The Treasury Department and IRS have issued long-awaited Proposed Regulations regarding the tax credit for carbon capture and sequestration under Section 45Q of the Code1 (the “section 45Q credit”).
Generally, the amount of the section 45Q credit and the party that is eligible to claim the credit depend on whether the taxpayer captures qualified carbon oxide using carbon capture equipment originally placed in service at a qualified facility before February 9, 2018 (“Old 45Q Facility”), or on or after February 9, 2018 (“New 45Q Facility”), and whether the taxpayer disposes of the qualified carbon oxide in geological storage (“sequestration”), uses it as a tertiary injectant in a qualified enhanced oil or natural gas recovery project (“EOR”), or utilizes the carbon oxide in certain specified ways (“utilization”). The effective date of the amendments to the Code extending and expanding the section 45Q credit is February 9, 2018 (the “Credit Effective Date”). The Credit Effective Date appears throughout the Proposed Regulations to distinguish between Old 45Q Facilities and New 45Q Facilities and establishing the effective date for certain provisions.
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