Sustainable Skies Act
Bill: S.2263 | Sponsor: Sen. Brown, Sherrod (D-OH)
Policy area: Taxation

Summary:
Sustainable Skies Act
This bill allows a business-related tax credit through 2031 for each gallon of sustainable aviation fuel used by a taxpayer in the production of a qualified mixture (i.e., a mixture of sustainable aviation fuel and kerosene that is sold for use in certain U.S. aircraft).
The bill generally defines sustainable aviation fuel as liquid fuel that consists of synthesized hydrocarbons, meets certain recognized international standards, is derived from biomass, waste streams, renewable energy sources, or gaseous carbon oxides, is not derived from palm fatty acid distillates, and achieves at least a 50% life cycle greenhouse gas emissions reduction in comparison with petroleum-based jet fuel.
To be eligible for such credit, a taxpayer must meet certification requirements showing that the sustainable aviation fuel conforms with one of the life cycle greenhouse gas emissions reduction tests set forth in this bill.

To amend the Internal Revenue Code of 1986 to provide a tax credit for 
           sustainable aviation fuel, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sustainable Skies Act''.

SEC. 2. SUSTAINABLE AVIATION FUEL CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 40A the following new section:

``SEC. 40B. SUSTAINABLE AVIATION FUEL CREDIT.

