IRS Form 7218 – The Clean Fuel Production Credit under IRC Section 45Z is one of the most valuable incentives for U.S. producers of low-carbon transportation fuels. IRS Form 7218 is the official form used to claim this credit on your tax return.
This guide explains everything producers need to know in 2026: eligibility rules, credit calculation, step-by-step Form 7218 instructions, registration requirements, recent legislative changes, and how to avoid common pitfalls. All information is based on official IRS sources, including the December 2025 Form 7218 instructions and the latest proposed regulations.
What Is the Clean Fuel Production Credit?
The Section 45Z credit rewards the domestic production and sale of qualified clean transportation fuel with a lifecycle greenhouse gas (GHG) emissions rate of 50 kg CO₂e per mmBTU or less. It applies to fuel produced after December 31, 2024, and sold by December 31, 2029.
The credit is divided into two categories:
- Non-SAF transportation fuel (e.g., renewable diesel, biodiesel, ethanol, renewable natural gas)
- Sustainable Aviation Fuel (SAF)
The credit is a general business credit reported on Form 3800 and can be transferred or taken as an elective payment by certain entities.
Who Can Claim the Credit? Key Eligibility Rules
To qualify, you must meet all of the following:
- Qualified Facility — The fuel must be produced at a U.S. facility (including territories) that is not claiming credits under Section 45V (clean hydrogen), Section 45Q (carbon capture), or the energy investment credit for clean hydrogen facilities in the same year.
- Producer Registration — You must be registered with the IRS using Form 637 under Activity Letter “CN” (non-SAF) and/or “CA” (SAF) before production begins.
- Qualified Sale — The fuel must be sold to an unrelated person for use in a trade or business, production of a fuel mixture, or retail sale into a vehicle/aircraft fuel tank.
- Emissions Rate — ≤ 50 kg CO₂e per mmBTU (determined via the annual IRS emissions rate table or a Provisional Emissions Rate/PER).
- Feedstock Rules (post-2025) — Fuel produced after December 31, 2025, must be derived exclusively from feedstock grown or produced in the United States, Mexico, or Canada.
- Foreign Entity Restrictions — Specified foreign entities are barred after July 4, 2025; foreign-influenced entities after July 4, 2027.
- No Double-Dipping — Fuel cannot be produced from another fuel that already qualified for the 45Z credit, and co-processing rules apply.
Note: A separate Form 7218 is required for each qualified facility.
How the Credit Is Calculated (2025–2029)?
Credit = Applicable Amount × Emissions Factor × Gallons (or gallon equivalents)
Emissions Factor = (50 kg CO₂e/mmBTU – Emissions Rate) ÷ 50 kg CO₂e/mmBTU
(Rounded to the nearest 0.1; cannot be negative after 2025 except for certain animal-manure pathways.)
Applicable Amounts (before inflation adjustment)
- 2025 sales:
- Non-SAF: $0.20 (base) or $1.00 (with prevailing wage & apprenticeship – PWA)
- SAF: $0.35 (base) or $1.75 (with PWA)
- 2026–2029 sales: $0.20 (base) or $1.00 (with PWA) for both SAF and non-SAF (SAF bonus eliminated after 2025).
2025 Inflation-Adjusted Rates (factor = 1.0611 per Notice 2025-37):
- Non-SAF base: $0.21/gal
- Non-SAF + PWA: $1.06/gal
- SAF base: $0.37/gal
- SAF + PWA: $1.86/gal
The IRS publishes an annual emissions rate table (first table in Notice 2025-11) using the 45ZCF-GREET model for most fuels and CORSIA models for SAF. Producers of fuels not on the table may petition for a Provisional Emissions Rate (PER).
How to Fill Out IRS Form 7218 (Step-by-Step)?
