IRS Issues Anticipated Guidance On Section 45Q Carbon Capture Credits

Further clarity could help unlock much needed investment for a significant number of delayed projects.

Takeaways

• After a two-year delay, the IRS finally issues highly anticipated guidance regarding the carbon capture tax credit available pursuant to IRC Section 45Q.
• The guidance follows previously issued guidance regarding similar tax credits available for wind and solar, which should provide a certain level of predictability and familiarity to investors.
• The new carbon capture guidance is a necessary step, but one that is insufficient without further clarification on issues such as tax credit recapture and utilization.

On February 19, 2020, the Internal Revenue Service issued long anticipated guidance to help businesses understand how legislation passed in 2018 impacts those claiming carbon capture credits pursuant to Section 45Q. The guidance addresses the definition of "beginning of construction" and provides a safe harbor for partnership