The Treasury Department and Internal Revenue Service (IRS) issued what their final regulations would be regarding the credit for qualified carbon oxide that was captured using carbon capture equipment placed in service on or after February 9, 2018.
Optima Tax Relief reviews how you can claim credits for carbon capture.
These final regulations help businesses have an understanding on how the credit for qualified carbon oxide sequestration could benefit those claiming two carbon capture credit amounts, which are:
- Up to $50 per metric ton of 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.
Included in the Bipartisan Budget Act, neither of these new credit amounts are subject to a limitation on the number of metric tons of qualified carbon oxide captured. Prior to the new changes in the law, carbon capture was limited to a total of 75,000,000 metric tons of qualified carbon dioxide.
The final regulations were put into to place in order to determine:
- 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.
- Standards for measuring utilization of qualified carbon oxide.
These 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 of land. In addition to this, the final regulations also help provide guidance on recapture, including introducing a recapture period of three years.
With these rules used as guidance, credits must be repaid if carbon oxide leaks into the atmosphere during a three-year period after the initial storage or injection.