Td 9944

Part I
26 CFR 1.45Q-1; 26 CFR 1.45Q-2; 26 CFR 1.45Q3; 26 CFR 1.45Q-4; 26 CFR 1.45Q-5

T.D. 9944
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Credit for Carbon Oxide
Sequestration
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final Regulations.
SUMMARY: This document contains
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regarding the credit for carbon oxide sequestration under section 45Q of the InWHUQDO5HYHQXH&RGH&RGH7KHVH¿QDO
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1.45Q-3(f), 1.45Q-4(e), and 1.45Q-5(j).
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1067

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Bulletin No. 2021–16

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1069

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April 19, 2021

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and clarify the meaning of “the cost of
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test.
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but sometimes sells electricity to the grid.
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1072

trial facility that is subject to the “not less
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section 45Q(d)(2)(C).
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facility or an industrial facility. The commenter suggested that routine but de minimis sales of electricity to the grid could
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under one of the MACRS classes listed
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the commenter requested guidance as to
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of carbon oxides emitted are attributable
to serving the steam and industrial load of
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the MACRS Asset Classes listed in the
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other more diverse or less clear facilities
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such.
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listed MACRS asset classes, the facility
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Bulletin No. 2021–16

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metric tons to secure geological storage
and 50,000 metric tons to enhanced oil reFRYHU\WKHWRWDOPHWULFWRQVZLOO
qualify for the section 45Q credit at their
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4. Minimum Threshold Requirements –
Direct Air Capture Facilities

5. Aggregation

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facilities. The commenter suggested that
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suggestion.
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in secure geological storage, then the total
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Bulletin No. 2021–16

Many commenters requested that the
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various facilities to meet the minimum
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The commenters generally recommended
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of the beginning of construction requirePHQWVLQ1RWLFH6HFWLRQRI
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but should not be limited to: (1) the units
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VLPLODURSHUDWLRQVDQGPDLQWHQDQFHSURWRFROVHVWDEOLVKHGE\WKHRZQHURIWKHHTXLSment, considering differences attributable
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1073

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agreement.
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commenters stated that not all of the beginning of construction factors are readily
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Commenters suggested an alternative
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aggregation of all facilities that include
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the beginning of construction requirement
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therefore, do not need to be excluded in
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facility in section 3.03 of Notice 2020-12,
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carbon oxide-emission source that, absent
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April 19, 2021

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natural carbon dioxide-bearing formations
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is not a natural carbon dioxide-bearing
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RWKHUGHSRVLWVZKHWKHUDZHOOLVSURGXFing from a natural carbon dioxide-bearing
formation is based on all the facts and circumstances.
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carbon dioxide stream from a manufacturLQJ SURFHVV ZKHUH FDUERQ GLR[LGH LV QRW
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dioxide by volume. A commenter suggestHG UHYLVLQJ WKH H[DPSOHV LQ †4G
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harbor. Commenters recommended that
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dioxide-bearing formation should be conVLGHUHG D PDQXIDFWXULQJ SURFHVV VR ORQJ
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other than carbon dioxide that are intendHGWREHVROGDWDSUR¿WRUIRUFRPPHUFLDO
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at natural carbon dioxide-bearing formations, or at naturally occurring subsurface
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commercially viable to extract and sell,
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2. Electricity Generating Facility
Commenters recommended adding
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the taxable year.
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regulations. The commenter requested
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4. General Comments
A commenter recommended revising
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carbon oxide emission source that, absent
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industrial facility to include facilities that
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of an industrial facility as a “facility that
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from a fuel combustion source does not
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industrial facility.
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oil and gas reservoirs, and unminable coal
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Bulletin No. 2021–16

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45Q credit.
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oxides. The commenters based this recommendation on the statutory language
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Bulletin No. 2021–16

JHQHUDWHG E\ D JLYHQ SURGXFW RU SURFHVV
should be correlated only to the volume
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Other commenters suggested that the
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requires the section 45Q credit calculation to be based on all greenhouse gases
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dioxide equivalents (CO2-e), not carbon
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the climate effects of different greenhouse gases. It includes carbon oxides,
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gases. Some of these commenters statHG WKDW VHFWLRQ 4I%LL GLUHFWV
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section 45Q credit is calculated.
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numerical values resulting from direct
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1079

accounting method for the secure geologic
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tax credit.
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as carbon oxide based on its CO2-equivalence. This is an unreasonable result under
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gases.
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detailed rules and equations for measuring
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regulations do not cite to these standards.
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durability relative to the status quo.
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than fuels, because the carbon intensity
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nition uses the cradle-to-grave boundary,
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material extraction until end-of-life.
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direct measurements on site. The direct
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Bulletin No. 2021–16

