Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2021

II 117TH CONGRESS 1ST SESSION S. 986 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. IN THE SENATE OF THE UNITED STATES MARCH 25, 2021 Ms. SMITH (for herself, Mrs. CAPITO, Mr. WHITEHOUSE, Mr. CRAMER, Mr. SCHATZ, Mr. HOEVEN, Mr. MANCHIN, Mr. BARRASSO, Mr. COONS, Mr. GRASSLEY, Mr. LUJA´N, Ms. ERNST, Mr. DURBIN, and Ms. KLOBUCHAR) introduced the following bill; which was read twice and referred to the Committee on Finance 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. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Carbon Capture, Utili- 4 zation, and Storage Tax Credit Amendments Act of 5 2021’’. 6 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 2 •S 986 IS SEC. 2. EXTENSION OF CREDIT FOR CARBON OXIDE SE- 1 QUESTRATION. 2 Section 45Q(d)(1) of the Internal Revenue Code of 3 1986 is amended by striking ‘‘January 1, 2026’’ and in- 4 serting ‘‘January 1, 2031’’. 5 SEC. 3. ELECTIVE PAYMENT FOR CARBON OXIDE SEQUES- 6 TRATION AND QUALIFYING ADVANCED COAL 7 PROJECTS. 8 (a) IN GENERAL.—Subchapter B of chapter 65 of the 9 Internal Revenue Code of 1986 is amended by adding at 10 the end the following new section: 11 ‘‘SEC. 6431. ELECTIVE PAYMENT FOR CARBON OXIDE SE- 12 QUESTRATION AND QUALIFYING ADVANCED 13 COAL PROJECTS. 14 ‘‘(a) ENERGY PROPERTY.—In the case of a taxpayer 15 making an election (at such time and in such manner as 16 the Secretary may provide) under this section with respect 17 to any portion of— 18 ‘‘(1) a carbon oxide sequestration credit which 19 would (without regard to this section) be determined 20 under section 45Q with respect to such taxpayer, or 21 ‘‘(2) a qualifying advanced coal project credit 22 which would (without regard to this section) be de- 23 termined under section 48A with respect to such 24 taxpayer, 25 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 3 •S 986 IS such taxpayer shall be treated as making a payment 1 against the tax imposed by subtitle A for the taxable year 2 equal to the amount of such portion. 3 ‘‘(b) TIMING.—The payment described in subsection 4 (a) shall be treated as made on the later of the due date 5 of the return of tax for such taxable year or the date on 6 which such return is filed. 7 ‘‘(c) EXCLUSION FROM GROSS INCOME.—Gross in- 8 come of the taxpayer shall be determined without regard 9 to this section. 10 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—Solely for pur- 11 poses of section 38, in the case of a taxpayer making an 12 election under this section, the carbon oxide sequestration 13 credit determined under section 45Q or the qualifying ad- 14 vanced coal project credit determined under section 48A 15 shall be reduced by the amount of the portion of such 16 credit with respect to which the taxpayer makes such elec- 17 tion. 18 ‘‘(e) SPECIAL RULES.—In the case of a taxpayer 19 making an election under this section with respect to the 20 qualifying advanced coal project credit determined under 21 section 48A, the credit subject to such an election shall 22 be determined notwithstanding— 23 ‘‘(1) section 50(b)(3), and 24 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 4 •S 986 IS ‘‘(2) in the case of any entity described in sec- 1 tion 50(b)(4)(A)(i), section 50(b)(4).’’. 2 (b) SPECIAL RULE FOR PROCEEDS OF TRANSFERS 3 FOR MUTUAL OR COOPERATIVE ELECTRIC COMPANIES.— 4 Section 501(c)(12)(I) of the Internal Revenue Code of 5 1986 is amended by inserting ‘‘or 6431(a)’’ after ‘‘section 6 45J(e)(1)’’. 7 (c) CLERICAL AMENDMENT.—The table of sections 8 for subchapter B of chapter 65 of such Code is amended 9 by adding at the end the following new item: 10 ‘‘Sec. 6431. Elective payment for carbon oxide sequestration and qualifying ad- vanced coal projects.’’. (d) EFFECTIVE DATE.—The amendments made by 11 this section shall apply to taxable years beginning after 12 the date of enactment of this Act. 13 SEC. 4. ALLOWANCE OF CERTAIN CARBON SEQUESTRATION 14 CREDITS AGAINST THE BASE EROSION MIN- 15 IMUM TAX. 16 (a) IN GENERAL.