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IRS Issues Final Rule on 45Q Tax Credit for Carbon Capture

This month the Treasury Department and the Internal Revenue Service issued the final rules about the section 45Q tax credit that can incentivize projects that capture and sequester carbon dioxide. ABO has been an advocate for the credit, and the new rule may open the door for algae production projects to apply.

“These final regulations provide taxpayers and the American energy sector with needed clarity on utilizing the section 45Q credit,” said Treasury Secretary Steven T. Mnuchin. “These regulations are an essential step toward harnessing the entrepreneurial spirit of Americans to further modernize the American energy sector, while ensuring American energy producers maintain their competitive edge around the world.”

The credit may also have applications beyond the energy sector, since projects that sequester carbon via direct air capture can qualify as well.

Additionally, while the final regulations are similar to the preliminary rules issued in March 2020, they also include provisions that allow smaller projects to take advantage of the tax credit.

Other resources:

Carbon capture gets a boost with 45Q tax credits

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