Most of the buzz around the “One Big Beautiful Bill” (OBBB) has centered on the 45Z Clean Fuels Production Credit — and for good reason. But this massive, 800+ page piece of legislation also includes a host of tax updates that could meaningfully impact biofuels producers and the broader ag industry. Some changes are here to stay; others, not so much. Either way, they’re worth a closer look.

1. “Permanent” Changes — for Now

In tax law, “permanent” often just means “until Congress changes its mind.” Still, several provisions in the OBBB can deliver real, long-term advantages for biofuel operations and cooperatives:

  • 100% bonus depreciation is now permanent for qualifying property placed in service after January 19, 2025.
  • There’s also temporary 100% depreciation for manufacturing and agricultural facilities built between January 20, 2025, and January 19, 2029 — a major boost for producers investing in new infrastructure.
  • Section 179 expensing limits have increased to $2.5 million (for up to $4 million in purchases), indexed for inflation.
  • Immediate R&D expensing is back, with a catch-up option for costs previously capitalized.
  • The 20% Qualified Business Income (QBI) deduction is here to stay, along with expanded phase-in thresholds.
  • And for pass-through businesses, PTE payments remain deductible, with the SALT cap temporarily raised to $40,000 (through 2029).

Together, these updates can improve cash flow, simplify investment decisions, and encourage continued innovation in renewable energy and ag production.

2. New Support for Agriculture and Biofuels

Beyond the tax code, the OBBB directs $66 billion in new funding toward farm programs — the largest increase since 2002. That includes extended USDA conservation, trade, and research programs, plus higher limits for Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC).

The 45Z Clean Fuels Production Credit gets an extension through 2029, though the top rate drops from $1.75 to $1.00 per gallon. This change keeps the incentive alive but makes smart tax planning and operational efficiency even more critical for maintaining profitability.

3. No Tax on Overtime Pay

One headline provision — no federal tax on overtime pay — may sound like a win for ag employers, but it’s more nuanced.

  • The deduction is capped at $12,500 for individuals or $25,000 for couples.
  • It phases out for higher-income earners ($150,000 single / $300,000 joint).
  • Payroll taxes like Social Security and Medicare still apply.

Before making any staffing or pay adjustments, it’s worth reviewing how this change might actually affect your workforce.

4. Don’t Forget the State Layer

While OBBB changes are federal, states won’t all follow suit. For example, Iowa will replace its Research Activities Credit with a new R&D Tax Credit in 2026 (capped at $40 million statewide), while Nebraska’s approach to bonus depreciation remains mixed. If your operation spans multiple states, you’ll want to understand how each jurisdiction aligns — or doesn’t — with the new federal rules.

The Main Takeaway

For biofuel producers, the OBBB reinforces one key takeaway: your tax strategy is now more important than ever. Whether you’re planning a facility upgrade, maximizing R&D deductions, or navigating 45Z credits, taking a proactive approach can help you unlock new efficiencies — and keep your business well-positioned in a changing energy landscape.

Contact a Pinion advisor to talk through how to make the most of these changes.