Carbon Capture Coalition Statement on IRS Announcement of Long-Awaited Guidance and Revenue Procedure on 45Q Implementation

February 19, 2020 | News

The following statement can be attributed to Carbon Capture Coalition Director Brad Crabtree:

The Carbon Capture Coalition welcomes the IRS’ release of long-awaited guidance defining beginning and continuous construction requirements for projects to qualify for the credit, as well as a revenue procedure establishing rules for business partnerships involving investors claiming the tax credit.

We are still actively reviewing the details at this time. However, we are very pleased to see that the IRS has taken into account key recommendations of the Carbon Capture Coalition. The beginning construction guidance adopts well-established precedents based on years of experience with the wind and solar tax credits and adapts that experience to carbon capture. Importantly, the guidance incorporates both the well-understood physical work test and five percent safe harbor for determining whether a carbon capture project has begun construction to qualify for the credit. In addition, we are especially pleased that the IRS has embraced our recommendation to provide for a longer six-year continuity requirement to complete construction of carbon capture projects (wind and solar have a four-year requirement). Similarly, the revenue procedure on partnerships draws on well understood precedents that should provide confidence to project developers and investors structuring financial deals to move forward with carbon capture projects.

We appreciate the work of IRS staff in developing the guidance and revenue procedure and for their thoughtful consideration of extensive input from the Carbon Capture Coalition and many others. Nevertheless, this work took far too long and has delayed hundreds of millions, if not billions of dollars in investments in the development and deployment of carbon capture, use and geologic storage projects that Congress sought to incentivize through its bipartisan reform of 45Q.

The final remaining piece of the puzzle needed to unleash private investment into carbon capture projects is a rule to address remaining long-term issues associated with implementation of the 45Q tax credit. The Coalition urges Treasury officials to expedite the completion of the rule as quickly as possible to avoid any further delays in project development that threaten to undermine the full potential of the 45Q policy to help foster economywide deployment of carbon capture to meet midcentury emissions reduction goals while supporting domestic energy and industrial production and high-wage jobs.

The Coalition’s consensus recommendations submitted to Treasury and the IRS in November 2018 and July 2019 can be found here.

BACKGROUND: Sunday, February 9, 2020 marked the two-year anniversary of passage of the FUTURE Act to reform and expand the Section 45Q tax credits for the geologic storage and beneficial use of carbon captured from industrial facilities, power plants and through direct air capture. Since that time, the window for carbon capture projects to begin construction and qualify for the 45Q tax credit has been reduced from six years to four. The Coalition has been calling for nearly a year on the Department of Treasury and the Internal Revenue Service (IRS) to provide urgently needed clarity and financial certainty for project developers and investors to move forward with carbon capture projects.