Carbon Capture Act

To amend the Internal Revenue Code of 1986 to improve and extend the credit for carbon dioxide sequestration. 1. Short title This Act may be cited as the Carbon Capture Act 2. Extension of enhanced carbon dioxide sequestration credit (a) In general Section 45Q 45Q. Credit for carbon dioxide sequestration (a) General rule For purposes of section 38, the carbon dioxide sequestration credit for any taxable year is an amount equal to the sum of— (1) $20 per metric ton of qualified carbon dioxide which is— (A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Carbon Capture Act, and (B) disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (2)(B), (2) $10 per metric ton of qualified carbon dioxide which is— (A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Carbon Capture Act, and (B) (i) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or (ii) utilized by the taxpayer in a manner described in subsection (e)(7), (3) the applicable dollar amount per metric ton of qualified carbon dioxide which is— (A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Carbon Capture Act, during the 15-year period beginning on the date the equipment was originally placed in service, and (B) disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (4)(B), and (4) the applicable dollar amount per metric ton of qualified carbon dioxide which is— (A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Carbon Capture Act, during the 15-year period beginning on the date the equipment was originally placed in service, and (B) (i) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or (ii) utilized by the taxpayer in a manner described in subsection (e)(7). A taxpayer that captures qualified carbon dioxide as provided under paragraph (1), (2), (3) or (4) and that enters into contractual arrangements with another person to ensure the disposal, use, or utilization required under paragraph (1), (2), (3) or (4), as the case may be, shall be treated as having disposed, captured, or used such qualified carbon dioxide to the extent disposed, captured, or used by such other persons pursuant to such contractual arrangements. (b) Applicable dollar amount; additional equipment; election (1) Applicable dollar amount For purposes of subsection (a)— (A) In general The applicable dollar amount shall be an amount equal to— (i) for taxable years beginning after 2016 and before 2026, the dollar amount established by linear interpolation between $12.83 and $35 for each calendar year during such period, and (ii) for taxable years beginning after 2025, an amount equal to the product of $35 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting 2024 1990 (B) Rounding The applicable dollar amount determined under subparagraph (A) shall be rounded to the nearest cent. (2) Installation of additional carbon capture equipment on existing qualified facility In the case of a qualified facility placed in service before the date of the enactment of the Carbon Capture Storage Act, for which additional carbon capture equipment is placed in service on or after the date of the enactment of such Act, the amount of qualified carbon dioxide which is captured by the taxpayer shall be equal to— (A) for purposes of paragraphs (1)(A) and (2)(A) of subsection (a), the lesser of— (i) the total amount of qualified carbon dioxide captured at such facility for the taxable year, or (ii) the total amount of the carbon dioxide capture capacity of the carbon capture equipment in service at such facility on the day before the date of the enactment of the Carbon Capture Act, and (B) for purposes of paragraphs (3)(A) and (4)(A) of such subsection, an amount equal to the excess (if any) of— (i) the amount described in subparagraph (A)(i), over (ii) the amount described in subparagraph (A)(ii). (3) Election For purposes of determining the carbon dioxide sequestration credit under this section, a taxpayer may elect to have the dollar amount applicable under paragraph (1) or (2) of subsection (a) apply in lieu of the dollar amounts applicable under paragraph (3) or (4) of such subsection for each metric ton of qualified carbon dioxide which is captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Carbon Capture Act. (c) Qualified carbon dioxide For purposes of this section: (1) In general The term qualified carbon dioxide (A) (i) from an industrial source which would otherwise be released into the atmosphere as industrial emission of greenhouse gas, or would otherwise lead to such release, or (ii) directly from the ambient air, and (B) is measured at the source of capture and verified at the point of disposal, injection, or utilization. (2) Recycled carbon dioxide The term qualified carbon dioxide (d) Qualified facility For purposes of this section, the term qualified facility (1) the construction of which begins before January 1, 2024, and— (A) the original planning and design for such facility includes installation of carbon capture equipment, or (B) the construction of carbon capture equipment with respect to such facility begins before such date, and (2) which captures— (A) in the case of a facility which emits not more than 500,000 metric tons of carbon dioxide into the atmosphere during the taxable year, not less than 25,000 metric tons of qualified carbon dioxide during the taxable year which is utilized in a manner described in subsection (e)(7), or (B) in the case of a facility not described in subparagraph (A), not less than 100,000 metric tons of qualified carbon dioxide during the taxable year. (e) Special rules and other definitions For purposes of this section— (1) Only carbon dioxide captured and secured or used within the United States taken into account The credit under this section shall apply only with respect to qualified carbon dioxide the capture and disposal, use, or utilization of which is within— (A) the United States (within the meaning of section 638(1)), or (B) a possession of the United States (within the meaning of section 638(2)). (2) Secure geological storage The Secretary, in consultation with the Administrator of the Environmental Protection Agency, the Secretary of Energy, and the Secretary of the Interior, shall establish regulations for determining adequate security measures for the geological storage of qualified carbon dioxide under subsection (a) such that the qualified carbon dioxide does not escape into the atmosphere. Such term shall include storage at deep saline formations, oil and gas reservoirs, and unminable coal seams under such conditions as the