—Section 59A(b)(1)(B)(ii) of the 17 Internal Revenue Code of 1986 is amended by striking 18 ‘‘plus’’ and the end of subclause (I), by redesignating sub- 19 clause (II) as subclause (IV), and by inserting after sub- 20 clause (I) the following new subclauses: 21 ‘‘(II) the credit allowed under 22 section 38 for the taxable year which 23 is properly allocable to the carbon di- 24 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 5 •S 986 IS oxide sequestration credit determined 1 under section 45Q(a), 2 ‘‘(III) the credit allowed under 3 section 38 for the taxable year which 4 is properly allocable to the investment 5 credit determined under section 46, 6 but only to the extent properly allo- 7 cable to the qualifying advanced coal 8 project credit determined under sec- 9 tion 48A, plus’’. 10 (b) APPLICATION TO TAXABLE YEARS BEGINNING 11 AFTER 2025.—Subparagraph (B) of section 59A(b)(2) of 12 the Internal Revenue Code of 1986 is amended to read 13 as follows: 14 ‘‘(B) by applying subparagraph (B)(ii) 15 thereof without regard to subclauses (I) and 16 (IV).’’. 17 (c) EFFECTIVE DATE.—The amendments made by 18 this section shall apply to base erosion payments (as de- 19 fined in section 59A(d) of the Internal Revenue Code of 20 1986) paid or incurred in taxable years beginning after 21 December 31, 2017. 22 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 6 •S 986 IS SEC. 5. MODIFICATIONS OF QUALIFYING ADVANCED COAL 1 PROJECT CREDIT. 2 (a) SEQUESTRATION REQUIREMENT FOR CERTAIN 3 EQUIPMENT.—Section 48A(e)(1)(G) of the Internal Rev- 4 enue Code of 1986 is amended by inserting ‘‘and 60 per- 5 cent in the case of an application for a reallocation of cred- 6 its under subsection (d)(4) with respect to an electrical 7 generating unit in existence on October 3, 2008’’ after 8 ‘‘under subsection (d)(4)’’. 9 (b) NAMEPLATE GENERATING CAPACITY REQUIRE- 10 MENT.—Section 48A(e)(1)(C) of such Code is amended by 11 striking ‘‘400 megawatts’’ and inserting ‘‘200 12 megawatts’’. 13 (c) ADVANCED COAL-BASED GENERATION TECH- 14 NOLOGY REQUIREMENTS.— 15 (1) IN GENERAL.—Section 48A(f)(1) of such 16 Code is amended by striking ‘‘generation technology 17 if—’’ and all that follows through ‘‘the unit is de- 18 signed’’ and inserting ‘‘generation technology if the 19 unit is designed’’. 20 (2) CONFORMING AMENDMENTS.—Section 21 48A(f) of such Code is amended— 22 (A) by striking all that precedes ‘‘the pur- 23 pose of this section’’ and inserting the fol- 24 lowing: 25 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 7 •S 986 IS ‘‘(f) ADVANCED COAL-BASED GENERATION TECH- 1 NOLOGY.—For’’, 2 (B) by striking ‘‘in subparagraph (B)’’ in 3 the second sentence and inserting ‘‘in this sub- 4 section’’, and 5 (C) by striking paragraphs (2) and (3). 6 (d) PERFORMANCE REQUIREMENTS IN CASE OF 7 BEST AVAILABLE CONTROL TECHNOLOGY.—Section 8 48A(f) of such Code, as amended by this Act, is amended 9 by adding at the end the following: ‘‘In the case of a ret- 10 rofit of a unit which has undergone a best available control 11 technology analysis after August 8, 2005, with respect to 12 the removal or emissions of any pollutant which is SO2 13 or NOx, the removal or emissions design level with respect 14 to such pollutant shall be the level determined in such 15 analysis.’’. 16 (e) CLARIFICATION OF REALLOCATION AUTHOR- 17 ITY.—Section 48A(d)(4) of the Internal Revenue Code of 18 1986 is amended— 19 (1) in subparagraph (A)— 20 (A) by striking ‘‘Not later than 6 years 21 after the date of enactment of this section, the’’ 22 and inserting ‘‘The’’, and 23 (B) by inserting ‘‘and every 6 months 24 thereafter until all credits available under this 25 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 8 •S 986 IS section have been allowed’’ after ‘‘the date 1 which is 6 years after the date of enactment of 2 this section’’, 3 (2) in subparagraph (B)— 4 (A) by striking ‘‘may reallocate credits 5 available under clauses (i) and (ii) of paragraph 6 (3)(B)’’ and