On 28 May 2020, the United States Internal Revenue Service (IRS)
issued a notice of proposed rulemaking specifying how companies may qualify for carbon capture tax credits. Section 45Q of the Internal Revenue Code (IRC) authorizes a tax credit of up to $50 per metric ton for disposal through geological storage (disposal), tertiary injection and disposal through secure geological storage (injection), utilization in a manner consistent with the IRC, or $35 per metric ton for enhanced oil recovery where CO2 is injected into the ground to help extract oil from wells. Under the proposed rule, applicants are required to contractually ensure disposal, injection, or utilization of qualified carbon. The contracts must include “commercially reasonable terms and provide[] for enforcement.” In addition, the proposed rule adopts the International Organization for Standardization 27916 standard as a viable alternative to current IRC standards, which establishes secure geological storage for the use of qualified carbon oxide for enhanced oil recovery. The proposed rule also allows companies to transfer earned credits to another taxpayer.