Qualified Agricultural Carbon Sequestration Act of 2022
Bill: H.R.9121 | Sponsor: Rep. Ryan, Tim (D-OH)
Policy area: Taxation

Summary:
Qualified Agricultural Carbon Sequestration Act of 2022
This bill allows certain qualified applicants (i.e., farms) a new tax credit for the abatement and sequestration of carbon dioxide emissions related to certain agricultural activities.
The bill requires the Department of the Treasury to establish a qualified agricultural carbon sequestration and abatement program to consider and award certifications for farms eligible for the credit.

To amend the Internal Revenue Code of 1986 to establish a tax credit 
 for abatement and sequestration of carbon dioxide equivalent through 
                         agricultural methods.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Qualified Agricultural Carbon 
Sequestration Act of 2022''.

SEC. 2. QUALIFIED AGRICULTURAL CARBON SEQUESTRATION CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 45Z the following new section:

``SEC. 45AA. QUALIFIED AGRICULTURAL CARBON SEQUESTRATION CREDIT.

    ``(a) In General.--For purposes of section 38, in the case of a 
qualified applicant, the qualified agricultural carbon sequestration 
credit for the taxable year is an amount equal to the sum of--
            ``(1) the carbon dioxide equivalent abatement credit,
            ``(2) the carbon dioxide equivalent sequestration credit, 
        and
            ``(3) the early adopter credit.
    ``(b) Carbon Dioxide Equivalent Abatement Credit.--
            ``(1) In general.--The amount of the carbon dioxide 
        equivalent abatement credit for the taxable year shall be equal 
        to the applicable dollar amount per metric ton of qualified 
        carbon dioxide equivalent abatement by a qualified applicant.
            ``(2) Qualified carbon dioxide equivalent abatement.--For 
        purposes of this subsection, the term `qualified carbon dioxide 
        equivalent abatement' means the amount (not less than zero) 
        equal to--
                    ``(A) the amount of carbon dioxide equivalent 
                emitted into the atmosphere by the qualified applicant 
                during the counterfactual baseline year, minus
                    ``(B) the amount of carbon dioxide equivalent 
                emitted into the atmosphere by such farm during the 
                taxable year.
            ``(3) Applicable dollar amount.--
                    ``(A) For purposes of this subsection, the 
                applicable dollar amount shall be an amount equal to--
                            ``(i) for any taxable year beginning in a 
                        calendar year after 2022 and before 2027, the 
                        dollar amount established by linear 
                        interpolation between $22.66 and $50 for each 
                        calendar year during such period, and
                            ``(ii) for any taxable year beginning in a 
                        calendar year after 2026, an amount equal to 
                        the product of $50 and the inflation adjustment 
                        factor 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.
            ``(4) Limitation.--For purposes of this subsection, the 
        carbon dioxide equivalent abatement credit shall only be 
        allowed in each taxable year subsequent to the counterfactual 
        baseline year.
    ``(c) Carbon Dioxide Equivalent Sequestration Credit.--
            ``(1) In general.--The amount of the carbon sequestration 
        credit for any taxable year shall be an amount equal to the sum 
        of--
                    ``(A) the qualifying amount, plus
                    ``(B) an amount equal to the sum of any carbon 
                sequestration allotment for such taxable year.
            ``(2) Qualifying amount.--For purposes of this subsection, 
        the term qualifying amount means--
                    ``(A) in the case of a taxable year for which 
                qualified carbon sequestration by a qualified applicant 
                is greater than zero, 10 percent of the applicable 
                dollar amount per metric ton of such qualified carbon 
                sequestration by such applicant, and
                    ``(B) in the case of a taxable year for which 
                qualified carbon sequestration by a qualified applicant 
                is equal to or less than zero, 0 percent of such 
                applicable dollar amount.
            ``(3) 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 2022 and before 2027, 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, 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 paragraph (1) shall be rounded to the 
                nearest cent.
            ``(4) Carbon sequestration allotment.--For purposes of this 
        subsection, the term `carbon sequestration allotment' means, 
        for each of the 9 taxable years subsequent to any taxable year 
        described in paragraph (1)(A), an amount equal to the amount 
        described in such paragraph.
            ``(5) Qualified carbon sequestration.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified carbon sequestration' means the 
                amount (not less than zero) equal to--
                            ``(i) the stock of soil organic carbon 
                        stored in the soil of the qualified farm during 
                        the taxable year, minus
                            ``(ii) the stock of soil organic carbon 
                        stored in the soil of such farm during the 
                        preceding taxable year.
                    ``(B) First year.--For purposes of the first 
                taxable year beginning after the date on which a 
                taxable entity after the date the taxpayer becomes a 
                qualified applicant, the taxable year described in 
                subparagraph (A)(ii) shall be the counterfactual 
                baseline year.
            ``(6) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any carbon sequestration 
        credit allowable under this subsection with respect to any 
        carbon which ceases to be sequestered in a manner consistent 
        with the requirements under this section for a period of not 
