Dollar Amounts Published for Carbon Oxide Sequestration Credit

Credit for Carbon Oxide Sequestration
Applicable Dollar Amounts

SECTION 1. PURPOSE

This notice publishes the applicable dollar amounts under § 45Q(b)(1) of the Internal Revenue Code for purposes of determining the credit for carbon oxide sequestration under § 45Q(a)(3) and (a)(4).

SECTION 2. BACKGROUND

Section 45Q was enacted by § 115 of the Energy Improvement and Extension Act of 2008, Division B of Pub. L. No. 110-343, 122 Stat. 3765, 3829 (October 3, 2008) to provide a credit for the sequestration of carbon dioxide. Section 45Q was amended by § 1131 of the American Recovery and Reinvestment Tax Act of 2009, Division B of Pub. L. 111-5, 123 Stat. 115, 325 (February 17, 2009), and more recently by section 41119 of the Bipartisan Budget Act of 2018 (BBA), Pub. L. No. 115-123 (February 9, 2018). As a result of modifications made by the BBA amendment, the credit under section 45Q now applies to the sequestration of “qualified carbon oxide,” a broader term than qualified carbon dioxide. The amount of the credit is also increased for carbon oxide captured with equipment originally placed in service on or after the date of enactment of BBA.

Section 45Q(a)(1) allows a credit of $20 per metric ton of qualified carbon oxide (i) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of BBA, (ii) disposed of by the taxpayer in secure geological storage, and (iii) not used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project.

Section 45Q(a)(2) allows a credit of $10 per metric ton of qualified carbon oxide (i) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of BBA and (ii) either (I) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage or (II) utilized by the taxpayer in a manner described in § 45Q(f)(5).

Section 45Q(a)(3) allows a credit of the applicable dollar amount (as determined under § 45Q(b)(1)) per metric ton of qualified carbon oxide (i) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of BBA during the 12-year period beginning on the date the equipment was originally placed in service,

(ii) disposed of by the taxpayer in secure geological storage, and (iii) neither used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project nor utilized in a manner described in § 45Q(f)(5).

Section 45Q(a)(4) allows credit of the applicable dollar amount (as determined under § 45Q(b)(1)) per metric ton of qualified carbon oxide (i) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of BBA during the 12-year period beginning on the date the equipment was originally placed in service, and (ii) either (I) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage or (II) utilized by the taxpayer in a manner described in § 45Q(f)(5).

Section 45Q(b)(1)(A)(i)(I) provides that, for any taxable year beginning in a calendar year after 2016 and before 2027, the applicable dollar amount for purposes of § 45Q(a)(3) is an amount equal to the dollar amount established by linear interpolation between $22.66 and $50 for each calendar year during such period.

Section 45Q(b)(1)(A(i)(II) provides that, for any taxable year beginning in a calendar year after 2016 and before 2027, the applicable dollar amount for purposes of § 45Q(a)(4) is an amount equal to the dollar amount established by linear interpolation between $12.83 and $35 for each calendar year during such period.

Section 45Q(b)(1)(A)(ii)(I) provides that, for any taxable year beginning in a calendar year after 2026, the applicable dollar amount for purposes of § 45Q(a)(3) shall be an amount equal to the product of $50 and the inflation adjustment factor for such calendar year determined under §43(b)(3)(B) for such calendar year, determined by substituting “2025” for “1990.” Section 45Q(b)(1)(A)(ii)(II) provides that, for any taxable year beginning in a calendar year after 2026, the applicable dollar amount for purposes of § 45Q(a)(4) shall be an amount equal to the product of $35 and the inflation adjustment factor for such calendar year determined under § 43(b)(3)(B) for such calendar year, determined by substituting “2025” for “1990.”

Pursuant to § 45Q(b)(1)(B), the applicable dollar amount determined under §45Q(b)(1)(A) is rounded to the nearest cent.

SECTION 3. APPLICABLE DOLLAR AMOUNTS

The applicable dollar amounts under § 45Q(b)(1)(A)(i)(I), established by linear interpolation for purposes of § 45Q(a)(3), are as follows:

The applicable dollar amounts under § 45Q(b)(1)(A)(i)(II), established by linear interpolation for purposes of § 45Q(a)(4), are as follows:

SECTION 4. DRAFTING INFORMATION

The principal author of this notice is David Selig of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information re-garding this notice, contact Mr. Selig at (202) 317-6853 (not a toll-free number).