Section 1 Short title
This Act may be cited as the “Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2021”.
Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2021
A BILL
To amend the Internal Revenue Code of 1986 to provide for a 5-year extension of the carbon oxide sequestration credit, and for other purposes.
Sec. 2 Extension of credit for carbon oxide sequestration
Section 45Q(d)(1) of the Internal Revenue Code of 1986 is amended by striking “January 1, 2026” and inserting “January 1, 2031”.
Sec. 3 Elective payment for carbon oxide sequestration and qualifying advanced coal projects
In general— Subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:
“6431. Elective payment for carbon oxide sequestration and qualifying advanced coal projects
“(a) Energy property—In the case of a taxpayer making an election (at such time and in such manner as the Secretary may provide) under this section with respect to any portion of—
“(1) a carbon oxide sequestration credit which would (without regard to this section) be determined under section 45Q with respect to such taxpayer, or
“(2) a qualifying advanced coal project credit which would (without regard to this section) be determined under section 48A with respect to such taxpayer,
“(b) Timing—The payment described in subsection (a) shall be treated as made on the later of the due date of the return of tax for such taxable year or the date on which such return is filed.
“(c) Exclusion from gross income—Gross income of the taxpayer shall be determined without regard to this section.
“(d) Denial of double benefit—Solely for purposes of section 38, in the case of a taxpayer making an election under this section, the carbon oxide sequestration credit determined under section 45Q or the qualifying advanced coal project credit determined under section 48A shall be reduced by the amount of the portion of such credit with respect to which the taxpayer makes such election.
“(e) Special rules—In the case of a taxpayer making an election under this section with respect to the qualifying advanced coal project credit determined under section 48A, the credit subject to such an election shall be determined notwithstanding—
“(1) section 50(b)(3), and
“(2) in the case of any entity described in section 50(b)(4)(A)(i), section 50(b)(4).”
Special rule for proceeds of transfers for mutual or cooperative electric companies— Section 501(c)(12)(I) of the Internal Revenue Code of 1986 is amended by inserting “or 6431(a)” after “section 45J(e)(1)”.
Clerical amendment— The table of sections for subchapter B of chapter 65 of such Code is amended by adding at the end the following new item:
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of enactment of this Act.
Sec. 4 Allowance of certain carbon sequestration credits against the base erosion minimum tax
In general— Section 59A(b)(1)(B)(ii) of the Internal Revenue Code of 1986 is amended by striking “plus” and the end of subclause (I), by redesignating subclause (II) as subclause (IV), and by inserting after subclause (I) the following new subclauses:
“(II) the credit allowed under section 38 for the taxable year which is properly allocable to the carbon dioxide sequestration credit determined under section 45Q(a),
“(III) the credit allowed under section 38 for the taxable year which is properly allocable to the investment credit determined under section 46, but only to the extent properly allocable to the qualifying advanced coal project credit determined under section 48A, plus”
Application to taxable years beginning after 2025— Subparagraph (B) of section 59A(b)(2) of the Internal Revenue Code of 1986 is amended to read as follows:
“(B) by applying subparagraph (B)(ii) thereof without regard to subclauses (I) and (IV).”
Effective date— The amendments made by this section shall apply to base erosion payments (as defined in section 59A(d) of the Internal Revenue Code of 1986) paid or incurred in taxable years beginning after December 31, 2017.
Sec. 5 Modifications of qualifying advanced coal project credit
Sequestration requirement for certain equipment— Section 48A(e)(1)(G) of the Internal Revenue Code of 1986 is amended by inserting “and 60 percent in the case of an application for a reallocation of credits under subsection (d)(4) with respect to an electrical generating unit in existence on October 3, 2008” after “under subsection (d)(4)”.
Nameplate generating capacity requirement— Section 48A(e)(1)(C) of such Code is amended by striking “400 megawatts” and inserting “200 megawatts”.
