This summer, when Congress passed the “One Big Beatiful Bill,” or the reconciliation package, it made attempts to fix the controversial 45Z tax credit. In previous issues of Illinois Field & Bean you have read articles that discuss some of the specific impacts of waste feedstocks including how used cooking oil has displaced soybean oil as a feedstock into some domestic biofuels markets. The fixes achieved to 45Z will help curb this expansion of waste feedstocks and efforts to weigh the scale in their favor. However, as we zoom out in the aftermath of the legislation, we remain concerned that the actions taken so far will maintain a cloud of uncertainty over demand for soybean oil biomass-based diesel.

In the policy world, one of my chief complaints is when we focus on the specific trees, we miss the whole forest. Our goal is and always will be to create the most advantageous market to sell soybeans by generating demand, supporting production and managing our regulatory environment. It is no secret that biofuels are a topic that has received tons of attention and much analysis over the past few years. We hear terms such as biofuels, RFS, 45Z, CCS, SAF, RD, clean fuels, LCFS, CFS, RVO and more as a regular refrain as part of what we need to focus on. It is, though, important to step back and see the entire forest, not just individual trees.

Since 2003 and the passage of the state sales tax exemption on biodiesel blends of greater than 10%, Illinois has been a leader in using traditional fatty acid methel eshter (FAME) biodiesel. This product is straightforward to produce, and plants such as the one that Incobrasa Industries operates next to its soybean crush plant, can take soybean oil and have it ready to hit the retail fuel market. These biodiesel plants are a mainstay of soybean oil demand in Illinois. Thanks to the state sales tax exemption combined with federal incentives from the Renewable Fuel Standard and tax credits, Illinois uses more than 100 million gallons of B100 biodiesel each year. Although that fuel comes from other feedstocks, including distillers corn oil, more than 100 million bushels of Illinois soybeans are used to produce the oil annually.

In 2022, Illinois Soybean Growers (ISG) worked to pass an increase in our state sales tax exemption amount that will generate demand for about 400 million gallons of biodiesel annually in Illinois. Next year, that increase will be fully in effect at B19 and higher blends. Yet at the same time, 45Z will come into effect. 45Z replaces the old 40A, known as the Blenders Tax Credit, which gave a $1-per-gallon incentive to every gallon of B100 blended into the fuel supply nationwide. To the Illinois biodiesel industry, that was worth over $300 million annually. Final rules will be developed later this year by the U.S. Treasury Department. Estimates are that soybean-based fuels will receive, at best, about half of the previous credit from 40A.

The new 45Z has fewer complex components than it did when passed by Congress as part of the Inflation Reduction Act (IRA) in 2022. However, it still has many new processes and business practices that will change how the biofuels industry operates. ISG remains committed to ensuring that the strong demand we have for biodiesel in Illinois remains and that we have the most effective policies and tax credits in place to help us see the forest through the trees to generate demand and usage of soybean-based biofuels in Illinois. Even with the new version of 45Z passing, a short-term extension of the 40A Blenders Tax Credit remains ISG’s top legislative priority in Washington for the remainder of 2025. Please stay at-the-ready to voice your support to legislators in support of demand for Illinois soybeans.