Part I – Facility and Other Information
- Line 1: Registration number (if electing transfer or elective payment)
- Line 2: Facility description, owner (if different), address, latitude/longitude
- Lines 3–4: Construction start and placed-in-service dates
- Line 5: Producer registration number and approval date for CA/CN
- Line 6: Check if using PER
- Line 7: Check “Yes” if PWA requirements are met (requires Form 7220)
Part II – Credit Calculation
- Line 1: Total from Part III, line 25(h)
- Line 2: Pass-through credits from K-1s or 1099-PATR
- Lines 3–5: Flow-through rules for partnerships, S corps, cooperatives, estates, and trusts
Part III – Fuel Produced and Sold (one line per fuel type/feedstock/year)
- (a) Type of fuel (non-SAF or SAF)
- (b) Feedstock
- (c) Calendar year sold
- (d) Emissions rate or PER (kg CO₂e/mmBTU)
- (e) Emissions factor calculation
- (f) Gallons or gallon equivalents sold
- (g) Inflation-adjusted applicable amount
- (h) Credit for this line
- Line 25: Total of column (h) → enters Part II, line 1
Important: Attach a separate Form 7218 for each facility. Partnerships and S corporations generally report their share on Schedule K unless transferring the credit.
Prevailing Wage & Apprenticeship (PWA) Requirements
Meeting PWA requirements multiplies the base credit by 5×.
- Prevailing Wage: All laborers and mechanics on construction, alteration, or repair must be paid at least the DOL-determined prevailing rates.
- Apprenticeship: 10–15% of total labor hours (depending on construction start date) must be performed by qualified apprentices from registered programs.
Facilities placed in service before 2025 are subject to PWA only for alteration/repair work in tax years beginning after 2024.
Registration and Recordkeeping
- Register via Form 637 (Activity Letters CA and/or CN).
- Keep detailed records of production, sales, feedstocks, emissions certifications, and PWA compliance.
- SAF producers must obtain annual third-party certification from a qualified certifier.
Recent Updates (as of February 2026)
- One Big Beautiful Bill (2025): Extended credit to 2029, limited post-2025 feedstocks to North America, removed SAF bonus after 2025, added foreign-entity restrictions.
- Proposed Regulations (Feb 2026): Clarify qualified sales (including to resellers), facility definitions, emissions rate rules, and certification. Comment period is open.
- Form 7218 Revision (Sept 2025): Clarified pass-through reporting on a separate Form 7218.
Common Questions
Can individuals claim this credit?
Rarely — it is primarily for businesses. Individuals may claim pass-through amounts from partnerships or S corps.
Do I need a separate form per facility?
Yes.
What if my fuel is not on the emissions rate table?
File a petition for a Provisional Emissions Rate (PER) with the IRS after obtaining a value from the Department of Energy.
Where do I find the latest inflation adjustments and emissions table?
See IRS.gov/Form7218, Notice 2025-37 (inflation), and Notice 2025-11 (emissions table).
Download the Official Documents
- Form 7218 (PDF): https://www.irs.gov/pub/irs-pdf/f7218.pdf
- Instructions for Form 7218 (Dec 2025): https://www.irs.gov/pub/irs-pdf/i7218.pdf
- About Form 7218: https://www.irs.gov/forms-pubs/about-form-7218
- Clean Fuel Production Credit Overview: https://www.irs.gov/credits-deductions/clean-fuel-production-credit
Final Advice
The Clean Fuel Production Credit can be worth over $1 per gallon for low-carbon fuels when PWA requirements are met. However, the rules are complex, especially around registration, emissions substantiation, feedstock restrictions, and PWA compliance.
Consult a tax professional or energy tax attorney familiar with Section 45Z before claiming the credit. Always use the latest IRS forms and instructions, as guidance continues to evolve.
Stay updated: Bookmark IRS.gov/Form7218 and check for new Notices or final regulations.
This article reflects the most current official IRS guidance and proposed regulations as of February 2026. Tax laws can change — verify with a qualified advisor for your specific situation.