The Tax Broker/Advisor as Quarterback in Section 45Z Credit Transactions
Navigating the Section 45Z tax credit is a game of inches; it requires a transaction “quarterback” to align the interests and priorities of biofuel producers and corporate taxpayers.
The Section 45Z Clean Fuel Production Credit, which was introduced by the Inflation Reduction Act (IRA) in 2022, awards clean fuel producers a per-gallon credit based on the carbon intensity score (CI score) of their fuel. The credits are transferable under Section 6418 and have opened the door for a diverse range of corporate taxpayers. Much like a quarterback who coordinates the entire offense and must understand the roles of each position, a tax advisor must understand how each piece fits to complete a §45Z transaction.
Understanding the Credit: A Shifting Playbook
Understanding §45Z requires tracking a rapidly evolving regulatory "playbook" that has shifted significantly since its inception. While the IRA laid the initial groundwork, the credit underwent a major transformation with the passage of the One Big Beautiful Bill Act (OBBBA) in 2025, including a 2-year extension of the §45Z through 2029 rather than the initial sunset of 2027. The most recent "audible" came with the proposed regulations released on Feb. 4, 2026. These proposed regulations provided the administrative framework for changes introduced in the OBBBA, notably resolving the definition of a "qualified sale" that allows sales to intermediaries to qualify for the credit. For the tax advisor, these updates represent more than just compliance. They are the new rules of the game that dictate how a deal must be structured.
Structuring and Diligence
The advisor’s primary value is realized in the structuring and diligence phases of the transaction. No two transactions follow the exact same script, requiring the advisor to navigate a unique set of nuances for every deal. The advisor must ensure that a variety of moving parts are aligned to establish a smooth transaction. This involves coordinating several deliverables from third-party experts to de-risk the transaction for the buyer. The first is confirming Prevailing Wage and Apprenticeship (PWA) compliance, which is the baseline requirement for unlocking the 5-times bonus credit. Next, it is necessary to pair the biofuel producer with a qualified CI score verifier to write a verification report and obtain a "safe harbor" for their emissions rate, which is the heart of what generates the §45Z credit. Lastly, to formalize the deal’s legal standing, the advisor assists the producer in engaging a specialized CPA or law firm to draft a tax eligibility opinion, validating that the project meets all statutory IRS requirements. On some deals, the advisor also manages the procurement of tax credit insurance, working alongside brokers to add additional financial protection to the transaction. Beyond these main deliverables, the advisor works closely with the producer to confirm their facility is appropriately registered to generate the credit, as well as providing additional diligence to the buyer, which includes organizational documents, audited financials, production/sales data, and more. By synchronizing these deliverables, the advisor transforms a fragmented pile of diligence into an asset that corporate buyers can acquire with confidence.
Advisor’s Value
Ultimately, the advisor "quarterback" role is the difference between a deal that stalls and one that delivers a win for both parties. As the Section 45Z market continues to mature, the tax advisor remains the leader on the field, ensuring that every bit of carbon reduction is converted into financial value. The advisor’s ability to bridge production data with tax law ensures that Section 45Z serves its true purpose of driving financial reward toward the producers leading the energy transition.
For more information, reach out to our renewables experts:
Faith Larson, faith@mickco.com or 605-977-4873 ext. 4.
Nick Scott, nick@mickco.com or 605-977-4873 ext. 5.
Colton Hellwig, colton@mickco.com or 605-977-4873 ext. 7.
The Company should seek independent legal, tax, and accounting advice as part of this process. Mickelson & Company is not providing legal or accounting services.