Guardian of the Galaxy? The Section 45Q Carbon Capture Tax Credit

The Biden Administration intends to bring climate change issues center stage and it can be expected to use tax provisions to implement its climate change agenda. Of the existing tax provisions incentivizing green behavior, the section 45Q tax credit for carbon capture and sequestration is a key element. Following taxpayer-favorable revisions in 2018, the credit has begun to stimulate qualifying investments. Final regulations expected in 2021 should provide the certainty needed to accelerate the development of a vibrant tax equity market for carbon capture, similar to the market that has developed for renewable energy projects. An understanding of section 45Q will be a useful tool with which to view the green tax initiatives we can expect to see under the new Administration.