        less than 10 years.
    ``(d) Early Adopter Credit.--
            ``(1) In general.--The amount of the early adopter credit 
        for any taxable year shall be an amount equal to the applicable 
        dollar amount per metric ton of early adopter carbon 
        sequestration.
            ``(2) Early adopter carbon sequestration.--For purposes of 
        this subsection, the term `early adopter carbon sequestration' 
        means the amount (not less than zero) equal to--
                    ``(A) the stock of soil organic carbon stored in 
                the soil of the qualified farm during the taxable year, 
                minus
                    ``(B) the average stock of soil organic carbon 
                stored in the soil of other farms in the county in 
                which such qualified farm is located during the taxable 
                year.
            ``(3) Credit may be taken only once.--The credit under this 
        subsection may only be taken with respect to a qualified farm 
        in the first year a credit is allowed to such farm under this 
        section.
            ``(4) 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 2022 and before 2027, 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, 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 paragraph (1) shall be rounded to the 
                nearest cent.
    ``(e) Qualified Applicant.--For purposes of this section, the term 
`qualified applicant' means a farm (including the taxpayer with 
operational control over sequestration on such farm, or a third party 
project developer or aggregator acting on the taxpayer's behalf) which 
has been certified by the Secretary pursuant to subsection (f).
    ``(f) Qualified Agricultural Carbon Sequestration and Abatement 
Program.--
            ``(1) In general.--Not later than 180 days after the date 
        of enactment of this section, the Secretary, after consultation 
        with the Secretary of Agriculture, shall establish a qualified 
        agricultural carbon sequestration and abatement program to 
        consider and award certifications for qualified applicants 
        eligible for credits under this section.
            ``(2) Application.--An applicant under this subsection 
        shall submit an application containing such information as the 
        Secretary may require, including information required for the 
        selection described in paragraph (3).
            ``(3) Selection.--In determining which applicants to 
        certify under this subsection, the Secretary shall do the 
        following:
                    ``(A) Certify the manner and methods by which the 
                taxpayer will measure the amount of carbon dioxide 
                equivalent abatement and sequestration. Such manner and 
                methods shall be consistent with current best 
                practices, with measured changes independently verified 
                by the Secretary of Agriculture as--
                            ``(i) real,
                            ``(ii) additional,
                            ``(iii) based on a realistic and credible 
                        baseline,
                            ``(iv) quantified, monitored, reported, and 
                        verified,
                            ``(v) having a clear and transparent chain 
                        of custody,
                            ``(vi) representing permanent emissions 
                        reductions,
                            ``(vii) assessed and mitigated against 
                        potential increase in emissions elsewhere,
                            ``(viii) only counted once towards a 
                        mitigation obligation, and
                            ``(ix) causing no net harm.
                    ``(B) Assess and approve independent greenhouse gas 
                crediting programs which register projects and credits 
                involving qualified farms.
            ``(4) 5-year certification.--A certification under 
        paragraph (3) shall be valid for a period of 5 years after the 
        date such certification is issued.
    ``(g) Counterfactual Baseline Year.--For purposes of this section, 
the term `counterfactual baseline year' means the year in which the 
Secretary certifies a qualified applicant under subsection (f).
    ``(h) Requirements Regarding Carbon Dioxide Equivalent.--The credit 
under this section shall apply only with respect to carbon dioxide 
equivalent the abatement or sequester of which is--
            ``(1) within the United States or a possession of the 
        United States, and
            ``(2) measured on a qualified farm and verified using the 
        methods or independent greenhouse gas crediting programs 
        certified by the Secretary under subsection (f)(3).
    ``(i) Regulations.--Not later than 14 months after the date of 
enactment of this section, the Secretary shall, after consultation with 
the Secretary of Agriculture, prescribe such regulations and guidance 
as may be necessary or appropriate to carry out this section, including 
regulations or guidance to--
            ``(1) establish the method and frequency by which soil 
        samples are taken from qualified farms to determine the amount 
        of carbon which is sequestered in the soil of such farms,
            ``(2) provide rules for the treatment of credits in cases 
        where a qualified farm is sold or transferred to another person 
        subsequent to the baseline year, and
            ``(3) provide rules for the early adopter credit in 
        subsection (d).''.
    (b) Conforming Amendments.--
            (1) Section 38(b) of such Code is amended by striking 
        ``plus'' at the end of paragraph (37), by striking the period 
        at the end of paragraph (38) and inserting ``, plus'', and by 
        adding at the end the following new paragraph:
            ``(39) the qualified agricultural carbon sequestration 
        credit determined under section 45AA(a).''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 45Z the following new item:

``Sec. 45AA. Qualified agricultural carbon sequestration credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2022.
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