Secretary may determine under such regulations. (3) Tertiary injectant The term tertiary injectant (4) Qualified enhanced oil or natural gas recovery project The term qualified enhanced oil or natural gas recovery project qualified enhanced oil recovery project crude oil or natural gas crude oil (5) Credit attributable to taxpayer (A) In general Except as provided subparagraph (B) or in any regulations prescribed by the Secretary, any credit under this section shall be attributable to— (i) in the case of qualified carbon dioxide captured using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Carbon Capture Act, the person that captures and physically or contractually ensures the disposal, utilization, or use as a tertiary injectant of such qualified carbon dioxide, and (ii) in the case of qualified carbon dioxide captured using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Carbon Capture Act, or with regard to which an election has been made under subsection (f)(2), the person that owns the carbon capture equipment and physically or contractually ensures the capture and disposal, utilization, or use as a tertiary injectant of such qualified carbon dioxide. (B) Election If the person described in subparagraph (A) makes an election under this subparagraph at such time and in such manner as the Secretary may prescribe by regulations, the credit under this section— (i) shall be allowable to the person that disposes of the qualified carbon dioxide, utilizes the qualified carbon dioxide, or uses the qualified carbon dioxide as a tertiary injectant, and (ii) shall not be allowable to the person described in subparagraph (A). (6) Recapture The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any qualified carbon dioxide which ceases to be captured, disposed of, or used as a tertiary injectant in a manner consistent with the requirements of this section. (7) Utilization of qualified carbon dioxide (A) In general For purposes of this section, utilization of qualified carbon dioxide means— (i) the chemical conversion of such qualified carbon dioxide to a material or chemical compound in which such qualified carbon dioxide is securely stored, or (ii) the use of such qualified carbon dioxide for any other purpose for which a commercial market exists (other than use as a tertiary injectant in a qualified enhanced oil or natural gas recovery project), as determined by the Secretary. (B) Measurement For purposes of determining the amount of qualified carbon dioxide utilized by the taxpayer under paragraph (2)(B)(ii) or (4)(B)(ii) of subsection (a), such amount shall be equal to the metric tons of carbon dioxide which the taxpayer demonstrates, based upon an analysis of lifecycle greenhouse gas emissions and subject to such requirements as the Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, determines appropriate, were captured and prevented from escaping into the atmosphere through use of a process described in subparagraph (A). (8) Direct air capture facility For purposes of this section, the term direct air capture facility (9) Inflation adjustment In the case of any taxable year beginning in a calendar year after 2009, there shall be substituted for the dollar amount contained in paragraphs (1) and (2) of subsection (a) an amount equal to the product of— (A) such dollar amount, multiplied by (B) the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting 2008 1990 (f) Application of section for certain carbon capture equipment (1) In general Except as provided in paragraph (2), in the case of any carbon capture equipment placed in service before the date of the enactment of the Carbon Capture Act, the credit under this section shall apply with respect to qualified carbon dioxide captured using such equipment before the end of the calendar year in which the Secretary, in consultation with the Administrator of the Environmental Protection Agency, certifies that 75,000,000 metric tons of qualified carbon dioxide have been taken into account in accordance with paragraphs (1) and (2) of subsection (a) during the period beginning after October 3, 2008. (2) Special rule for certain facilities not claiming prior credit In the case of any qualified facility— (A) which captures not less than 100,000 metric tons of carbon dioxide during the taxable year, (B) which is placed in service after December 31, 2015, and (C) with respect to which no credit has been allowed under this section (as in effect on the day before the date of the enactment of such Act) by any person for any taxable year beginning prior to the date of enactment of such Act, the taxpayer may elect to treat such qualified facility as placed in service on the date of enactment of such Act. (g) Regulations The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section, including regulations or other guidance to— (1) ensure proper allocation under subsection (a) for qualified carbon dioxide captured by a taxpayer during the taxable year ending after the date of the enactment of the Carbon Capture Act, and (2) determine whether a facility satisfies the requirements under subsection (d)(1) during such taxable year. . (b) Effective date Except to the extent provided in section 45Q(f) of such Code, as amended by this Act, the amendments made by this section shall apply to property placed in service on after the date of the enactment of this Act.

Summary: Carbon Capture Act This bill amends the Internal Revenue Code to extend and modify the tax credit for carbon dioxide (CO2) sequestration. The bill modifies the credit to: allow certain new industrial or direct air capture facilities to qualify for the credit if construction begins before 2024; allow qualified projects to claim the credit for 15 years, beginning on the date the equipment was originally placed in service; increase the credit amounts for certain projects placed in service upon or after the enactment of this bill; expand the purposes for which captured CO2 may be used; modify the requirements for the amount of CO2 that must be captured; specify that the 75 million metric ton cap on the CO2 that may qualify for the credit applies only to projects placed in service before the enactment of this bill; allow the credit to be transferred from the entity that owns and uses the capture equipment to the entity that disposes of or uses the CO2; and allow certain facilities that were placed in service after 2015 and have not previously claimed the credit to be treated as placed in service on the date of the enactment of this bill.