26 U.S.C. § 45Q (INTERNAL REVENUE CODE)
§ 45Q. Credit for carbon oxide sequestration
(a) General rule
For purposes of section 38, the carbon oxide sequestration credit for any taxable year is an amount equal to the sum of—
(1) $20 per metric ton of qualified carbon oxide 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 Bipartisan Budget Act of 2018, 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 oxide 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 Bipartisan Budget Act of 2018, 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 (f)(5),
(3) the applicable dollar amount (as determined under subsection (b)(1)) per metric ton of qualified carbon oxide 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 Bipartisan Budget Act of 2018, during the 12-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 (as determined under subsection (b)(1)) per metric ton of qualified carbon oxide 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 Bipartisan Budget Act of 2018, during the 12-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 (f)(5).
(b) Applicable dollar amount; additional equipment; election
(1) Applicable dollar amount
(A) In general
The applicable dollar amount shall be an amount equal to—
(i) for any taxable year beginning in a calendar year after 2016 and before 2027—
(I) for purposes of paragraph (3) of subsection (a), the dollar amount established by linear interpolation between $22.66 and $50 for each calendar year during such period, and
(II) for purposes of paragraph (4) of such subsection, the dollar amount established by linear interpolation between $12.83 and $35 for each calendar year during such period, and
(ii) for any taxable year beginning in a calendar year after 2026—
(I) for purposes of paragraph (3) of subsection (a), an amount equal to the product of $50 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting “2025” for “1990”, and
(II) for purposes of paragraph (4) of such subsection, 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 “2025” for “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 Bipartisan Budget Act of 2018, 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 oxide 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 oxide 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 Bipartisan Budget Act of 2018, and
(B) for purposes of paragraphs (3)(A) and (4)(A) of such subsection, an amount (not less than zero) equal to the excess of—
(i) the amount described in clause (i) of subparagraph (A), over
(ii) the amount described in clause (ii) of such subparagraph.
(3) Election
For purposes of determining the carbon oxide sequestration credit under this section, a taxpayer may elect to have the dollar amounts 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 oxide 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 Bipartisan Budget Act of 2018.
(c) Qualified carbon oxide
For purposes of this section—
(1) In general
The term “qualified carbon oxide” means—
(A) any carbon dioxide which—
(i) is captured from an industrial source by carbon capture equipment which is originally placed in service before the date of the enactment of the Bipartisan Budget Act of 2018,
(ii) would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and
(iii) is measured at the source of capture and verified at the point of disposal, injection, or utilization,
(B) any carbon dioxide or other carbon oxide which—
(i) is captured from an industrial source by carbon capture equipment which is originally placed in service on or after the date of the enactment of the Bipartisan Budget Act of 2018,
(ii) would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and
(iii) is measured at the source of capture and verified at the point of disposal, injection, or utilization, or
(C) in the case of a direct air capture facility, any carbon dioxide which—
(i) is captured directly from the ambient air, and
(ii) is measured at the source of capture and verified at the point of disposal, injection, or utilization.
(2) Recycled carbon oxide
The term “qualified carbon oxide” includes the initial deposit of captured carbon oxide used as a tertiary injectant. Such term does not include carbon oxide that is recaptured, recycled, and re-injected as part of the enhanced oil and natural gas recovery process.
(d) Qualified facility
For purposes of this section, the term “qualified facility” means any industrial facility or direct air capture facility—
(1) the construction of which begins before January 1, 2026, and—
(A) construction of carbon capture equipment begins before such date, or
(B) the original planning and design for such facility includes installation of carbon capture equipment, and
(2) which captures—
(A) in the case of a facility which emits not more than 500,000 metric tons of carbon oxide into the atmosphere during the taxable year, not less than 25,000 metric tons of qualified carbon oxide during the taxable year which is utilized in a manner described in subsection (f)(5),
(B) in the case of an electricity generating facility which is not described in subparagraph (A), not less than 500,000 metric tons of qualified carbon oxide during the taxable year, or
(C) in the case of a direct air capture facility or any facility not described in subparagraph (A) or (B), not less than 100,000 metric tons of qualified carbon oxide during the taxable year.
(e) Definitions
For purposes of this section—
(1) Direct air capture facility
(A) In general
Subject to subparagraph (B), the term “direct air capture facility” means any facility which uses carbon capture equipment to capture carbon dioxide directly from the ambient air.
(B) Exception
The term “direct air capture facility” shall not include any facility which captures carbon dioxide—
(i) which is deliberately released from naturally occurring subsurface springs, or
(ii) using natural photosynthesis.
