IRS Newswire January 6, 2021
News Essentials
Issue Number: IR-2021-05
Inside This Issue
Treasury, IRS provide regulations to help businesses claim credits for carbon capture
WASHINGTON – Today the Treasury Department and Internal Revenue Service issued final regulations regarding the credit for qualified carbon oxide captured using carbon capture equipment placed in service on or after Feb. 9, 2018.
The final regulations help businesses understand how the credit for qualified carbon oxide sequestration may benefit those claiming two carbon capture credit amounts, which are:
Up to $50 per metric ton of qualified carbon oxide for permanent sequestration; and
Up to $35 per metric ton of qualified carbon oxide for Enhanced Oil or Natural Gas Recovery purposes.
Neither of these new credit amounts, contained in the Bipartisan Budget Act of 2018, is subject to a limitation on the number of metric tons of qualified carbon oxide captured. The law also expanded carbon capture to include “qualified carbon oxide,” a broader term than “qualified carbon dioxide.” Prior to the change in law, carbon capture was limited to a total of 75,000,000 metric tons of qualified carbon dioxide.
These final regulations provide rules to determine:
Adequate security measures for the geological storage of qualified carbon oxide;
Exceptions to the general rule for determining to whom the credit is attributable;
Procedures for a taxpayer to make an election to allow third-party taxpayers to claim the credit;
The definition of carbon capture equipment; and
Standards for measuring utilization of qualified carbon oxide.
In addition, the final regulations allow smaller carbon capture facilities to be aggregated into one project for purposes of claiming the credit when certain factors are present, such as common ownership and location. The final regulations also provide guidance on recapture, including introducing a recapture period of three years. Under these rules, credits must be repaid if carbon oxide leaks into the atmosphere during a three-year period after the initial storage or injection.
The Treasury Department and IRS received written and electronic comments responding to the proposed regulations. A public hearing on the proposed regulations was held on Aug. 26, 2020. Copies of written comments and the list of speakers at the public hearing are available at Regulations.gov.
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Issue Number: RR-2021-02
Inside This Issue
Revenue Ruling 2021-02 obsoletes Notice 2020-32 and Rev. Rul. 2020-27 due to the enactment of the COVID-related Tax Relief Act of 2020 (Act). The Act retroactively amends the CARES Act to provide that no amount is included in the gross income of a Paycheck Protection Program (PPP) participant by reason of forgiveness of a PPP loan, and no deduction is denied, no tax attribute is reduced, and no basis increase is denied, by reason of the exclusion from gross income. Accordingly, the holdings in Notice 2020-32 and Rev. Rul. 2020-27 are no longer determinative with regard to the treatment of certain expenses paid with PPP loan proceeds.
Revenue Ruling 2021-02 will be in IRB: 2021-04, dated January 25, 2021.
Issue Number: IR-2021-04
Inside This Issue
Eligible Paycheck Protection Program expenses now deductible
WASHINGTON – The Treasury Department and the Internal Revenue Service issued guidance today allowing deductions for the payments of eligible expenses when such payments would result (or be expected to result) in the forgiveness of a loan (covered loan) under the Paycheck Protection Program (PPP).
Today’s guidance, Revenue Ruling 2021-02, reflects changes to law contained in the COVID-related Tax Relief Act of 2020, enacted as part of the Consolidated Appropriations Act, 2021 (Act), Public Law 116-260, which was signed into law on Dec. 27, 2020.
The COVID-related Tax Relief Act of 2020 amended the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to say that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan. This change applies for taxable years ending after March 27, 2020.
Revenue Ruling 2021-02 obsoletes Notice 2020-32 and Revenue Ruling 2020-27. This obsoleted guidance disallowed deductions for the payment of eligible expenses when the payments resulted (or could be expected to result) in forgiveness of a covered loan.
For more information about this, the COVID-related Tax Relief Act of 2020, and other tax changes, visit IRS.gov.
