January 31, 2021 - Douglas Myser

IRS regulations on carbon capture. The treasury department and Internal Revenue Service issued final regulations regarding the credit for qualified carbon oxide captured using carbon capture equipment placed in service on or after February 9, 2018. The final regulations help businesses understand how the credit for qualified carbon oxide sequestration may benefit those claiming two carbon capture credit amounts, which are: Up to $50 per metric ton on qualified carbon oxide for permanent sequestration: and up to $35 per metric ton of qualified carbon oxide for Enhanced Oil or Natural Gas Recovery purposes. Neither of these new credit amounts, contained in the Bipartisan Act of 2018, is subject to a limitation on the number of metric tons of qualified carbon oxide captured. The law also expanded carbon capture to include "qualified carbon oxide", a broader term than "qualified carbon dioxide." Prior to the change in law, carbon capture was limited to a total of 75,000,000 metric tons of qualified carbon dioxide. IRS regulations on carbon capture.

These final regulations provide rules to determine if adequate security measures for the geological storage of qualified carbon oxide: exceptions to the general rule for determining to whom the credit is attributable; procedures for a taxpayer to make an election to allow third party taxpayers to claim the credit: the definition of carbon capture equipment and standards for measuring utilization of qualified carbon oxide. In addition, the final regulations allow smaller carbon capture facilities to be aggregated into one project for purposes of claiming the credit when certain factors are present, such as common ownership and location. The final regulations also provide guidance on recapture options. The document that contains the final regulations is under Section 45Q of the Internal Revenue Code, and provides the regulations that give guidance regarding the credits for carbon oxide sequestration.

These final regulations affect persons who physically or contractually ensure the capture and disposal of qualified carbon oxide, use of qualified carbon oxide as a tertiary injectant in a qualified enhanced oil or natural gas recovery project.