II 

112TH CONGRESS 

2D SESSION S. 3581 

To amend the Internal Revenue Code of 1986 to modify the credit for 

carbon dioxide sequestration. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 20, 2012 

Mr. CONRAD (for himself, Mr. ENZI, and Mr. ROCKEFELLER) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to modify 

the credit for carbon dioxide sequestration. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. MODIFICATIONS TO CARBON DIOXIDE SEQUES4 TRATION CREDIT. 

5 (a) ALLOCATION AND CERTIFICATION OF CREDIT.— 

6 (1) IN GENERAL.—Subsection (e) of section 

7 45Q of the Internal Revenue Code of 1986 is 

8 amended to read as follows: 

9 ‘‘(e) LIMITATION.— 


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1 ‘‘(1) ALLOCATION LIMITATION.—No credit shall 

2 be allowed under subsection (a) with respect to 

3 qualified carbon dioxide captured by carbon capture 

4 equipment at a qualified facility for the amount of 

5 qualified carbon dioxide captured by such carbon 

6 capture equipment in excess of— 

7 ‘‘(A) the portion of the national limitation 

8 allocated with respect to such carbon capture 

9 equipment under subsection (f), over 

10 ‘‘(B) the amount of qualified carbon diox11 ide captured by such carbon capture equipment 

12 during periods after July 31, 2013. 

13 ‘‘(2) NATIONAL LIMITATION.—For purposes of 

14 paragraph (1)(A), the national limitation is the ex15 cess of— 

16 ‘‘(A) 75,000,000 metric tons of qualified 

17 carbon dioxide, over 

18 ‘‘(B) the number of metric tons of quali19 fied carbon dioxide captured before August 1, 

20 2013, for which a credit under subsection (a) 

21 was allowed.’’. 

22 (2) ALLOCATION AND CERTIFICATION.—Section 

23 45Q of such Code is amended by adding at the end 

24 the following new subsection: 


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1 ‘‘(f) ALLOCATION FOR AND CERTIFICATION OF CAR2 BON CAPTURE PROJECTS.— 

3 ‘‘(1) ESTABLISHMENT OF PROCEDURES.—Not 

4 later than July 1, 2013, the Secretary shall estab5 lish, by regulation, processes and procedures— 

6 ‘‘(A) for allocating the national limitation 

7 under subsection (e)(2) to projects for placing 

8 carbon capture equipment in service at qualified 

9 facilities, and 

10 ‘‘(B) for certifying projects for which an 

11 allocation has been made under subparagraph 

12 (A). 

13 ‘‘(2) ALLOCATIONS.— 

14 ‘‘(A) APPLICATION.—Each applicant for 

15 an allocation under this subsection shall submit 

16 an application to the Secretary under such 

17 terms and conditions as are established by the 

18 Secretary in regulations. 

19 ‘‘(B) PRIORITY.—The Secretary shall rank 

20 applications received under subparagraph (A) in 

21 the following order: 

22 ‘‘(i) Applicants with applications re23 ceived by the Secretary on an earlier date 

24 shall be given higher priority than appli25 cants with applications received on a later 


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1 date. For purposes of this clause, any ap2 plication received before the date that is 30 

3 days after the procedures and processes 

4 described in paragraph (1) are established 

5 shall be considered to have been received 

6 on such date. 

7 ‘‘(ii) In the case of applications re8 ceived on the same date, those applicants 

9 concurrently applying for certification shall 

10 be given higher priority. 

11 ‘‘(iii) In the case of applications re12 ceived on the same date and concurrently 

13 applying for certification, those projects 

14 with the earlier date by which construction 

15 commenced shall be given higher priority. 

16 ‘‘(C) ALLOCATION TO APPLICANTS.—Sub17 ject to subparagraph (D), the Secretary shall 

18 allocate tonnage to each applicant— 

19 ‘‘(i) based on the amount requested 

20 on the application, and 

21 ‘‘(ii) in order of the rank of the appli22 cation under subparagraph (B), 

23 until the amount of tonnage available under 

24 this section is exhausted. Projects for which no 

25 or a partial allocation is made shall retain their 


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1 ranking and shall be eligible to receive an allo2 cation of tonnage previously allocated that is 

3 forfeited or recaptured. 

