Energy & Environment — Sponsored By: Panasonic
IRS issues guidances on carbon capture tax credit
The Internal Revenue Service (IRS) on Wednesday issued two guidances aimed at helping businesses take advantage of a tax credit for those using use equipment to capture carbon from the atmosphere.
Carbon capture technology, which helps remove carbon from the atmosphere, is still developing. One way it’s currently used is in oil recovery, making it controversial among those who oppose fossil fuel extraction.
The news comes amid a push from both sides of the aisle to expand tax credits for business that sequester carbon.
The section 45Q tax credit incentivizes the use of this technology by allowing a credit of $20 per metric ton of qualified carbon oxide captured at facilities whose construction starts before 2024.
One Wednesday document provides guidance on how businesses can show that they have started construction. The other sets criteria under which partnerships can get the credit.
The guidance was met with initial praise from the Carbon Capture Coalition, which supports the deployment of carbon capture technology.
“The beginning construction guidance adopts well-established precedents based on years of experience with the wind and solar tax credits and adapts that experience to carbon capture,” the group’s director, Brad Crabtree, said in a statement.
“Similarly, the revenue procedure on partnerships draws on well understood precedents that should provide confidence to project developers and investors structuring financial deals to move forward with carbon capture projects,” Crabtree added.
The IRS said in a statement Wednesday that it expects to issue further guidance “in the near future on issues ranging from secure geological storage to utilization to recapture of the credit for those claiming credits for carbon capture.”
Legislation that would expand the 45Q tax credit was rolled out this month as part of a carbon capture package endorsed by House Minority Leader Kevin McCarthy (R-Calif.).
Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.