IRS Confirmed Livestock Manure Qualifies for Fuel Credits
The new guidance allows farmers to earn clean fuel tax credits for energy produced from livestock waste systems.
Updated on Oct. 2, 2026 in Organic Food
Live Poll
Should the federal government offer tax credits to farms that convert livestock manure into biogas?
The IRS has officially cleared the way for gas derived from livestock manure to qualify for the 45Z Clean Fuel Production Tax Credit. This update provides clarity for operators of the hundreds of anaerobic digesters currently functioning across the United States.
Why it matters
By clarifying eligibility for these credits, the IRS aims to encourage further investment in biogas infrastructure on farms. This shift impacts how agricultural operations manage waste while potentially scaling the production of renewable natural gas.
The current landscape includes 394 operational manure-based digesters and 70 more under construction. While these facilities contribute to renewable natural gas production, the specific carbon intensity benchmarks used to calculate individual tax credit amounts remain under further review.
The players
IRS
The federal agency responsible for tax collection and the issuance of guidance regarding the 45Z tax credit.
USDA
The federal executive department responsible for developing the model used to calculate fuel carbon intensity.
The details
Anaerobic digesters utilize specific bacteria to break down livestock waste in an oxygen-free environment, which produces biogas as a byproduct. The IRS calculates the specific tax credit amount by evaluating the carbon intensity of the fuel produced compared to how the farm previously handled its waste, with the USDA providing the official model for these determinations.
Timeline
2022 marked the passage of the Inflation Reduction Act.
October 2, 2026, was the date the IRS issued the new tax credit guidance.
Later this year, the IRS will provide specific manure carbon intensity rates.
2029 is when the 45Z tax credits are set to expire.
Health Landscape
This guidance follows the framework established by the Inflation Reduction Act to incentivize cleaner energy production. It marks a significant regulatory step in standardizing how agricultural waste is integrated into national renewable energy goals.
While this news concerns agricultural policy, it highlights a shift toward farm-based energy production that may impact local air and water quality. If you live near large-scale livestock operations, it is worth discussing with local health officials how waste management changes in your area.
The takeaway
This policy update creates a financial incentive for farms to adopt waste-to-energy technologies, which could accelerate the adoption of anaerobic digesters nationwide. Readers interested in local environmental impacts can monitor state-level updates on biogas facility planning and site permits.
Further reading
Learn more about the intersection of agriculture and environmental standards in our Organic Food section.
Live Poll
Should the federal government offer tax credits to farms that convert livestock manure into biogas?
