substitute for

Senate BILL NO. 236

A bill to create a sustainable aviation fuel incentive program; to provide for the powers and duties of certain state governmental officers and entities; to provide for the certification of certain tax credits and incentives; and to prescribe penalties.

the peoplE of the state of michigan enact:

Sec. 1. This act may be cited as the "sustainable aviation fuel incentive program act".

Sec. 3. As used in this act:

(a) "Aviation fuel" means fuel as that term is defined in section 4 of the aeronautics code of the state of Michigan, 1945 PA 327, MCL 259.4.

(b) "Biomass" means any organic matter that is available on a renewable or recurring basis, including agricultural crops and trees; wood and wood waste and residues; plants, including aquatic plants, grasses, residues, and fibers; animal fat; and the organic portion of solid wastes.

(d) "Greenhouse gas" means carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride.

(e) "Income tax act of 1967" means the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.847.

(f) "Qualified sustainable aviation fuel" means aviation fuel that the department certifies, based upon evidence submitted by the applicant under section 5, meets the definition of sustainable aviation fuel and satisfies the requirements in subsection (1) of the sustainable aviation fuel tax credit.

(g) "Qualified taxpayer" means that term as defined under section 678 of the income tax act of 1967, MCL 206.678.

(h) "Sustainable aviation fuel" means aviation fuel that satisfies all of the following:

(i) Except as otherwise provided under this subparagraph, is derived from biomass, waste streams, renewable or zero emissions energy sources, or gaseous carbon oxides. Beginning January 1, 2030, the aviation fuel must be derived from domestic feedstock resources and must not be derived from coprocessing an applicable material, or materials derived from an applicable material, with a feedstock that is not biomass.

(ii) Meets the requirements of the ASTM International D7566 "Standard Specification for Aviation Turbine Fuel Containing Synthesized Hydrocarbons" or D1655 "Standard Specification for Aviation Turbine Fuels".

(iii) Achieves at least a 50% life-cycle greenhouse gas emissions reduction in comparison with petroleum-based aviation fuel, as determined by any of the following:

(A) The most recent life-cycle methodology for calculating the life-cycle emissions of sustainable aviation fuels adopted by the International Civil Aviation Organization with the agreement of the United States.

(B) The most recent version of the Argonne National Laboratory's Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model, inclusive of, but not limited to, climate smart agricultural practices, on-site renewables, and carbon capture and sequestration.

(C) Any other model the department approves to calculate life-cycle greenhouse gas emissions for sustainable aviation fuel.

(i) "Sustainable aviation fuel incentive program" or "program" means the program created under section 5.

(j) "Sustainable aviation fuel tax credit" means the tax credit allowed under section 678 of the income tax act of 1967, MCL 206.678.

(k) "Tax year" means that term as defined in section 611 of the income tax act of 1967, MCL 206.611.

Sec. 5. (1) The department shall create a sustainable aviation fuel incentive program to encourage persons engaged in the business of producing aviation fuel to produce more sustainable aviation fuel in this state. The department shall administer the program and develop and use an application, approval, and certification process for the approval of sustainable aviation fuel tax credits and make that process available on the department's website.

(2) A person seeking to claim a sustainable aviation fuel tax credit shall, within 2 months after the close of the person's tax year and in a form and manner as prescribed by the department, submit an application to the department for approval and certification of the number of gallons of sustainable aviation fuel that satisfies the requirements in subsection (1) of the sustainable aviation fuel tax credit, and the amount of the sustainable aviation fuel tax credit allowed to be claimed by the applicant. The applicant must submit all of the following with the application required under this subsection:

(a) Evidence that the person is engaged in the business of producing or blending sustainable aviation fuel in this state and that the sustainable aviation fuel sold during the tax year for which the credit is sought to be claimed satisfies the requirements in subsection (1) of the sustainable aviation fuel tax credit.

(b) Evidence that the aviation fuel is sustainable aviation fuel and, for a person seeking the increased credit under subsection (2) of the sustainable aviation fuel tax credit, evidence of the total percentage reduction in life-cycle greenhouse gas emissions above 50%.

(c) Copies of each purchaser's certification that the sustainable aviation fuel purchased in this state from that person was purchased for use as fuel in an aircraft departing from an airport in this state.

(3) For purposes of the purchaser's certification required under subsection (2)(c), if the purchaser is a wholly owned subsidiary of an airline operator, the purchaser may make the certification required under subsection (2)(c) based on information from the airline operator that the sustainable aviation fuel was purchased for use in an aircraft departing from an airport in this state. If a purchaser makes a certification required under subsection (2)(c) that it knows or has reason to know is false, any person responsible for preparing or submitting that certification is guilty of a misdemeanor punishable by imprisonment for not more than 1 year, a fine of not more than $1,000.00, or both. A purchaser that is a wholly owned subsidiary of an airline operator that makes a certification required under subsection (2)(c) based on information from that airline operator is deemed to have the same knowledge of the accuracy of such information as the airline operator.

(4) Subject to the limitation under section 7, not later than 30 days after receipt of an application submitted under this section, the department shall approve, reject, or request additional information if deemed necessary. If additional information is requested, the applicant has 30 days upon receipt of the notification from the department to submit the additional information. If the applicant fails to submit the additional information requested within 30 days after being notified that additional information was needed, the application is considered abandoned and rejected. If an application is rejected by the department, the department must notify the applicant in writing and include the reasons for the rejection. If an application is approved, the department must issue a certificate to the applicant. The certificate required under this subsection must state all of the following:

(a) The person is a qualified taxpayer.

(b) The sustainable aviation fuel for which the credit is being claimed by the qualified taxpayer is qualified sustainable aviation fuel.

(c) The total amount of the qualified sustainable aviation fuel and the maximum amount of the sustainable aviation fuel tax credit allowed to be claimed by the qualified taxpayer for the designated tax year.

(d) The taxpayer's federal employer identification number or the Michigan department of treasury number assigned to the taxpayer.

Sec. 7. The department shall not approve and certify more than $4,500,000.00 in sustainable aviation fuel tax credits under the program during the 2025-2026 state fiscal year. For each state fiscal year after the 2025-2026 state fiscal year, the maximum amount allowed to be approved and certified under the program during a state fiscal year is $9,000,000.00.

Sec. 9. (1) Not later than January 1 of each year, the department shall submit a report to the senate energy and environment committee, the house of representatives energy committee, the senate and house of representatives appropriations committees, and the senate and house of representatives fiscal agencies on the operation and effectiveness of the program for the immediately preceding fiscal year.

(2) The report under subsection (1) must include all of the following information:

(a) The total amount of sustainable aviation fuel tax credits certified under the program.

(b) The number of applications received and the number approved during the fiscal year.

Enacting section 1. This act does not take effect unless Senate Bill No. 235 of the 103rd Legislature is enacted into law.