The Inflation Discount Act of 2022 (the
“Act”), signed into legislation on August 16, 2022, boosts the
federal tax incentives for carbon seize tasks. The Act
will increase the quantity of the tax credit score, eases the necessities for
qualifying for the credit score, and gives builders with extra
choices for monetizing the credit score.

The Act breathes new life into Part 45Q, the federal carbon
seize tax credit score, obtainable to taxpayers capturing and
sequestering qualifying carbon dioxide and different carbon oxides and
claimed over a 12-year interval. The credit score was first enacted in 2008
however, regardless of a number of taxpayer-favorable modifications in 2018, has not
attracted as a lot funding in carbon seize tasks as some had
hoped. The Act seeks to treatment this downside by typically revamping
the credit score as follows:

• Bigger Credit score. The Act will increase the utmost
  quantity of the credit score for capturing and sequestering carbon oxide
  from $50 per metric ton to $85 per metric ton (and $180 per metric
  ton for carbon dioxide captured utilizing direct air seize
  expertise). If a venture is financed with tax-exempt bonds, the
  credit score is decreased by not more than 15%, versus 50% underneath
  prior legislation. These headline credit score quantities, nevertheless, are topic to
  complying with prevailing wage and apprenticeship
  necessities.




• Qualifying Amenities. The Act considerably
  reduces the yearly threshold quantity of carbon oxide that should be
  captured for a facility to qualify for the credit score. For direct air
  seize services, the brink is diminished from 100,000 metric
  tons to 1,000; for sure electricity-generating services, from
  500,000 metric tons to 18,750 metric tons; and for different
  services, from 100,000 metric tons to 12,500 metric tons.




• Building Begin. The Act delays the
  deadline for beginning building of services and carbon seize
  tools from December 31, 2025, to December 31, 2032.




• Direct Pay Election. The Act permits tax-exempt
  entities, together with state and native governments, to assert credit
  as money refunds (moderately than offsets in opposition to taxes in any other case
  payable). The election can also be obtainable to different taxpayers, however
  just for a most of 5 years.




• Credit score Gross sales. The Act permits taxpayers to promote
  credit tax-free by transferring the credit to different taxpayers in
  alternate for money.

The modifications will typically take impact for certified services
and carbon seize tools positioned in service after December 31,
2022.

The Act is predicted to spur curiosity in carbon seize tasks
that will not have been as economically viable underneath prior legislation.
Furthermore, the 2 new choices for monetizing credit—the
direct-pay election and transferability of credit—will give
builders extra flexibility to finance carbon seize tasks, and
might cut back the necessity for these tasks to depend on tax-equity
traders.

The content material of this text is meant to offer a common
information to the subject material. Specialist recommendation must be sought
about your particular circumstances.

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