45Q: Credit for Carbon Oxide Sequestration

Federal Agency

Sub-Department

Internal Revenue Service (IRS)

Purpose

To invest in carbon dioxide sequestration coupled with permitted end uses within the United States.

Applicant and/or Project Eligibility Requirements

Eligible entities must (i) own an industrial facility at which carbon capture equipment is placed in service, (ii) capture not less than 500,000 metric tons of qualified CO2 during the taxable year at such industrial facility, and (iii) physically or contractually ensure that the qualified CO2 is securely stored in a geologic formation.

Decarbonization Considerations

Carbon sequestration is the process of capturing and storing atmospheric carbon dioxide to reduce the amount of carbon dioxide in the atmosphere with the goal of reducing global climate change. The extension of this tax credit will help decarbonize the industry and contribute to the development of carbon capture technology.

Equity Considerations

If a new carbon oxide sequestration facility is planned, consider engaging with community members in the early stage to address challenges and concerns through open conversations. Local governments, Tribal communities, and other organizations may consider working with the facility owners to leverage such economic development opportunities to develop a carbon capture workforce.

Helpful Tips

Direct Pay is eligible for this credit for tax-exempt entities. To learn more about how these tax credits work for entities with and without tax liability, check out our Funding Guidance here: https://cityrenewables.org/funding-guidance/understanding-available-incentives/tax-credits-for-renewable-energy/

Other Notes

For more information on prevailing wage and apprenticeship requirements, see here: https://www.irs.gov/credits-deductions/prevailing-wage-and-apprenticeship-requirements