IRS Releases New Guidance on Emissions Rate Determinations Under IRC Section 45Z

• The addition of dairy and swine manure to the annual emissions rates table as primary feedstocks to produce renewable natural gas (RNG) eligible for CFPCs;
• The recognition of “farm-specific prior manure management practices” as an alternate fate in determining avoided emissions with respect to diary and swine manure; and
• The provision of safe harbor relief for regenerative agricultural practices used in the production of certain feedstock crops.

The new guidance also provides some clarifications with respect to the application of various amendments to IRC section 45Z passed as part of last year’s One Big Beautiful Bill Act (OBBBA).

2026 Annual Emissions Rates Table
Attached as an Exhibit to Notice 2026-53 is the annual emissions rates table for the 2026 calendar year. Such table is statutorily required to be published each year and presumably was delayed until now as the IRS considered the impact of legislative changes under the OBBBA. In this regard, as amended by the OBBBA, IRC section 45Z requires Treasury to provide a distinct emissions rate with respect to any transportation fuel derived from animal manure based on the specific feedstock, which may include dairy manure, swine manure, poultry manure or any unlisted sources determined to be appropriate by Treasury.

Based on the legislative directive, the 2026 annual emissions table specifically identifies dairy and swine manure as primary feedstocks for fuel produced after December 31, 2025, although poultry and unlisted sources of manure are not addressed. Pursuant to the table, emissions rates for RNG produced from dairy or swine manure are to be determined using the most recent 45ZCF-GREET model, which recently was released by the Department of Energy (DOE) in connection with Notice 2026-53, along with a log of changes from the prior version of the model. Among the significant changes in the new version is the addition pathways for RNG produced from dairy and swine manure via anaerobic digestion and upgrading.

For types of animal manure not included in the 2026 annual emissions rate table, producers are invited to apply to the DOE for a “provisional emissions rate” (PER). The IRS stated, however, that a further revised 45ZCF-GREET model is expected to be released later in 2026 that would include poultry manure and beef manure as primary feedstocks. Accordingly, the IRS suggested that producers wait for the later release before applying for a PER with respect to such feedstocks.

Alternative Fate/Avoided Emissions
Notice 2026-53 and the new 45ZCF-GREET model permit the determination of a distinct emissions rate for RNG produced from animal manure using an alternative fate reflecting “farm-specific prior manure management practices” applied to each specific animal manure feedstock.  In determining such alternative fate, a “farm” is defined to include any animal feeding operation, with or without a nutrient management plan or other animal operation with a nutrient management plan. Farm-specific prior manure management practices depend on the type of manure and may include manure storage in uncovered lagoons, deep pits, liquid/slurry, pasture/range/paddock, dry lot and solid storage. 

The relevant prior practices are those in place immediately preceding the earlier of: (i) the commencement date of anaerobic digester operations or (ii) September 8, 2026, the date of issuance of Notice 2026-53. For this purpose, an anaerobic digester is considered operational on the date on which the system begins capturing, productively using and/or destroying biogas after an initial start-up period (not to exceed nine months). Substantiation of the prior practices used as an alternative fate is required in order to take into account the associated avoided emissions in the emissions rate determination.

Pending further guidance, a farm specific alternative fate cannot be used for animal manure sourced from a new farm (i.e., one that commences operations after December 8, 2026) as the IRS is concerned that allowing use of a farm specific alternative fate where there are no identifiable past practices could lead to abuse through the selection of high-emitting practices at start-up.

Regenerative Agricultural Practices
In June 2026, the U.S. Department of Agriculture (USDA) published a Feedstock Carbon Intensity Calculator (USDA FD-CIC) and related Technical Guidelines for the Production of Regenerative Agricultural Biofuel Feedstocks (USDA Technical Guidelines) to reflect the impact on emissions of specified regenerative practices used during crop production. Correspondingly, the newly released 45ZCF-GREET model includes revisions to incorporate the USDA FD-CIC for calculations of carbon intensity adjustments for feedstocks that are produced using relevant regenerative agricultural practices. The feedstock crops covered are field corn, soybeans, sorghum and spring canola.

In the preamble to proposed regulations issued under IRC section 45Z earlier this year, Treasury and the IRS anticipated the final publication of the USDA FD-CIC and stated that it would be available for use by producers for fuel produced and sold during 2025. In Notice 2026-53, the IRS acknowledged that, for fuel produced both in 2025 and 2026 using a primary feedstock attributable to regenerative agricultural practices, the feedstock likely was planted before the publication of the USDA FD-CID in final form. As such, for fuel produced in 2025 and 2026, Notice 2026-53 provides a safe harbor under which certain requirements under the USDA Technical Guidelines, specifically relating to the pre-application development of a nutrient budget, are deemed satisfied. In order to rely on the safe harbor, producers must comply with substantiation and record-keeping requirements, including as relates to the application of any nutrients and measurable nutrient sources and removals that are used as inputs in the USDA FD-CIC.

Other OBBBA-Related Changes
Consistent with the OBBBA, IRS Notice 2026-53 provides that the use of negative emissions rates is prohibited for transportation fuel produced after December 31, 2025, unless the fuel is derived from animal manure. IRC section 45Z, as amended by the OBBBA, left the use of negative emissions rates for transportation fuel produced from animal manure to the discretion of Treasury. Thus, Notice 2026-53 essentially affirms that Treasury will allow such use.

A producer of transportation fuel after December 31, 2025, must determine an emissions rate that does not include emissions associated with indirect land use change (ILUC). Prior versions of the 45ZCF-GREET model include ILUC emissions, so a producer using such a version must subtract the ILUC value set forth in the 45ZCF-GREET model from its emissions rate determination. IRS Notice 2026-53 explains how to make the required adjustment within the model.

For transportation fuel produced after December 31, 2025, primary feedstocks must be produced or grown only in the United States, Canada or Mexico in order for the producer to claim CFPCs in respect of such fuel. As relates to this foreign feedstock restriction, the IRS reiterated concerns relating to the ability to reliably identify the origin of imported unused cooking oil (UCO) obtained from aggregators but also recognized that the OBBBA expressly allows for the use of UCO imported from Canada and Mexico. Thus, the 2026 annual emissions rates table adds Canadian and Mexican UCO as primary feedstocks, and producers using Canadian or Mexican UCO must use a version of the 45ZCF-GREET model that includes such feedstocks (i.e., June 2026 or later).

Final Points
Notice 2026-53 provides welcome guidance for RNG producers seeking to claim CFPCs with respect to fuel produced from dairy and swine manure, including permitting the use of farm-specific prior manure management practices as an alternative fate for purposes of determining avoided emissions. The Notice also provides helpful safe harbor relief for regenerative agricultural practices. Producers of fuel from poultry and beef manure will need to wait for the expected further revisions to the 45ZCF-GREET model later in 2026. Notice 2026-53 is effective on and after September 8, 2026. Please reach out to a Pillsbury team member if you would like to discuss how Notice 2026-53 impacts your clean fuel projects.