Tax Credit Offers New Opportunities

Mar 11, 2024


Landon Van Dyke
Conservation Agronomist


THE WAIT IS FINALLY OVER! Your reward for conservation practices by way of a grain premium is here. A new tax credit (45Z) allows ethanol plants to offer a premium to farmers for low carbon intensity (CI) grain. This program includes any grain sold starting January 1, 2025, and goes for three years. This means the crop we’re planting in just a couple of months will be eligible, so now is the time to begin preparations.

To qualify, the CI of your grain must be lower than the threshold (which is about 29 for most counties). While we don’t know for certain, it’s likely this will be on a field-by-field basis. This standard and other aspects are still to be determined by further guidance from federal agencies. The premium is also being worked out, but it is anticipated to be somewhere in the range of $0.01–$0.06/bushel/point of reduced CI. Using the middle point and a CI score of 15, the premium would be $0.49/ bushel. This falls in line with one recent study estimating an average premium of $0.40–$0.50/bushel.  

DETERMINING YOUR CI SCORE
To determine your CI score, you will go through a verification process that records and documents emissions attributed to your grain production. The best way to prepare for this process is to get involved in the Truterra® program (which Key Cooperative can help you with). This program will get you ready for the information you are required to report.

The main factors in a CI score include:
  • Tillage passes and depth
  • Cover crop usage
  • Fertilizer products and amounts 
Fewer trips across the field and reduced soil disturbance mean fewer emissions and a lower score. Planting a cover crop also lowers your score because that growing plant is taking CO2 from the air and putting it in the soil when the ground would normally be bare. A lesser-known way to reduce your score is by achieving higher yields (or more bushels to spread the carbon footprint over). That’s the same goal we’ve always had, which means carbon sequestering does not have to go against your existing goals!

While some of the details are still being ironed out, we understand the framework and what practices lead to a lower score, so we’re able to help you start right away. Call me at 641-780-9885 to get enrolled in the Truterra program, so we can begin the documentation steps and make sure you’re ready. 

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