45Q Carbon Storage Tax Credit Regulations Proposed

On May 28, 2020, the Internal Revenue Service (“IRS”) issued a long-awaited proposal governing how companies can claim federal tax credits for carbon oxides, including carbon dioxide (“CO2”), storage under section 45Q of the federal tax code.

The proposed rule impacts those who physically or contractually ensure the capture and disposal of qualified carbon oxide, use of qualified carbon oxide as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, or utilization of qualified carbon oxide in a manner that qualifies for the credit

The rule addresses requirements including security of geologic storage, processes for transferring credits to third parties, facility eligibility, and credit “recapture,” in the event of leakage of CO2 from storage. The proposed rule has a 60-day comment period.

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