(2) Qualified enhanced oil or natural gas recovery project
The term “qualified enhanced oil or natural gas recovery project” has the meaning given the term “qualified enhanced oil recovery project” by section 43(c)(2), by substituting “crude oil or natural gas” for “crude oil” in subparagraph (A)(i) thereof.
(3) Tertiary injectant
The term “tertiary injectant” has the same meaning as when used within section 193(b)(1).
(f) Special rules
(1) Only qualified carbon oxide captured and disposed of or used within the united states taken into account
The credit under this section shall apply only with respect to qualified carbon oxide 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 oxide under subsection (a) such that the qualified carbon oxide 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) Credit attributable to taxpayer
(A) In general
Except as provided in 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 oxide captured using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, the person that captures and physically or contractually ensures the disposal, utilization, or use as a tertiary injectant of such qualified carbon oxide, and
(ii) in the case of qualified carbon oxide 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 Bipartisan Budget Act of 2018, 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 oxide.
(B) Election
If the person described in subparagraph (A) makes an election under this subparagraph in such time and 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 oxide, utilizes the qualified carbon oxide, or uses the qualified carbon oxide as a tertiary injectant, and
(ii) shall not be allowable to the person described in subparagraph (A).
(4) Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any qualified carbon oxide which ceases to be captured, disposed of, or used as a tertiary injectant in a manner consistent with the requirements of this section.
(5) Utilization of qualified carbon oxide
(A) In general
For purposes of this section, utilization of qualified carbon oxide means—
(i) the fixation of such qualified carbon oxide through photosynthesis or chemosynthesis, such as through the growing of algae or bacteria,
(ii) the chemical conversion of such qualified carbon oxide to a material or chemical compound in which such qualified carbon oxide is securely stored, or
(iii) the use of such qualified carbon oxide for any other purpose for which a commercial market exists (with the exception of use as a tertiary injectant in a qualified enhanced oil or natural gas recovery project), as determined by the Secretary.
(B) Measurement
(i) In general
For purposes of determining the amount of qualified carbon oxide 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 qualified carbon oxide 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—
(I) captured and permanently isolated from the atmosphere, or
(II) displaced from being emitted into the atmosphere,
through use of a process described in subparagraph (A).
(ii) Lifecycle greenhouse gas emissions
For purposes of clause (i), the term “lifecycle greenhouse gas emissions” has the same meaning given such term under subparagraph (H) of section 211(o)(1) of the Clean Air Act (42 U.S.C. 7545(o)(1)), as in effect on the date of the enactment of the Bipartisan Budget Act of 2018, except that “product” shall be substituted for “fuel” each place it appears in such subparagraph.
(6) Election for applicable facilities
(A) In general
For purposes of this section, in the case of an applicable facility, for any taxable year in which such facility captures not less than 500,000 metric tons of qualified carbon oxide during the taxable year, the person described in paragraph (3)(A)(ii) may elect to have such facility, and any carbon capture equipment placed in service at such facility, deemed as having been placed in service on the date of the enactment of the Bipartisan Budget Act of 2018.
(B) Applicable facility
For purposes of this paragraph, the term “applicable facility” means a qualified facility—
(i) which was placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, and
(ii) for which no taxpayer claimed a credit under this section in regards to such facility for any taxable year ending before the date of the enactment of such Act.
(7) Inflation adjustment
In the case of any taxable year beginning in a calendar year after 2009, there shall be substituted for each 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” for “1990”.
(3) 1 Credit reduced for certain tax-exempt bonds
The amount of the credit determined under subsection (a) with respect to any project for any taxable year shall be reduced by the amount which is the product of the amount so determined for such year and the lesser of ½ or a fraction—
(A) the numerator of which is the sum, for the taxable year and all prior taxable years, of the proceeds from an issue described in section 142(a)(17) used to provide financing for the project the interest on which is exempt from tax under section 103, and
(B) the denominator of which is the aggregate amount of additions to the capital account for the project for the taxable year and all prior taxable years.
The amounts under the preceding sentence for any taxable year shall be determined as of the close of the taxable year.
(g) Application of section for certain carbon capture equipment
In the case of any carbon capture equipment placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, the credit under this section shall apply with respect to qualified carbon oxide 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, during the period beginning after October 3, 2008, a total of 75,000,000 metric tons of qualified carbon oxide have been taken into account in accordance with—
(1) subsection (a) of this section, as in effect on the day before the date of the enactment of the Bipartisan Budget Act of 2018, and
(2) paragraphs (1) and (2) of subsection (a) of this section.
(h) 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 oxide captured by a taxpayer during the taxable year ending after the date of the enactment of the Bipartisan Budget Act of 2018, and
(2) determine whether a facility satisfies the requirements under subsection (d)(1) during such taxable year.
