Guidance to claim carbon capture credits; The Internal Revenue Service (IRS) and the U.S. Department of the Treasury issued new guidance for the businesses all over USA to claim carbon capture credits. As per the details of guidance to claim carbon capture credits, proposed regulations  are issued by the IRS and Treasury that facilitate in understanding that how taxpayers can gain the benefits of claiming carbon capture credits with the legislation passed in 2018. In order to get the complete details of new regulations on how to claim carbon capture credits from IRS, feel free to contact our representative at Black Ink.

IRS New Guidance to Claim Carbon Capture Credits In USA

To help businesses claim credits for carbon capture, Treasury and IRS provide regulations in USA. As per the proposed regulations, businessmen can get guidance regarding two new credits for carbon oxide captured using equipment initially placed in service on or after February 9, 2018. By claiming two new carbon capture credits, taxpayers are allowed for the following:

  • Up to $50 per metric ton of qualified carbon oxide for permanent sequestration.
  • Up to 35 for Enhanced Oil Recovery purposes.

It must be noted that both of the above two new carbon capture credits are not based on the limitation of the number of metric tons of qualified carbon oxide captured. Along with it, carbon capture is also expanded as per the new law as now “qualified carbon oxide” I also included in it. “Qualified carbon oxide” is a broader term than “qualified carbon dioxide.” Earlier than the law changed, carbon capture was confined to a total of 75,000,000 metric tons of qualified carbon oxide.

Moreover, many of the issues and questions have been answer in the new proposed regulations and guidance to claim carbon capture credits. Some of the main topics that are answered and explained cover the following:

  • Procedures for the determination of adequate security measures for the geological storage of qualified carbon oxide.
  • Exceptions to the general rule for the determination of who the credit is attributable to.
  • Procedures for taxpayers to make an election that allows third-party taxpayers to claim the credit.
  • Standards for the measurement of utilization of qualified carbon oxide.
  • Rules and regulations for credit recapture.

Prior Guidance to Claim Carbon Capture Credits

In February 2018, the Bipartisan Budget Agreement was enacted in the United States. The IRS issued Notice 2019-32 (PDF) that requested taxpayers for the comments concerning the changes to the carbon capture credit in the new law. After careful consideration and evaluation of comments from taxpayers, the IRS is issuing the proposed regulations to provide clarity on the guidance to claim carbon capture credits nationwide. It is worth mentioning here that in early 2020, the IRS provided guidance and safe harbor on carbon capture credits to the businessmen in USA. The guidance further elaborated the definition of “beginning of construction” as well as provision of a safe harbor for partnerships.

The IRS provides guidance in Notice 2020-12 (PDF) that helps businesses for the determination of the favorable scenarios and time for beginning the construction on a qualified facility or on carbon capture equipment that may be eligible for the carbon capture credit. Furthermore, the notice provides guidance in lieu of those taxpayers who ask for private letter rulings in this area.

The IRS also issued In Revenue Procedure 2020-12 (PDF) that clarifies that a safe harbor is created by the IRS to allocate rules and regulations for carbon capture partnerships that are same as that of the safe harbors developed for partnerships receiving the wind energy production tax credit plus the rehabilitation credit. The application of carbon capture credit rules becomes simple with the help of safe harbor for those partnerships that are able to claim the credit.

Due to COVID-19 pandemic in USA, the IRS is offering many other COVID-19 credits for the businesses that are impacted by the Coronavirus. Stay connected with our News Section to know latest updates by the IRS along with further enhancements in the guidance to claim carbon capture credits.





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