Section 45Q carbon capture and sequestration final regulations released

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Eversheds Sutherland (US) LLPOn January 6, 2021, the Internal Revenue Service and the Department of the Treasury released final regulations on the IRC section 45Q carbon capture and sequestration (CCS) credit in order to implement changes made to that tax credit by the Bipartisan Budget Act of 2018. The release of these final regulations follows the release of a notice of proposed rulemaking (NPRM) on May 28, 2020. The final regulations (available here) have been highly anticipated by stakeholders.

The IRS released two other items of guidance under section 45Q on February 19, 2020: Notice 2020-12 (addressing the beginning of construction requirement for CCS projects) and Revenue Procedure 2020-12 (addressing allocation of section 45Q credits in partnership flip structures). Our guide to the section 45Q Carbon Capture and Sequestration Credit Guidance, which covers the prior guidance and provides detailed analysis, will be updated to reflect these newly issued final regulations.

The final regulations follow changes made in December 2020 to section 45Q in the Taxpayer Certainty and Disaster Relief Act of 2020. That legislation extended the section 45Q carbon capture and sequestration credit by two years such that construction of CCS facilities must begin before January 1, 2026, rather than January 1, 2024, as provided under prior law. 

For a copy of our guide to the section 45Q Carbon Capture and Sequestration Credit Guidance, a summary of the section 45Q and other energy tax changes in the Taxpayer Certainty and Disaster Relief Act of 2020, or for more information, please visit www.section45Q.com.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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