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U.S. Department of Treasury Releases Final Rules for Tax Credits Related to Inflation Reduction Act
16th March 2024
On Tuesday, March 5, 2024, the U.S. Department of Treasury released final rules concerning tax credits related to the Inflation Reduction Act, including section 45Q (carbon oxide sequestration) and section 45V (production of clean hydrogen) of the Federal Tax Code, among others. The Institute welcomes the guidance which will make it easier for the below entities to monetize the tax credits.
The rules primarily impact a narrow set of potential CCS operators including state, local, and tribal governments, tax-exempt organizations, U.S. territories, rural energy Co-Ops, and others who may want to access the tax credits. Specifically, the rules provide guidance on how these entities can utilize the elective pay (otherwise known as “direct pay”) option for claiming the credits as well as defining rules for transferability of the credits. The rules also provide a broader pathway for eligible tax-exempt entities in partnerships to access the elective pay (direct pay) option.
The Internal Revenue Service has updated its elective payment and transferability frequently asked questions based on the final regulations here.
Read the U.S. Department of Treasury press release here.