July 11, 2018
The recent enactment of the Bipartisan Budget Act of 2018 extended and significantly expanded the existing tax credit for carbon sequestration under Section 45Q of the Internal Revenue Code. Although the Section 45Q credit for carbon sequestration has been available since 2008, the limitations and uncertainty associated with the credit greatly limited its effectiveness in spurring investment in eligible carbon capture equipment. As amended, the new Section 45Q represents a serious attempt by Congress to make the credit more attractive by incorporating a number of industry-favorable changes:
In the coming months, the IRS is expected to issue guidance that will help facilitate and implement these new Section 45Q rules, which provide a meaningful incentive to increase development of carbon capture facilities and should lead to new tax equity transactions.