On February 19, 2020, the Internal Revenue Service (IRS) issued two guidance documents to help businesses understand how modifications made to the section 45Q tax credit by the Bipartisan Budget Act of 2018 affect those claiming carbon capture credits.
- In Notice 2020-12, the IRS provides guidance to help businesses determine when construction has begun on a qualified facility or on carbon capture equipment that may be eligible for the carbon capture credit. This notice provides broad guidance in lieu of taxpayers requesting private letter rulings in this area.
- In Revenue Procedure 2020-12, the IRS creates a safe harbor for the allocation rules for carbon capture partnerships similar to the safe harbors developed for partnerships receiving the wind energy production tax credit and the rehabilitation credit. The safe harbor simplifies the application of carbon capture credit rules to partnerships able to claim the credit.
The modifications to the section 45Q tax credit could result in new capital investments for projects using innovative carbon capture technology. Projects using innovative energy technology that avoids, reduces, or sequesters greenhouse gas emissions could be eligible for loan guarantees under the Title 17 Innovative Energy Loan Guarantee Program administered by the Department’s Loan Programs Office (LPO). Under this program, LPO has $8.5 billion in loan guarantee authority for Advanced Fossil Energy Projects, under which carbon capture projects could be eligible. LPO has experience with projects employing carbon capture technology, having offered a conditional commitment to guarantee loans of up to $2 billion for the Lake Charles Methanol project in Louisiana.
To learn how LPO could provide debt capital for carbon capture projects, please reach out for a pre-application consultation with a member of our staff by emailing LPO@hq.doe.gov.