07/1/2021
Revenue Ruling 2021-13 Section 45Q.—Credit for Carbon Oxide Sequestration clarifies that
for each single process train of carbon capture equipment, only one taxpayer will be considered the person to whom the credit is attributable; and that one person is not required to own every component of carbon capture equipment within a single process train
a person must own at least one component of the carbon capture equipment in the single process train to be the person to whom the section 45Q credit is attributable
the relevant placed-in-service date for section 45Q purposes is the placed-in-service date of the single process train of carbon capture equipment, regardless if certain assets within that single process train have a different placed-in-service date for depreciation purposes.
The revenue ruling explains that:
(1) an acid gas removal unit at an industrial facility is a component of carbon capture equipment within the meaning of § 1.45Q-2(c)
(2) an investor in certain components of carbon capture equipment at an industrial facility is not required to own every component of carbon capture equipment within a single process train at an industrial facility to be the person to whom the section 45Q credit is attributable under § 1.45Q-1(h), but must own at least one component of carbon capture equipment in the single process train of carbon capture equipment at the industrial facility
(3) solely for purposes of section 45Q(a), the original placed-in-service date of a single process train of carbon capture equipment at an industrial facility that includes the existing acid gas removal unit and new components of carbon capture equipment is the date that the single process train is placed in a condition or state of readiness and availability for the capture, processing, and preparation of carbon oxide for transport for disposal, injection, or utilization
(4) the original placed-in-service date of the single process train for purposes of §§ 167 and 168.
ISSUES & HOLDINGS:
(1) For purposes of section 45Q(a) of the Internal Revenue Code (Code), is the acid gas removal unit at Facility X carbon capture equipment within the meaning of § 1.45Q-2(c) of the Income Tax Regulations? - For purposes of § 45Q(a), the acid gas removal unit at Facility X is carbon capture equipment within the meaning of § 1.45Q-2(c).
(2) Is Investor required to own every component of carbon capture equipment within a single process train at Facility X to be the person to whom the credit under § 45Q(a) (section 45Q credit) is attributable under § 1.45Q-1(h)? - Investor is not required to own every component of carbon capture equipment within a single process train at Facility X to be the person to whom the section 45Q credit is attributable under § 1.45Q-1(h). However, Investor must own at least one component of carbon capture equipment in the single process train of carbon capture equipment at Facility X.
(3) For purposes of § 45Q(a), what is the original placed-in-service date of the single process train of carbon capture equipment at Facility X that includes the existing acid gas removal unit and new components of carbon capture equipment? - Solely for purposes of § 45Q(a), the original placed-in-service date of a single process train of carbon capture equipment at Facility X that includes the existing acid gas removal unit and new components of carbon capture equipment is the date that the single process train is placed in a condition or state of readiness and availability for the capture, processing, and preparation of carbon oxide for transport for disposal, injection, or utilization. Under the facts provided, this means that the placed-in-service date of the single process train would be 2021.
(4) How, if at all, does the original placed-in-service date of the single process train affect the placed-in-service date of the existing acid gas removal unit for depreciation purposes under §§ 167 and 168 of the Code? - The original placed-in-service date of the single process train for purposes of § 45Q has no effect on the placed-in-service date of the existing acid gas removal unit or new components of carbon capture equipment for depreciation purposes under §§ 167 and 168, although the placed-in-service date of the new components of carbon capture equipment for depreciation purposes under §§ 167 and 168 may be the same date as the original placed-in-service date of the single process train for purposes of § 45Q.
See IRB: 2021-30, July 26, 2021 for the full text.