The IRS addressed key commercial and technical issues regarding the development and financing of carbon capture and sequestration projects.

Key Points:

..The IRS released the first two of three anticipated guidance packages designed to answer important questions about the carbon capture tax credit.

..Revenue Procedure 2020-12 establishes a safe harbor template for allocating tax credits among investors and developers in carbon capture equipment. An IRS safe harbor is often a prerequisite for attracting tax credit investors to a new market.

..Notice 2020-12 provides guidance on when construction has begun on a qualified facility or carbon capture equipment.

..Further guidance is anticipated to address other important questions, such as when tax credits may be recaptured and how to properly sequester carbon oxide for tax credit qualification purposes.