    ``(a) In General.--
            ``(1) Credit amount.--For purposes of section 38, the 
        sustainable aviation fuel credit for the taxable year is, with 
        respect to each gallon of sustainable aviation fuel which is 
        used by the taxpayer in the production of a qualified mixture--
                    ``(A) a base credit amount of $1.50, plus
                    ``(B) the applicable supplementary credit amount.
            ``(2) Applicable supplementary credit amount.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the applicable supplementary credit amount is $0.01 for 
                every percentage point above 50 percent for which the 
                sustainable aviation fuel is certified under subsection 
                (f) to reduce emissions in comparison with petroleum-
                based jet fuel as described in subsections (d)(2)(A) or 
                (d)(2)(B).
                    ``(B) Maximum supplementary credit amount.--For 
                purposes of subparagraph (A), the maximum applicable 
                supplementary credit amount allowable is $0.50.
            ``(3) 40A exception.--If the biodiesel fuels credit under 
        section 40A is not in effect for a taxable year, paragraph 
        (1)(A) shall by applied by substituting `$1.15' for `$1.50'.
    ``(b) Qualified Mixture.--For purposes of this section, the term 
`qualified mixture' means a mixture of sustainable aviation fuel and 
kerosene, which--
            ``(1) is sold by the taxpayer producing such mixture for 
        use in an aircraft that has fuel uplift in the United States, 
        or
            ``(2) is used--
                    ``(A) by the taxpayer producing such mixture, and
                    ``(B) in an aircraft that has fuel uplift in the 
                United States.
    ``(c) Sale or Use Must Be in Trade or Business, etc.--Sustainable 
aviation fuel used in the production of a qualified mixture shall be 
taken into account--
            ``(1) only if the sale or use described in subsection (b) 
        is in a trade or business of the taxpayer, and
            ``(2) for the taxable year in which such sale or use 
        occurs.
    ``(d) Sustainable Aviation Fuel.--For purposes of this section, the 
term `sustainable aviation fuel' means liquid fuel--
            ``(1) that--
                    ``(A) consists of synthesized hydrocarbons,
                    ``(B) meets the requirements of--
                            ``(i) ASTM International Standard D7566, or
                            ``(ii) the Fischer Tropsch provisions of 
                        ASTM International Standard D1655, Annex A1,
                    ``(C) is derived from biomass (as such term is 
                defined in section 45K(c)(3)), waste streams, renewable 
                energy sources, or gaseous carbon oxides, and
                    ``(D) is not derived from palm fatty acid 
                distillates, and
            ``(2) that achieves at least a 50 percent lifecycle 
        greenhouse gas emissions reduction in comparison with 
        petroleum-based jet fuel, as determined by a test that shows--
                    ``(A) the fuel production pathway achieves at least 
                a 50 percent reduction of the aggregate attributional 
                core lifecycle emissions and the positive induced land 
                use change values under the lifecycle methodology for 
                sustainable aviation fuels adopted by the International 
                Civil Aviation Organization with the agreement of the 
                United States, or
                    ``(B) the fuel production pathway achieves at least 
                a 50 percent reduction of the aggregate attributional 
                core lifecycle greenhouse gas emissions values and the 
                positive induced land use change values under another 
                methodology that the Secretary, in consultation with 
                the Administrator of the Environmental Protection 
                Agency and the Secretary of Energy working jointly, 
                determines is--
                            ``(i) reflective of the latest scientific 
                        understanding of lifecycle greenhouse gas 
                        emissions, and
                            ``(ii) as stringent as the requirement 
                        under subparagraph (A).
    ``(e) Time Limit for Adoption of New Sustainable Aviation Fuel 
Emissions Reduction Test.--For purposes of subparagraph (B) of 
subsection (d)(2), the Secretary, in consultation with the 
Administrator of the Environmental Protection Agency and the Secretary 
of Energy working jointly, shall, within 24 months after the date of 
the enactment of this section, adopt at least one methodology for 
testing lifecycle greenhouse gas emissions that meets the requirements 
of such subparagraph.
    ``(f) Certification Requirements.--
            ``(1) In general.--No credit shall be allowed under 
        subsection (a) unless the taxpayer meets certification 
        requirements demonstrating the sustainable aviation fuel 
        conforms with one of the lifecycle greenhouse gas emissions 
        reduction tests under subsection (d)(2).
            ``(2) Certification requirement for test in (d)(2)(a).--For 
        purposes of paragraph (1), with respect to certifications based 
        on the test under subparagraph (A) of subsection (d)(2), the 
        taxpayer shall obtain from the fuel producer a certification 
        from a sustainability certification scheme approved by the 
        International Civil Aviation Organization demonstrating that 
        the fuel conforms with the Carbon Offsetting and Reduction 
        Scheme for International Aviation's sustainability criteria and 
        the traceability and information transmission requirements 
        approved by the International Civil Aviation Organization with 
        the agreement of the United States.
            ``(3) Certification requirements for test in (d)(2)(b).--
        For purposes of paragraph (1), with respect to certifications 
        based on the test under subparagraph (B) of subsection (d)(2)--
                    ``(A) the taxpayer shall obtain from the fuel 
                producer a certification that the fuel has been 
                determined by the Environmental Protection Agency to 
                qualify under the requirements of such subparagraph, 
                and
                    ``(B) the taxpayer shall obtain from the fuel 
                producer an additional certification that the fuel 
                conforms with the sustainability criteria and the 
                traceability and information transmission requirements 
                that the Secretary, in consultation with the 
                Administrator of the Environmental Protection Agency 
                and the Secretary of Energy working jointly, determines 
                are equivalent with those necessary to claim emissions 
                reductions from sustainable aviation fuel use under the 
                Carbon Offsetting and Reduction Scheme for 
                International Aviation adopted by the International 
                Civil Aviation Organization with the agreement of the 
                United States.
    ``(g) Termination.--This section shall not apply to any sale or use 
after December 31, 2031.''.
    (b) Credit Made Part of General Business Credit.--Section 38(b) of 
the Internal Revenue Code of 1986 is amended by striking ``plus'' at 
the end of paragraph (32), by striking the period at the end of 
paragraph (33) and inserting ``, plus'', and by inserting after 
paragraph (33) the following new paragraph:
            ``(34) the sustainable aviation fuel credit determined 
        under section 40B.''.
    (c) Conforming Amendment.--Section 40A(f) of such Code is amended 
by striking paragraph (4).
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.
                                 <all>