IRS Issues Guidance on Sustainable Aviation Fuel Tax Credit

The IRS has issued guidance on new sustainable aviation fuel tax credits that take effect on January 1, 2023. The guidance, Notice 2023-06, includes the following:

• Definitions of which products qualify as sustainable aviation fuel
• Use of CORSIA to determine the GHG emissions factor for the additional credit portion
• A statement that sustainable aviation fuel (described as a SAF synthetic blending component) is not itself a taxable fuel unless placed directly into the fuel tank of a vehicle, but that SAF blends are taxable fuels
• A new “SA” designation on IRS Form 637 for all producers and importers of SAF with a detailed list of the information required to be filed with an application
• A statement that all SAF blenders must be registered on IRS Form 637 with either an “S” or “M” designation for blending taxable fuel, the letter being determined by whether blending takes place within or outside the bulk transfer terminal system
• Requirements for a Certificate for SAF and Certificate for SAF Reseller similar to the biodiesel and renewable diesel certificates
• Confirmation that the excise tax credit must first be offset against excise tax liability on Form 720 before being claimed as a refund on Form 8849, Schedule 3. Claims for Q1 2023 can be filed on a Form 720X once the Form 637 activity letter is received

Comments will be accepted through February 17, 2023 on any issues that may need further clarification or guidance as they relate to this credit. For information, contact us.

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