Section 45Q was enacted by § 115 of the Energy Improvement and Extension Act of 2008, Division B of Pub. L. No. 110-343, 122 Stat. 3765 (October 3, 2008), to provide a credit for the sequestration of carbon dioxide. Section 45Q was amended significantly by § 41119 of the Bipartisan Budget Act of 2018, Pub. L. No. 115-123 (February 9, 2018), to apply to carbon oxides, and most recently by § 13104 of the IRA.
Generally, the IRA modifies § 45Q by adjusting credit amounts;1 extending the deadline for beginning construction of a qualified facility from January 1, 2026 to January 1, 2033; broadening the definition of a “qualified facility” by reducing the required carbon capture thresholds; modifying the rules applicable to direct air capture (DAC) facilities and electric generating units; and providing a new election to restart the § 45Q credit period for qualified facilities at which carbon capture equipment is placed in service in an area subsequently affected by a federally declared disaster (as defined by § 165(i)(5)(A) of the Code).
This tax credit provides a credit for carbon dioxide sequestration coupled with permitted end uses within the United States. U.S. facilities within minimum volumes: 1,000 metric tons of CO2 per year for DAC facilities; 18,750 metric tons for electricity generating facilities (with carbon capture capacity of 75% of baseline CO2 production); 12,500 metric tons for other facilities.
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