SECTION 2. BACKGROUND

Section 45Q was enacted by § 115 of the Energy Improvement and Extension Act of 2008, Pub. L. No. 110–343, 122 Stat. 3829 (October 3, 2008), and amended by § 1131 of the American Recovery and Reinvestment Tax Act of 2009, Division B of Pub. L. 111–5, 123 Stat 115 (February 17, 2009). Section 41119 of the Bipartisan Budget Act of 2018, Pub. L. No. 115–23 (February 9, 2018) significantly increased and extended the § 45Q credit for the sequestration of carbon dioxide.

Section 45Q(a)(1) allows a credit of $20 per metric ton of qualified carbon oxide captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, is disposed of by the taxpayer in secure geological storage, and is not used by the taxpayer as a tertiary injectant in a quali

fied enhanced oil or natural gas recovery project.

Section 45Q(a)(2) allows a credit of $10 per metric ton of qualified carbon oxide captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, and is used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or utilized by the taxpayer in a manner described in § 45Q(f)(5).

Section 45Q(a)(3) allows a credit of the applicable dollar amount (as determined under § 45Q(b)(1)) per metric ton of qualified carbon oxide captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, during the 12-year period beginning on the date the equipment was originally placed in service. The taxpayer must dispose of the qualified carbon oxide in secure geological storage, not use the qualified carbon oxide as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, and not utilize it in a manner described in § 45Q(f)(5).

Section 45Q(a)(4) allows credit of the applicable dollar amount (as determined under § 45Q(b)(1)) per metric ton of qualified carbon oxide captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, during the 12-year period beginning on the date the equipment was originally placed in service. The taxpayer must dispose of the qualified carbon oxide in secure geological storage, and use the qualified carbon oxide as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, or utilize it in a manner described in § 45Q(f)(5).

Section 45Q(c) defines the term “qualified carbon oxide” as (1) any carbon dioxide which is captured from an industrial source by carbon capture equipment which is originally placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, which would otherwise be released into the atmosphere

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as industrial emission of greenhouse gas or lead to such release, and is measured at the source of capture and verified at the point of disposal, injection, or utilization; (2) any carbon dioxide or other carbon oxide which is captured from an industrial source by carbon capture equipment which is originally placed in service on or after the date of the enactment of the Bipartisan Budget Act of 2018, which would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and is measured at the source of capture and verified at the point of disposal, injection, or utilization; or (3) in the case of a direct air capture facility, any carbon dioxide which is captured directly from the ambient air, and is measured at the source of capture and verified at the point of disposal, injection, or utilization.

Section 45Q(d) defines the term “qualified facility” any industrial facility or direct air capture facility (1) the construction of which begins before January 1, 2024, and (A) construction of carbon capture equipment begins before such date, or (B) the original planning and design for such facility includes installation of carbon capture equipment; and (2) which captures (A) in the case of a facility which emits not more than 500,000 metric tons of carbon oxide into the atmosphere during the taxable year, not less than 25,000 metric tons of qualified carbon oxide during the taxable year which is utilized in a manner described in § 45Q(f)(5), (B) in the case of an electricity generating facility which is not described in § 45Q(d)(2)(A), not less than 500,000 metric tons of qualified carbon oxide during the taxable year, or (C) in the case of a direct air capture facility or any facility not described in § 45Q(d)(2) (A) or (B), not less than 100,000 metric tons of qualified carbon oxide during the taxable year.

Under § 45Q(f)(7), for taxable years beginning in a calendar year after 2009, the dollar amounts contained in § 45Q(a)(1) and (2) must be adjusted for inflation by multiplying such dollar amount by the inflation adjustment factor for such calendar year determined under § 43(b)(3)(B), determined by substituting “2008” for “1990.”

Section 43(b)(3)(B) defines the term “inflation adjustment factor” as, with respect to any calendar year, a fraction the

numerator of which is the GNP implicit price deflator for the preceding calendar year and the denominator of which is the GNP implicit price deflator for 1990. For purposes of § 45Q(f)(7), for the 2018 calendar year, the inflation adjustment factor is a fraction the numerator of which is the GNP implicit price deflator for 2017 (113.500) and the denominator of which is the GNP implicit price deflator for 2008 (99.239).

Section 45Q(g) provides that in the case of any carbon capture equipment placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, the credit under § 45Q shall apply with respect to qualified carbon oxide captured using such equipment before the end of the calendar year in which the Secretary, in consultation with the Administrator of the Environmental Protection Agency, certifies that, during the period beginning after October 3, 2008, a total of 75,000,000 metric tons of qualified carbon oxide have been taken into account in accordance with (1) § 45Q(a), as in effect on the day before the date of the enactment of the Bipartisan Budget Act of 2018, and (2) § 45Q(a)(1) and (2).