4 ‘‘(D) LIMITATION.—The Secretary may 

5 not allocate to any project more than the lesser 

6 of— 

7 ‘‘(i) the number of metric tons of 

8 qualified carbon dioxide projected to be 

9 captured at the qualified facility under the 

10 project during the 10-year period begin11 ning on the date on which such project is 

12 placed in service, 

13 ‘‘(ii) the number of metric tons of 

14 qualified carbon dioxide projected to be 

15 captured at the qualified facility under the 

16 project— 

17 ‘‘(I) which are subject to a writ18 ten, binding contract for disposal in 

19 secure geological storage (whether or 

20 not used as a tertiary injectant), or 

21 ‘‘(II) for which there is a plan for 

22 such disposal by the applicant, or 

23 ‘‘(iii) 15,000,000 metric tons of quali24 fied carbon dioxide. 


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1 ‘‘(E) REDUCTION FOR PRIOR CREDITS.— 

2 The amount of any allocation under subpara3 graph (C) to any project shall be reduced by 

4 the number of metric tons of carbon dioxide 

5 captured by the carbon capture equipment with 

6 respect to such project before August 1, 2013, 

7 for which a credit was allowed under subsection 

8 (a). 

9 ‘‘(3) CERTIFICATION.— 

10 ‘‘(A) IN GENERAL.—No credit shall be al11 lowed under subsection (a) with respect to any 

12 project for using carbon capture equipment to 

13 capture qualified carbon dioxide at a qualified 

14 facility before the date on which such project is 

15 certified under this paragraph. 

16 ‘‘(B) APPLICATION FOR CERTIFICATION.— 

17 Each project which is allocated a portion of the 

18 national limitation shall submit an application 

19 for certification to the Secretary containing 

20 such information as the Secretary may require. 

21 Such application shall be submitted— 

22 ‘‘(i) not later than— 

23 ‘‘(I) 6 months after the date on 

24 which such project receives an alloca25 tion, and 


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1 ‘‘(II) 30 days after the later of 

2 the date on which the regulations, 

3 processes, and procedures are estab4 lished under paragraph (1) or the 

5 construction start date, and 

6 ‘‘(ii) not earlier than the construction 

7 start date. 

8 For purposes of this subparagraph, the term 

9 ‘construction start date’ means the earlier of 

10 the first date on which physical work on the 

11 project of a significant nature is undertaken or 

12 the date by which 5 percent or more of the total 

13 cost of the project has been spent. 

14 ‘‘(C) REVOCATION OF CERTIFICATION.— 

15 ‘‘(i) MATERIALLY INACCURATE REP16 RESENTATIONS.—The Secretary may re17 voke a certification under this paragraph if 

18 the Secretary determines that an applicant 

19 has made a materially inaccurate represen20 tation with respect to the project. 

21 ‘‘(ii) FAILURE TO TIMELY PLACE

22 EQUIPMENT IN SERVICE.—A certification 

23 under this paragraph shall be revoked in 

24 any case in which carbon capture equipVerDate Mar 15 2010 03:04 Sep 25, 2012 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S3581.IS S3581

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1 ment with respect to the project is not 

2 placed in service— 

3 ‘‘(I) before the date which is 5 

4 years after the date on which the allo5 cation was issued, in the case of a 

6 new industrial facility, or 

7 ‘‘(II) before the date which is 3 

8 years after the date on which the allo9 cation was issued, in the case of a 

10 modification of an existing industrial 

11 facility. 

12 ‘‘(D) REALLOCATION.—In any case— 

13 ‘‘(i) in which a certification is revoked 

14 under subparagraph (C), or 

15 ‘‘(ii) in which a taxpayer to whom an 

16 allocation is made under paragraph (2) 

17 fails to obtain certification for a project 

18 under this paragraph, 

19 the amount of national limitation which was al20 located to such project under paragraph (2) 

21 shall be reallocated under such rules as estab22 lished by the Secretary under regulations. 

23 ‘‘(4) PUBLIC DISCLOSURE.— 

24 ‘‘(A) IN GENERAL.—The Secretary shall, 

25 within 30 days of making any allocation, certifiVerDate Mar 15 2010 03:04 Sep 25, 2012 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S3581.IS S3581

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1 cation, revocation, or change in the ranking of 

2 projects, publicly disclose the amount of such 

3 allocation, a description of the project for which 

4 such allocation, certification, or revocation was 

5 made, and the change in the ranking of 

6 projects, as the case may be. 

7 ‘‘(B) ANNUAL REPORT.—The Secretary 

8 shall issue an annual report summarizing cred9 its allocated and available for allocation.’’. 

