Incentive for Carbon Capture

Section 45Q of the Internal Revenue Code provides a tax credit for the sequestration, storage and use of carbon dioxide.  Pursuant to this provision, qualified carbon dioxide means carbon dioxide captured from an industrial source which would otherwise be released into the atmosphere as industrial emission of greenhouse gas and that is also measured at the source of capture and verified at the point of disposal or injection.

The credit for any tax year is an amount equal to the sum of: (1) $20.37 for 2011 (as adjusted for inflation) per metric ton of qualified carbon dioxide which is captured by the taxpayer at a qualified facility and disposed of by the taxpayer in secure geological storage; and (2) $10.19 for 2011 (as adjusted for inflation) per metric ton of qualified carbon dioxide which is captured by the taxpayer at a qualified facility and used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project.

To claim the credit (on Form 8933), a person must: (1) own an industrial facility at which carbon capture equipment is placed in service, (2) capture not less than 500,000 metric tons of qualified carbon dioxide there during the tax year, and (3) physically or contractually ensure that the qualified carbon dioxide is securely stored in a geologic formation (for carbon dioxide used as a tertiary injectant in an enhanced oil recovery project, this requirement applies only to carbon dioxide captured after Feb. 17, 2009).