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claiming section 45Q credits, or be alORZHGWRFODLPVHFWLRQ4FUHGLWVZKLOH
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requirements of section 45Q and sections
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for a section 45Q credit on an amended
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by the statute of limitations before such
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Bulletin No. 2021–16

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tax years to address this concern.
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by the IRS. According to the commenter,
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and credibility in the section 45Q credit
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1083

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used in environmental guidance, referring
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carbon oxide as the lesser of the amount
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section 45Q credit should be available
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carbon dioxide by selling it to commercial
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April 19, 2021

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reduction in carbon dioxide equivalents.
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the IRS requested comments on this issue.
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April 19, 2021

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regulations should avoid suggesting that
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A commenter noted that secure storage
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carbon oxide, as such, or (ii) sales of a
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been converted but is not securely stored.

1084

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that another category should be added for
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commenter noted that these technologies
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may be subject to high uncertainty. This
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becomes available. Further, the commenter stated that the economic viability of
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such as a techno-economic assessment of
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Bulletin No. 2021–16

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requirements as to the nature of the use of
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Bulletin No. 2021–16

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(5)(A) and that eventual emission into the
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of in secure geological storage or used as a
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to include sustainable technologies such
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the generation of carbon dioxide through
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should qualify for the section 45Q credit.
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conversion of carbon dioxide to carbon
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as carbon monoxide, as a durable good
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qualify for the section 45Q credit exceeds
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regarding section 45Q.
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April 19, 2021

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including used as a tertiary injectant, in
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April 19, 2021

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that claimed the section 45Q credits.
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storage facility, such as volcanic activity
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carbon oxide is removed from its original
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current taxable year.
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three years or to the most recent taxable
year.
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tax equity transactions and in turn, further
UHGXFLQJ WKH FRVW RI &&86 SURMHFWV 8Otimately, this commenter asserted that reGXFLQJWKHUHFDSWXUHSHULRGWRWKUHH\HDUV
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less than three years for carbon dioxide
injected into an underground reservoir
to become stable. This commenter noted
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years, this commenter advocated for a
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storage over 1000 years. Therefore, the
commenters suggested that no technical
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greater than one year.
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scales and other commercial transactions
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as ground leases of land. The commenter
stated that sequestration of carbon oxide
IRU  \HDUV DOVR IXUWKHUV WKH SROLF\ LQtent of section 45Q to have some real and
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global climate change.
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Bulletin No. 2021–16

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civil disturbances, terrorist acts, military
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and actions of a governmental authority.
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A commenter suggested that for Class
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maintenance of the storage facility.
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amount.
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secured carbon dioxide and then subsequently reinject it into the ground after
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commercially viable oil. The commenter
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event.
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is deliberately removed from secure geological storage. One commenter noted that
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guidance for determining the character of
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ture rules to the intentional removal of seFXUHO\VWRUHGTXDOL¿HGFDUERQR[LGHDQG
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of or used as a tertiary injectant before
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the netting occurs.
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suggested that any loss of containment of
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April 19, 2021

from an action unrelated to the selection,
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facility.
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used as a tertiary injectant, including at
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of maintaining a Class VI storage site.
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1088

VI. Miscellaneous Issues
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quotient of the total amount of all regular
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C. Capture and Utilization Photosynthesis

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D. Beginning of Construction
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regarding the economic substance doctrine.
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GHHPHG DWWULEXWDEOH WR  DQG LV UHFDSWXUHG DW
WKHVWDWXWRU\UDWHRISHUPHWULFWRQ7KH
QH[W  PHWULF WRQV RI UHFDSWXUHG TXDOL¿HG
carbon oxide is deemed attributable to 2023, and is
UHFDSWXUHG DW WKH  VWDWXWRU\ UDWH RI  SHU
metric ton. The remaining 3,200,000 metric tons are
QRW VXEMHFW WR UHFDSWXUH EHFDXVH RI WKH WKUHH\HDU
ORRNEDFNOLPLWLQ†4J7KXVWKHWRWDOUHFDSWXUHDPRXQWLVDQGLVDGGHGWR$¶V
WD[GXHIRU

1112

Bulletin No. 2021–16