IRS proposes regulations for CCS tax credits

In Washington, last week the Treasury Department and the Internal Revenue Service issued proposed regulations to help businesses understand how legislation passed in 2018 may benefit those claiming carbon capture credits.

The proposed regulations provide guidance regarding two new credits for carbon oxide captured using equipment originally placed in service on or after February 9, 2018, allowing up to:

• • $50 per metric ton of qualified carbon oxide for permanent sequestration, and up to
• • $35 for Enhanced Oil Recovery purposes.

Neither of these new credits is subject to a limitation on the number of metric tons of qualified carbon oxide captured.  The new 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 oxide.

Additionally, the proposed regulations address issues for which taxpayers had questions, including: procedures to determine adequate security measures for the geological storage of qualified carbon oxide, exceptions to the general rule for determining who the credit is attributable to, procedures for a taxpayer to make an election to allow third-party taxpayers to claim the credit, standards for measuring utilization of qualified carbon oxide and rules for credit recapture.