow, we will be monitoring the new “qualified production property” deduction, which would effectively allow for full first-year depreciation for new manufacturing facilities if construction begins before January 1, 2030.

Other notables:

  • Making Permanent the Qualified Business Income Deduction: The proposal would permanently extend the deduction for qualified business income and increase the deduction from 20% to 23%.
  • Permanently Extending Higher Estate and Gift Exemptions: The proposal permanently increases the estate and gift tax exclusion amount to $15M per person, beginning in 2026. The exemption is indexed for inflation beginning in 2027.
  • 100% Bonus Depreciation Through 2029: The proposal extends 100% bonus depreciation for qualified property (including fruit- and nut-bearing trees and vines) with a useful life of 20 years or less which is placed in service between January 20, 2025 and December 31, 2029. For property placed in service after 2029, the bonus depreciation percentage is zero.
  • Increased First-Year Expensing Limits: The proposal would increase the Section 179 expensing limits, allowing a maximum deduction of $2.5M, with a phase-out limit of $4M.
  • Return of Research Expenditure Deductions: For tax years beginning after December 31, 2024 and before January 1, 2030, the proposal permits taxpayers to elect to immediately deduct domestic research and experimentation expenditures. While this is a step in the right direction, it is only a temporary fix.
  • Changes to the State and Local Tax (SALT) Deduction Cap: The House bill makes two big changes.
    • Increased Deduction Limit: The proposal increases the deduction limitation to $30,000 ($15,000 if MFS) for taxpayers with income below $400,000, with a phase-out down to the original $10,000 cap for high-income individuals.
    • Banning Deductibility of PTE Taxes: The proposal prevents the use of state elective pass-through entity taxes to deduct more than the new threshold by deducting those taxes at the entity level. Instead, those taxes must be passed out to owners and used in computing the owner’s personal deduction limitation.
  • Qualified Production Property Deduction: The proposal creates a new, bonus depreciation-like first-year depreciation deduction for nonresidential real property that constitutes an integral part of a manufacturing activity, refining activity, or agricultural or chemical production activity. The deduction is 100% of the cost of the property.
    • Targeted to New Construction: Construction must begin between January 20, 2025 and December 31, 2029, and property must be placed in service before January 1, 2033.
    • Purchased property, kind of? Qualified property may be purchased rather than constructed, but is only qualified if the property was not used in a qualified production activity by any person at any time between January 1, 2021 and May 12, 2025.
  • Expanded Cash Method Availability for Manufacturers: For tax years beginning after December 31, 2025, the gross receipts threshold for determining a manufacturer’s ability to use the cash method of accounting is $80M (the regular threshold is $25M).

Next Steps

While the House’s tax bill lays groundwork for significant tax reform, there are significant hurdles to overcome before it moves to the Senate.

“The key word for this new tax legislation is proposed,” notes Brian Kuehl, Pinion’s Director of Government and Public Affairs.

“Biofuels have long enjoyed bipartisan support because they benefit rural communities, reduce emissions, and strengthen national security. We need to remind lawmakers that this is a win-win opportunity.”

“With deadlines looming and investment decisions hanging in the balance, the time to act is now. Delays or watered-down provisions could cost the industry years of progress. While House leaders are pushing for the package to be completed by July 4, we believe the process will likely not move that fast and that final passage is more likely in September or October.”

Republican leaders are aiming to bring the bill to the floor for a vote as early as next week. First, the House Budget Committee will work to consolidate its elements into a comprehensive package, followed by review from the House Rules Committee. Speaker Mike Johnson has pushed to pass tax legislation by Memorial Day and the White House has expressed a desire to see passage by July 4. House Ways and Means Chair Jason Smith (R-Mo.) is less bullish on a quick timeline, saying that he would like to pass a bipartisan tax package before the end of the year.

Impacts on Other Industries

Pinion’s tax advisors have also provided an overview of how the proposed tax provisions will impact businesses in agriculture, manufacturing, and other industries:

Pinion’s government and public affairs team will continue to monitor the proposed tax bill and its impact on various businesses.

Reach out to a Pinion advisor with questions or concerns around your biofuel business’ tax strategy.