Smith, Capito introduce bill to extend 45Q tax credit

Sens. Tina Smith, D-Minn.; and Shelley Moore Capito, R-W.V.; on March 25 introduced the Carbon Capture Utilization and Storage Tax Credit Amendments Act. The Carbon Capture Coalition and Growth Energy have spoken out in support of the bill.

The legislation extends the window for projects to begin construction and qualify for the 45Q tax credit by an additional five years, through the end of 2030. The CCC said this extension would provide project developers and investors with the financial certainty and time horizon needed to complete current projects and launch many new ones to begin scaling up carbon capture, direct air capture, and carbon utilization technologies to meet midcentury climate goals.

The bill also establishes a direct pay option for the 45Q and 48A tax credits, which would allow recipients to receive the full value of the credits as an estimated payment on their tax return in lieu of needing to apply the credit to their tax liability. The CCC said the direct pay option allows companies to secure the private investment needed to finance projects while avoiding the wasteful inefficiencies and added costs of tax equity transactions that constrain the very innovation that the credits aim to incentivize.

In addition, the bill increases the value of the 45Q credit for direct air capture and storage and reforms the Section 48A investment credit to allow companies access to existing federal incentives to complement 45Q in financing the retrofit of existing power plants with carbon capture technology.

“To achieve the full potential of carbon capture to support domestic energy and industrial production, protect and create jobs that pay family-sustaining wages, and achieve net-zero emissions by midcentury, we need a suite of federal policies that enhance and build on the federal Section 45Q tax credit,” said Brad Crabtree, director of the CCC. “The Carbon Capture, Utilization, and Storage Tax Credit Amendments Act helps meet this urgent need.”

“As our nation moves to decarbonize the transportation sector and achieve clean energy and climate goals, real-world data continue to prove the important role that biofuels play,” said Emily Skor, CEO of Growth Energy. “Not only do biofuels like ethanol significantly reduce greenhouse gas emissions in the transportation sector, but more and more ethanol producers are looking towards capturing CO₂ from the production process and storing it underground or using it for other commercial applications, including dry ice production for COVID-19 vaccination storage.  

“Extending the 45Q tax credit will incentivize expanded and accelerated carbon capture projects, which is necessary to reach net-zero emissions goals set by the Biden Administration,” Skor continued. “We are grateful to Senators Smith and Capito for introducing this legislation.”