inserting ‘‘shall reallocate credits 7 remaining available under paragraph (3)’’, 8 (B) by striking ‘‘or’’ at the end of clause 9 (i), and 10 (C) by striking clause (ii) and inserting the 11 following: 12 ‘‘(ii) any applicant for certification 13 which submitted an accepted application 14 has subsequently failed to satisfy the re- 15 quirements under paragraph (2)(D), or 16 ‘‘(iii) any certification made pursuant 17 to paragraph (2) has been revoked pursu- 18 ant to paragraph (2)(E).’’, and 19 (3) in subparagraph (C)— 20 (A) by striking ‘‘clause (i) or (ii) of para- 21 graph (3)(B)’’ and inserting ‘‘paragraph (3)’’, 22 (B) by striking ‘‘is authorized to’’ and in- 23 serting ‘‘shall’’, and 24 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 9 •S 986 IS (C) by striking ‘‘an additional program’’ 1 and inserting ‘‘additional programs’’. 2 (f) EFFECTIVE DATE.— 3 (1) IN GENERAL.—Except as provided in para- 4 graph (2), the amendments made by this section 5 shall apply to allocations and reallocations after the 6 date of the enactment of this Act. 7 (2) REALLOCATION.—The amendments made 8 by subsection (e) shall apply to credits remaining 9 available under section 48A(d)(3) of the Internal 10 Revenue Code of 1986 on the date of the enactment 11 of this Act. 12 SEC. 6. ENHANCEMENT OF CARBON OXIDE SEQUESTRA- 13 TION CREDIT FOR DIRECT AIR CAPTURE FA- 14 CILITIES. 15 (a) IN GENERAL.—Section 45Q of the Internal Rev- 16 enue Code of 1986 is amended— 17 (1) in subsection (b)(1)— 18 (A) in subparagraph (A), by striking ‘‘The 19 applicable dollar amount’’ and inserting ‘‘Sub- 20 ject to subparagraph (B), the applicable dollar 21 amount’’, and 22 (B) by striking subparagraph (B) and in- 23 serting the following: 24 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 10 •S 986 IS ‘‘(B) SPECIAL RULE FOR DIRECT AIR CAP- 1 TURE FACILITIES.— 2 ‘‘(i) IN GENERAL.—Subject to clause 3 (ii), for any taxable year beginning in a 4 calendar year after 2021, in the case of 5 any qualified facility described in sub- 6 section (d)(2)(C), the applicable dollar 7 amount shall be an amount equal to— 8 ‘‘(I) for purposes of paragraph 9 (3) of subsection (a), an amount equal 10 to the product of $120 and the infla- 11 tion adjustment factor for such cal- 12 endar year determined under section 13 43(b)(3)(B) for such calendar year, 14 determined by substituting ‘2020’ for 15 ‘1990’, and 16 ‘‘(II) for purposes of paragraph 17 (4) of such subsection, an amount 18 equal to the product of $75 and the 19 inflation adjustment factor for such 20 calendar year determined under sec- 21 tion 43(b)(3)(B) for such calendar 22 year, determined by substituting 23 ‘2020’ for ‘1990’. 24 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 11 •S 986 IS ‘‘(ii) USE IN ENHANCED OIL OR NAT- 1 URAL GAS RECOVERY PROJECT.—For any 2 taxable year beginning in a calendar year 3 after 2030, this subparagraph shall not 4 apply with respect to any qualified carbon 5 oxide which is used by the taxpayer in a 6 manner described in subsection 7 (a)(4)(B)(i). 8 ‘‘(C) ROUNDING.—The applicable dollar 9 amount determined under subparagraph (A) or 10 (B) shall be rounded to the nearest cent.’’, and 11 (2) in subsection (d)(2)— 12 (A) in subparagraph (B), by striking ‘‘or’’ 13 at the end, and 14 (B) by striking subparagraph (C) and in- 15 serting the following: 16 ‘‘(C) in the case of a direct air capture fa- 17 cility, not less than 10,000 metric tons of quali- 18 fied carbon oxide during the taxable year, or 19 ‘‘(D) in the case of any facility not de- 20 scribed in subparagraph (A), (B), or (C), not 21 less than 100,000 metric tons of qualified car- 22 bon oxide during the taxable year.’’. 23 VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS 12 •S 986 IS (b) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to taxable years beginning after 2 December 31, 2021. 3 Æ VerDate Sep 11 2014 22:12 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6301 E:\BILLS\S986.IS S986 kjohnson on DSK79L0C42PROD with BILLS