Credit for Carbon Oxide Sequestration

The Credit for Carbon Oxide Sequestration is a credit for qualified carbon oxide captured at a qualified facility using certain carbon capture equipment, which is disposed of in secure geological storage, used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of in secure geological storage, or utilized for certain purposes.

Only qualified carbon oxide captured and disposed of, used, or utilized within the United States or a possession of the United States is considered.

A qualified facility is any industrial facility or direct air capture facility the construction of which begins before January 1, 2033, and either the construction of carbon capture equipment begins before that date, or the original planning and design of the facility includes installation of carbon capture equipment.

A direct air capture facility must capture not less than 1000 metric tons of qualified carbon oxide during the taxable year. An electricity generating facility must capture not less than 18,750 metric tons of qualified carbon oxide during the taxable year, and the carbon capture equipment for the applicable generating unit must have a capture design capacity of not less than 75 percent of the baseline carbon oxide production of the unit.

Any other facility must capture not less than 12,500 metric tons of qualified carbon oxide during the taxable year.

In general, the applicable dollar amount of the credit is:

$17/metric ton of carbon oxide captured and disposed of in secure geological storage.
$12/metric ton for carbon oxide that is captured and used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of in secure geological storage, or injected for enhanced oil recovery, or utilized.
$36 for direct air capture facilities.

These dollar amounts are increased by 5 times for qualified facilities and carbon capture equipment meeting prevailing wage and registered apprenticeship requirements.

The applicable dollar amounts are different for qualified carbon oxide that is captured using carbon capture equipment that is originally placed in service at a qualified facility before the enactment of the Bipartisan Budget Act of 2018.

The Credit for Carbon Oxide Sequestration is eligible for direct payment or transfer.

How to claim the credit

Taxpayers will need to complete Form 8933, Carbon Oxide Sequestration Credit and file it with the taxpayer’s annual return submitted to the IRS.

Taxpayers other than partnerships or S corporations whose only source of this credit is from those pass-through entities (other than a partnership with a valid 761(a) election) aren’t required to complete or file Form 8933. They should report this credit directly on line 1x in Part III of Form 3800, General Business Credit.