(Added Pub. L. 110–343, div. B, title I, § 115(a), Oct. 3, 2008, 122 Stat. 3829; amended Pub. L. 111–5, div. B, title I, § 1131(a), (b), Feb. 17, 2009, 123 Stat. 325; Pub. L. 113–295, div. A, title II, § 209(j)(1), Dec. 19, 2014, 128 Stat. 4030; Pub. L. 115–123, div. D, title II, § 41119(a), Feb. 9, 2018, 132 Stat. 162; Pub. L. 116–260, div. EE, title I, § 121, Dec. 27, 2020, 134 Stat. 3051; Pub. L. 117–58, div. H, title IV, § 80402(e), Nov. 15, 2021, 135 Stat. 1334.)
heading: Inflation Adjusted Items for Certain Tax Years
text: For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table below.
heading: Editorial Notes
heading: References in Text
text: The date of the enactment of the Bipartisan Budget Act of 2018 and the date of the enactment of such Act, referred to in text, is the date of enactment of Pub. L. 115–123, which was approved Feb. 9, 2018.
heading: Amendments
text: 2021—Subsec. (f)(3). Pub. L. 117–58 added par. (3) relating to certain tax-exempt bonds at end of subsec. (f).
2020—Subsec. (d)(1). Pub. L. 116–260 substituted “January 1, 2026” for “January 1, 2024” in introductory provisions.
2018—Pub. L. 115–123 amended section generally. Prior to amendment, section related to credit for carbon dioxide sequestration.
2014—Subsec. (d)(2). Pub. L. 113–295 substituted “Administrator of the Environmental Protection Agency, the Secretary of Energy, and the Secretary of the Interior, shall establish” for “Administrator of the Environmental Protection Agency the Secretary of Energy, and the Secretary of the Interior,, shall establish”.
2009—Subsec. (a)(1)(B). Pub. L. 111–5, § 1131(b)(2), inserted “and not used by the taxpayer as described in paragraph (2)(B)” after “storage”.
Subsec. (a)(2)(C). Pub. L. 111–5, § 1131(a), added subpar. (C).
Subsec. (d)(2). Pub. L. 111–5, § 1131(b)(1), inserted “the Secretary of Energy, and the Secretary of the Interior,” after “Environmental Protection Agency” and substituted “paragraph (1)(B) or (2)(C) of subsection (a)” for “subsection (a)(1)(B)” and “, oil and gas reservoirs, and unminable coal seams” for “and unminable coal seems”.
Subsec. (e). Pub. L. 111–5, § 1131(b)(3), substituted “taken into account in accordance with subsection (a)” for “captured and disposed of or used as a tertiary injectant”.
heading: Statutory Notes and Related Subsidiaries
heading: Effective Date of 2021 Amendment
text: Pub. L. 117–58, div. H, title IV, § 80402(f), Nov. 15, 2021, 135 Stat. 1334, provided that: “The amendments made by this section [amending this section and sections 141, 142, and 146 of this title] shall apply to obligations issued after December 31, 2021.”
heading: Effective Date of 2018 Amendment
text: Pub. L. 115–123, div. D, title II, § 41119(b), Feb. 9, 2018, 132 Stat. 168, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017.”
heading: Effective Date of 2014 Amendment
text: Amendment by Pub. L. 113–295 effective as if included in the provisions of the American Recovery and Reinvestment Tax Act of 2009, Pub. L. 111–5, div. B, title I, to which such amendment relates, see section 209(k) of Pub. L. 113–295, set out as a note under section 24 of this title.
heading: Effective Date of 2009 Amendment
text: Pub. L. 111–5, div. B, title I, § 1131(c), Feb. 17, 2009, 123 Stat. 325, provided that: “The amendments made by this section [amending this section] shall apply to carbon dioxide captured after the date of the enactment of this Act [Feb. 17, 2009].”
heading: Effective Date
text: Section applicable to carbon dioxide captured after Oct. 3, 2008, see section 115(d) of Pub. L. 110–343, set out as an Effective Date of 2008 Amendment note under section 38 of this title.
heading: Inflation Adjusted Items for Certain Years
text: Provisions relating to inflation adjustment of items in this section for certain years were contained in the following:
2021—Internal Revenue Notice 2021–35.
2020—Internal Revenue Notice 2020–40.
2019—Internal Revenue Notice 2019–31.
2018—Internal Revenue Notice 2018–40.
2017—Internal Revenue Notice 2017–32.
2016—Internal Revenue Notice 2016–53.
2015—Internal Revenue Notice 2015–44.
2014—Internal Revenue Notice 2014–40.
2013—Internal Revenue Notice 2013–34.
2012—Internal Revenue Notice 2012—42.
2011—Internal Revenue Notice 2011–50.
2010—Internal Revenue Notice 2010–75.