Treasury issues final CCS tax credit rule

Source: By Carlos Anchondo, E&E News reporter • Posted: Thursday, January 7, 2021

The Trump administration’s Treasury Department issued a final rule yesterday providing detailed guidelines for companies using a tax credit for carbon capture and storage projects.

In a statement, Treasury Secretary Steven Mnuchin said the regulations governing the tax credit known as 45Q would “further modernize the American energy sector, while ensuring American energy producers maintain their competitive edge around the world.”

Details ranging from the definition of carbon capture equipment to specific storage guidelines would give “needed clarity” to the energy sector and taxpayers, Mnuchin said.

Language in the final rule touched on the debate over secure geological storage of carbon dioxide (Energywire, June 1, 2020). The Treasury Department affirmed use of the ISO standard — a standard from the International Organization for Standardization — to “establish that qualified carbon oxides are being securely stored,” despite criticisms from groups like Greenpeace USA that a third-party verifying process would be easier for companies to comply with than EPA’s greenhouse gas reporting rule.

Companies can still opt to use the EPA protocol, with ISO as an alternative compliance pathway.

Brad Crabtree, executive director of the Carbon Capture Coalition, said the final rule — in addition to the two-year extension of 45Q enacted last month — “will help to unlock billions of dollars in private capital” for commercial carbon capture projects already under development.

“Looking ahead, the coalition will continue to work with the new Congress and incoming Biden administration to advance vitally important complementary legislative priorities, including the option of direct pay to provide a cash payment in lieu of the 45Q tax credit,” Crabtree said in a statement.

The coalition, an umbrella group of more than 80 organizations advocating for greater deployment of the technology, has said it supports “requiring public disclosure” of relevant documentation by taxpayers that would rely on the ISO standard.

The Treasury Department responded by saying the department and IRS “do not have the authority to disclose taxpayer information or to require taxpayers to self-disclose taxpayer information as a condition of using the ISO standard provided in the final regulations.”

“The coalition will recommend to policymakers an alternative approach to providing that transparency to maintain public confidence in the integrity of the 45Q tax credit,” Crabtree said.

Lee Beck, a carbon capture policy director at the Clean Air Task Force, said the IRS’s rejection of calls to put in place additional procedures for reporting the amount of carbon oxide sequestered using the ISO standard “underscores the importance for EPA to amend the greenhouse gas reporting rule to establish a transparent reporting pathway for projects that opt in to the ISO standard.”

Beck also said the Clean Air Task Force “strongly concurs” with the IRS decision that the credit can only be awarded for the amount of carbon oxide captured and utilized and not for “the CO2 equivalence reduction of other greenhouse gases based on a lifecycle analysis.”