Federal Direct Pay and Transferable Production Tax Credits

The Inflation Reduction Act significantly extended Section 45(Q), which provides $85 per metric ton increased from $50 per metric ton and $180 per metric ton for carbon dioxide captured using direct air capture technology. Reductions in the tax credit amounts due to tax-exempt bond financing and yearly threshold amount of carbon oxide that must be captured for a facility to qualify for the tax credit apply; additional qualification threshold reductions also apply for direct air capture facilities and for certain electricity-generating facilities. This law also, significantly, delays the deadline for starting construction of facilities and carbon capture equipment from 2025 to 2032.