Carbon capture developers finally have the guidance they need to determine how to access federal tax incentives that advocates say could help drive down the cost for the technology.
The Internal Revenue Service on Wednesday issued final guidance for developers outlining how it will oversee the carbon capture tax credit program. The lack of IRS guidance had long been keeping investors on the sidelines, as they were hesitant to commit capital without the rules spelled out for claiming the credits.
Even Trump officials in the Energy Department and other agencies had expressed frustration that the IRS took so long to put together the guidance. Early last year, a top Energy Department official said billions of dollars of projects were waiting on the IRS guidance.
Advocates for the technology had feared the IRS’s delay could cause carbon capture projects, which are costly and take years to develop, to miss the tax credit deadline. Initially, projects would have had to break ground by 2024 to qualify for the incentives, but Congress recently provided carbon capture developers with some more wiggle room.
In a bipartisan clean energy package passed as part of the year-end spending bill, Congress extended the deadline for the carbon capture tax credits for an additional two years.
The IRS guidance sets out what the agency will require from project developers to qualify for the incentives, including how companies must demonstrate they are securely storing carbon underground. The guidelines also spell out in what situations the government can reclaim the tax incentive if projects fall short of requirements and how to divvy up the tax credit if multiple parties collaborate to fund a single carbon capture project.
