Senate Bill Would Boost 45Q Tax Credit

As a piece of legislation makes its way through Congress, the name it’s given can say a lot about its overall importance and what it intends to accomplish, but also a little bit about the current political environment. Surging inflation has been one of the biggest stories of the past year and politicians of all stripes have been looking for ways to ease the pressure on consumers. Those concerns were a big reason why the Biden administration’s Build Back Better Act (BBBA), which included several climate- and energy-related measures, ultimately died in Congress late last year. The Inflation Reduction Act of 2022, which Democrats in Washington hope to pass soon, embraces the fight against inflation and includes other significant provisions, but clean energy is at the heart of the bill. In today’s RBN blog, we look at the legislation's climate and clean-energy initiatives — including a methane-reduction program, more tax credits for electric vehicles, and incentives for renewable energy and clean hydrogen — and how they would help reduce greenhouse gas (GHG) emissions.

The budget reconciliation bill signed into law July 4 by President Trump — known as the One Big Beautiful Bill Act (OBBBA) — dramatically scales back a number of clean-energy tax credits and adds a new layer of complexity for some projects, leading to a lot of doom and gloom around clean-energy initiatives, but the new legislation is a big positive for the carbon-capture industry. In today’s RBN blog, we look at how changes to the 45Q tax credit could help advance carbon-capture efforts while also providing a boost to producers of crude oil and blue hydrogen. 

The Internal Revenue Code’s tax credit for carbon oxide sequestration, better known as 45Q, is fortunate to enjoy something very rare in Washington, DC, these days — generally bipartisan support. A host of changes aimed at bolstering the tax credit were included in the House-approved version of the Democrats’ central piece of legislation, the Build Back Better (BBB) Act, but it appears to have no way forward in the Senate — it was declared “dead” Tuesday by West Virginia Senator Joe Manchin, a must-have vote — which means it will likely be split into separate pieces, further complicating its path to passage. Several proposed changes to the 45Q tax credit have already been included in separate legislation, so they could still become a reality. In today’s RBN blog, we’ll look at some potential changes to the tax credit as well as measures that might restrict its use.