10 (3) CONFORMING AMENDMENTS.— 

11 (A) Paragraph (2) of section 45Q(c) of 

12 such Code is amended by inserting ‘‘which is 

13 part of a project which is certified under sub14 section (f)(3)’’ after ‘‘carbon capture equip15 ment’’. 

16 (B) Paragraph (3) of section 45Q(c) of 

17 such Code is amended by striking ‘‘which’’ and 

18 inserting ‘‘at which such carbon capture equip19 ment’’. 

20 (b) 10-YEAR CREDIT LIMITATION.—Section 45Q(a) 

21 of the Internal Revenue Code of 1986 is amended— 

22 (1) in paragraph (1)(A), by inserting ‘‘during 

23 the 10-year period beginning on the later of the date 

24 on which the carbon capture equipment described in 

25 subsection (c)(1) is placed in service or the date on 


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1 which the project with respect to such carbon cap2 ture equipment was certified under subsection 

3 (f)(3)’’ after ‘‘qualified facility’’, and 

4 (2) in paragraph (2)(A), by inserting ‘‘during 

5 the 10-year period beginning on the later of the date 

6 on which the carbon capture equipment described in 

7 subsection (c)(1) is placed in service or the date on 

8 which the project with respect to such carbon cap9 ture equipment was certified under subsection 

10 (f)(3)’’ after ‘‘qualified facility’’. 

11 (c) DEFINITION OF CARBON CAPTURE EQUIP12 MENT.—Section 45Q(d) of the Internal Revenue Code of 

13 1986 is amended by adding at the end the following new 

14 paragraph: 

15 ‘‘(8) CARBON CAPTURE EQUIPMENT.—The term 

16 ‘carbon capture equipment’ means equipment to cap17 ture and pressurize qualified carbon dioxide.’’. 

18 (d) CREDIT ALLOWED TO TAXPAYER PERFORMING

19 CARBON CAPTURE.— 

20 (1) IN GENERAL.—Paragraph (5) of section 

21 45Q(d) of the Internal Revenue Code of 1986 is 

22 amended to read as follows: 

23 ‘‘(5) PERSON TO WHOM CREDIT IS ALLOW24 ABLE.— 


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1 ‘‘(A) IN GENERAL.—Except as provided in 

2 subparagraph (B) or in regulations prescribed 

3 by the Secretary, any credit under this section 

4 shall be allowed to the taxpayer who— 

5 ‘‘(i) captures the qualified carbon di6 oxide, and 

7 ‘‘(ii) through contract or otherwise, 

8 disposes of the qualified carbon dioxide in 

9 a manner meeting the requirements of 

10 paragraph (1)(B) or (2)(C) of subsection 

11 (a), as the case may be. 

12 ‘‘(B) ELECTION TO ALLOW CREDIT TO

13 PERSON DISPOSING CARBON DIOXIDE.—If the 

14 person described in subparagraph (A) makes an 

15 election under this subparagraph in such man16 ner as the Secretary may prescribe by regula17 tions, the credit under this section— 

18 ‘‘(i) shall be allowable to the person 

19 that disposes of qualified carbon dioxide in 

20 a manner meeting the requirements of 

21 paragraph (1)(B) or (2)(C) of subsection 

22 (a), as the case may be, and 

23 ‘‘(ii) shall not be allowable to the per24 son described in subparagraph (A).’’. 

25 (2) CONFORMING AMENDMENTS.— 


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1 (A) Section 45Q(a) of such Code is amend2 ed by striking ‘‘by the taxpayer’’ each place it 

3 appears in paragraph (1)(B), (2)(B), and 

4 (2)(C). 

5 (B) Section 45Q(c) of such Code, as 

6 amended by subsection (a), is amended by 

7 striking paragraph (1) and redesignating para8 graphs (2) and (3) as paragraphs (1) and (2), 

9 respectively. 

10 (e) RULES RELATING TO CREDIT RECAPTURE.— 

11 Paragraph (6) of section 45Q(d) of the Internal Revenue 

12 Code of 1986 is amended by adding at the end the fol13 lowing new sentence: ‘‘Notwithstanding section 7805(b), 

14 any regulation issued pursuant to this paragraph shall 

15 apply only with respect to qualified carbon dioxide cap16 tured or disposed of after the date on which such regula17 tion is filed with the Federal Register.’’. 

18 (f) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to carbon dioxide captured after 

20 July 31, 2013. 

Æ 


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