IRS Notice 2026-53: Clean Fuel Tax Credit for Farms Explained

IRS Notice 2026-53 Clarifies Clean Fuel Tax Credit for Farms

The U.S. Internal Revenue Service (IRS) has released Notice 2026-53, offering important guidance on the Section 45Z Clean Fuel Production Credit. This notice specifically addresses how farms can benefit from turning animal manure into clean fuel. It identifies dairy and swine manure as key feedstocks for this credit, potentially providing new financial incentives for agricultural operations. The guidance aims to support the domestic biofuels market and encourage the use of renewable natural gas (RNG) produced from livestock waste.

Manure as a Primary Feedstock

Notice 2026-53, issued on September 8, 2026, officially lists dairy and swine manure in its emissions-rate table for the Section 45Z credit. This table is used to calculate the value of the credit, giving a defined place to projects that convert livestock waste into renewable energy. The notice applies to activities on or after its publication date. It also covers regenerative agricultural practices alongside manure-derived fuels.

Documenting Farm Practices is Key

A critical aspect of the new guidance is the requirement for documented manure practices. To qualify for avoided emissions calculations, farms must be able to prove how they handled manure before fuel production. This means that simply claiming emissions were avoided is not enough; specific records of practices like open lagoons, deep pits, or solid storage systems are necessary. Without this substantiation, the emissions reductions associated with a farm’s specific manure handling cannot be included in the credit calculation.

A Path to Negative Emissions for Manure Fuel

For fuel produced after December 31, 2025, animal manure may qualify for negative emissions rates. The IRS and Treasury have stated that these negative rates are generally prohibited, but an exception is made for transportation fuel derived from animal manure. This distinction is significant for renewable natural gas projects that use anaerobic digesters to capture methane from livestock waste. The policy is designed to encourage more investment in digester technology and RNG projects on farms.

Future Additions to Feedstock List

Currently, the emissions-rate table in Notice 2026-53 includes dairy and swine manure. However, the Treasury and IRS have indicated that they plan to update the 45ZCF-GREET model later in 2026. These updates are expected to add poultry manure and beef manure as primary feedstocks. The Department of Energy’s model has already incorporated renewable natural gas pathways for other organic wastes, including food scraps and corn stover, alongside dairy and swine manure.

Industry Response to the Guidance

The American Biogas Council has welcomed the release of Notice 2026-53, stating that it provides a clearer pathway for renewable natural gas producers to utilize the Section 45Z Clean Fuel Production Tax Credit. The council noted that the guidance includes provisions they requested to encourage investment in new biogas systems that convert organic waste into RNG for transportation fuel. Many biogas producers had been waiting for this clarification before claiming the credit, and the new provisions are seen as a positive step for the industry.

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