SECTION 1. PURPOSE

On October 3, 2008, section 115 of the Energy Improvement and Extension Act of 2008, Pub. L. 110-343, Div. B, Title I, 122 Stat. 3765, 3829, enacted the credit for the sequestration of carbon dioxide under § 45Q of the Internal Revenue Code (Code). Section 45Q was amended by section 1131 of the American Recovery and Reinvestment Tax Act of 2009, Pub. L. 111-5, Div. B, Title I, 123 Stat 115, 325 (February 17, 2009) and, more recently, by section 41119 of the Bipartisan Budget Act of 2018 (BBA), Pub. L. 115-123, Div. D, Title II, 132 Stat. 64, 162 (February 9, 2018). As a result of the modifications made by the BBA amendment, the credit under § 45Q now applies to the sequestration of “qualified carbon oxide,” a broader term than the qualified carbon dioxide that was previously the subject of the credit. Further, § 45Q now provides that construction of a qualified facility that includes carbon capture equipment must begin before January 1, 2024. This amendment became effective for taxable years beginning after December 31, 2017.

On May 20, 2019, the Department of Treasury (Treasury) and the Internal Revenue Service (IRS) published Notice 2019-32, 2019-21 I.R.B. 1187, requesting comments on issues concerning the credit for carbon oxide sequestration under § 45Q (Section 45Q Credit). In response to that notice, many commenters requested guidance regarding the beginning of construction requirement for the Section 45Q Credit. This notice provides guidance on the determination of when construction has begun on a qualified facility or on carbon capture equipment that may be eligible for the Section 45Q Credit. This notice provides two methods for taxpayers to establish the beginning of construction requirement (Physical Work Test and Five Percent Safe Harbor), a

Continuity Requirement for both methods, guidance on transfers of ownership of a qualified facility, and additional guidance applicable to the beginning of construction requirement.

The IRS will not issue private letter rulings or determination letters to taxpayers regarding the application of this notice or the beginning of construction requirement of § 45Q.