The Minnesota Senate Taxes Committee has taken a step towards supporting the state's sustainable aviation fuel (SAF) industry by approving legislation that extends and expands an existing tax credit. Senate File 1312, passed on March 3, aims to incentivize greater production and utilization of SAF, positioning Minnesota as a leader in aviation decarbonization and economic development.

The current Minnesota SAF tax credit offers a $1.50 per gallon incentive for biomass-derived SAF that achieves a minimum 50% reduction in lifecycle greenhouse gas (GHG) emissions. To qualify, the SAF must be produced or blended within the state and sold for use in aircraft departing from Minnesota airports. This credit, initially set to expire in June 2030, is now proposed for a five-year extension through July 1, 2035.

SF 1312 goes beyond a simple extension, introducing a supplemental tax credit to encourage deeper GHG reductions. Under the proposed expansion, qualified taxpayers can claim an additional 2 cents per gallon for each whole percentage point of carbon intensity (CI) reduction beyond the initial 50%, capped at 50 cents per gallon. This tiered system aims to drive innovation and investment in advanced SAF technologies that achieve even greater environmental benefits.

Recognizing the need for fiscal responsibility, the legislation includes caps on the annual value of the tax credit. For fiscal years 2025 through 2027, the cap is set at $7.4 million, decreasing to $2.1 million annually for fiscal years 2028 through 2035. Importantly, any unused credit amounts can be carried forward, providing flexibility for producers and blenders.

The bill, introduced by Senators Anne Rest, Bill Weber, Robert Kupec, John Jasinski, and Scott Dibble, has garnered strong bipartisan support. Companion legislation, House File 1669, has also been introduced in the Minnesota House, signaling a unified effort to advance the state's SAF agenda.

Senator Robert Kupec emphasized the multifaceted benefits of the legislation, stating, "Sustainable aviation fuel has the potential to rapidly decarbonize the aviation industry, provide additional revenue streams for a wide array of farmers, communities, and industries, and create good-paying jobs throughout Minnesota. But this only happens if we take steps to bring production to scale." He highlighted the "win-win-win-win" scenario, emphasizing support for farmers, carbon emission reduction, and economic growth.

Senator John Jasinski echoed these sentiments, describing the bill as an "economic jet engine for the state of Minnesota." He pointed to the potential for new facilities, job creation, and opportunities for farmers to utilize their crops and repurpose waste materials.