Advanced coal-Based generation technology requirements—
In general— Section 48A(f)(1) of such Code is amended by striking “generation technology if—” and all that follows through “the unit is designed” and inserting “generation technology if the unit is designed”.
Conforming amendments— Section 48A(f) of such Code is amended—
by striking all that precedes “the purpose of this section” and inserting the following:
“(f) Advanced coal-Based generation technology—For”
by striking “in subparagraph (B)” in the second sentence and inserting “in this subsection”, and
by striking paragraphs (2) and (3).
Performance requirements in case of best available control technology— Section 48A(f) of such Code, as amended by this Act, is amended by adding at the end the following: “In the case of a retrofit of a unit which has undergone a best available control technology analysis after August 8, 2005, with respect to the removal or emissions of any pollutant which is SO2 or NOx, the removal or emissions design level with respect to such pollutant shall be the level determined in such analysis.”.
Clarification of reallocation authority— Section 48A(d)(4) of the Internal Revenue Code of 1986 is amended—
in subparagraph (A)—
by striking “Not later than 6 years after the date of enactment of this section, the” and inserting “The”, and
by inserting “and every 6 months thereafter until all credits available under this section have been allowed” after “the date which is 6 years after the date of enactment of this section”,
in subparagraph (B)—
by striking “may reallocate credits available under clauses (i) and (ii) of paragraph (3)(B)” and inserting “shall reallocate credits remaining available under paragraph (3)”,
by striking “or” at the end of clause (i), and
by striking clause (ii) and inserting the following:
“(ii) any applicant for certification which submitted an accepted application has subsequently failed to satisfy the requirements under paragraph (2)(D), or
“(iii) any certification made pursuant to paragraph (2) has been revoked pursuant to paragraph (2)(E).”
in subparagraph (C)—
by striking “clause (i) or (ii) of paragraph (3)(B)” and inserting “paragraph (3)”,
by striking “is authorized to” and inserting “shall”, and
by striking “an additional program” and inserting “additional programs”.
Effective date—
In general— Except as provided in paragraph (2), the amendments made by this section shall apply to allocations and reallocations after the date of the enactment of this Act.
Reallocation— The amendments made by subsection (e) shall apply to credits remaining available under section 48A(d)(3) of the Internal Revenue Code of 1986 on the date of the enactment of this Act.
Sec. 6 Enhancement of carbon oxide sequestration credit for direct air capture facilities
in subsection (b)(1)—
in subparagraph (A), by striking “The applicable dollar amount” and inserting “Subject to subparagraph (B), the applicable dollar amount”, and
by striking subparagraph (B) and inserting the following:
“(B) Special rule for direct air capture facilities
“(i) In general—Subject to clause (ii), for any taxable year beginning in a calendar year after 2021, in the case of any qualified facility described in subsection (d)(2)(C), the applicable dollar amount shall be an amount equal to—
“(I) for purposes of paragraph (3) of subsection (a), an amount equal to the product of $120 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting “2020” for “1990”, and
“(II) for purposes of paragraph (4) of such subsection, an amount equal to the product of $75 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting “2020” for “1990”.
“(ii) Use in enhanced oil or natural gas recovery project—For any taxable year beginning in a calendar year after 2030, this subparagraph shall not apply with respect to any qualified carbon oxide which is used by the taxpayer in a manner described in subsection (a)(4)(B)(i).
“(C) Rounding—The applicable dollar amount determined under subparagraph (A) or (B) shall be rounded to the nearest cent.”
in subsection (d)(2)—
in subparagraph (B), by striking “or” at the end, and
by striking subparagraph (C) and inserting the following:
“(C) in the case of a direct air capture facility, not less than 10,000 metric tons of qualified carbon oxide during the taxable year, or
“(D) in the case of any facility not described in subparagraph (A), (B), or (C), not less than 100,000 metric tons of qualified carbon oxide during the taxable year.”
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2021.