Carbon Capture Coalition Responds to IRS Proposed Guidance on Direct Pay and Transferability Priorities  

On August 14, the Carbon Capture Coalition responded to proposed guidance published in the Federal Register by the U.S. Department of Treasury (Treasury) and the Internal Revenue Service (IRS), related to the direct pay election and transfer of certain credits. The Coalition appreciates the work of the staff at Treasury and the IRS to implement the direct pay and transferability provisions made law in August 2022 under the Inflation Reduction Act (IRA). These policy changes will be transformative and facilitate much-needed investment in carbon management technologies to ensure projects can scale at the rate and pace required to meet midcentury climate targets, protect and create family-sustaining jobs, and provide tangible health benefits to affected communities.  

A direct pay mechanism allows project developers to leverage greater private capital for investment in projects, given that traditional tax equity investors in carbon capture, direct air capture, and other less commercially mature technologies typically require a significant portion of the value of the tax credit. For every dollar expended by the federal government through the 45Q incentive, direct pay will deliver greater value for the American taxpayer by yielding more deployment of carbon capture, removal, and reuse technologies—and thus greater climate, jobs, and economic benefits. Additionally, the option for a project developer to effectively transfer the tax credit to investors or project partners with the ability to fully monetize the tax credit under certain conditions will be essential to attracting investment and financing many carbon capture projects.  

In all, implementation of the enacted direct pay mechanism and broader transferability terms will provide a powerful boost to investments in projects by helping project developers more readily and cost-effectively finance projects over the long-term, thus ensuring that the 45Q program achieves its full potential to incentivize economywide deployment of carbon management technologies. As Treasury and IRS continue work on the implementation of the clean energy and industrial tax provisions enacted under the IRA, it is essential that guidance and regulations related to direct pay and transferability are swiftly promulgated, so that project developers can access the full suite of 45Q enhancements provided by the 117th Congress.  

You can view the Coalition’s comments on the proposed guidance here. 

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Convened by the Great Plains Institute, the Carbon Capture Coalition is a nonpartisan collaboration of more than 100 companies, unions, conservation and environmental policy organizations, building federal policy support to enable economywide, commercial scale deployment of carbon management technologies. This includes carbon capture, removal, transport, utilization, and storage from industrial facilities, power plants, and ambient air.