Unlocking 45Z: Why Your Tax Credit Depends on a Farmer’s Record
By Jayce Hafner, CEO, FarmRaise
Special to The Digest
I’m a farmer’s daughter, born and raised in the heart of the Shenandoah Valley, where I live today. As a kid, I helped my dad plant clover and get our steers to market. Working together, farmer neighbors traded stories of farm management: new tillage practices, beef genetics that hold up to heat, fences built to stand the test of a rambunctious bull. I quickly learned that farms have two layers of value: the land itself and how we work it. Today, this “how” underpins the Clean Fuel Production Credit (Section 45Z), and farmer practice documentation will unlock this game-changing opportunity for ethanol plants and working lands across America.
What 45Z means for your balance sheet
Before we get into what this means for implementation (and, critically, how to partner with farmers to maximize the credit), we must appreciate the scale of the 45Z opportunity. Many ethanol plants can qualify for the Clean Fuel Production Credit, earning, as a rule of thumb, about two cents per gallon for every point they lower a carbon intensity (CI) score. For a typical dry mill, with long-run margins averaging about 13 cents a gallon, a ten-point CI reduction is worth nearly 20 cents a gallon. On a hundred million gallons of ethanol production per year, that is an additional twenty million dollars annually. 45Z is a powerful economic lever, codified in federal law through 2029.
Lowering CI depends on the farmer employing agronomic practices like nutrient management, reduced tillage, and cover cropping, practices that many of your supply-shed growers have likely been using for years. USDA’s final feedstock rule requires supply chains to record these practices with field-level granularity, placing the burden of documentation on the producer. Given the critical role that American farmers will play in unlocking 45Z, plants that share this credit most generously with their producers will likely benefit from the highest degree of participation, CI reduction, and supply-chain loyalty. Working together, ethanol plants and producers can meaningfully unlock this credit while rewarding producers adequately for stewardship that promotes soil health across generations. 45Z is American dynamism at work.
What’s required to maximize the credit
USDA’s final rule spells out what’s required to build audit-ready documentation underpinning a CI score. Every participating producer selling reduced-CI crops is required to prepare a Biofuel Feedstock Report certified under penalties of perjury, with field-level practice data that feeds into the calculator. These data points include expected yield per acre and actual yield, nitrogen inputs, cover crop and tillage practices, and applied manure. Each input must be supported by field- or farm-level evidence. Permissible records include FSA and crop-insurance records, farm-management software, precision-agriculture data, application records, receipts, remotely sensed data, and georeferenced and timestamped photographs. These records must be retained for five years and made accessible to a third-party verifier. Every verifier I speak with underscores that they cannot calculate a score based on aggregated data or proprietary algorithms. They need source documentation: a record backing the input or evidence behind the practice.
We’re also working with a ticking clock. Evidence is best captured in season, which means producers in your supply chains should be compiling their data files now. Cover crop seed goes in during the fall planting window, and the nitrogen application decisions that drive a significant portion of CI reduction are being made throughout the growing cycle. Instead of reconstructing a haphazard data file from memory, strong files are built on real-time evidence and documentation. Compiling this data file takes meaningful effort, and most farmers don’t get into agriculture because they love paperwork. Making documentation straightforward for producers and clean for verifiers is a crucial part of capturing the full potential of 45Z.
What every ethanol producer should do before September
The ethanol plants poised to capture this credit will make one important decision before fall: they’ll choose a system of record for farmer data. A strong system will pair every practice with an artifact: a seed-purchase receipt, an application record, a geotagged photo, a yield record, each tied to a field identifier that reconciles across your enrollment system, your delivery tickets, and the grower’s own field names. In our experience, growers who trust the system report accurately, on time, year over year.
That conviction is exactly why we built the FarmRaise Passport. We are not an MRV platform; our job is to gather and clean the evidence, attribute each artifact to its source, and provide the data when a verifier asks. Today, we support audit-ready agronomic data collection across more than half a million acres in North America, with partners like Blue Diamond Growers and Avalo, and we designed our architecture in direct consultation with verifiers. We’ve achieved high levels of farmer participation because our platform is designed for usability; farmers connect their systems, enter data once, and automate reporting without an administrative overload.
Treasury and IRS are still finalizing 45Z guidance, and the payment mechanics will likely evolve. What will not change is the practices farmers are implementing across fields between now and then. The proof unlocks the premium, and the proof is being planted this fall. The farmers and the ethanol producers who document the story of the land today will be the ones ready to be paid for it.
About Farm Raise. FarmRaise Passport is the digital infrastructure connecting a growing community of 20K+ innovative farmers to the program administrators, supply chain partners, and lenders who need proof of their conservation and sustainability practices. Built by a team of farmer-obsessed software engineers, business managers, and yes, farmers, FarmRaise Passport turns scattered farm paperwork into one portable, decision-grade record, giving partners the USDA program documentation, Section 45Z credit verification, and Scope 3 disclosure data they need, without adding to farmers’ workload.
Category: Thought Leadership
