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The ACCESS 45Q Act Would Enhance Section 45Q Carbon Capture and Sequestration Tax Credit

Client Updates

On December 3, 2020, U.S. Representatives Marc Veasey (D-TX) and David B. McKinley (R-W.Va) introduced bipartisan legislation entitled the Accelerating Carbon Capture and Extending Secure Storage through 45Q Act (the “ACCESS 45Q Act”) as H.R. 8858. The bill is designed to incentivize investment in carbon capture, utilization and storage ("CCUS"), and was co-sponsored by several other representatives, including Lizzie Fletcher (D-TX).

Internal Revenue Code section 45Q offers a federal tax credit for the capture and sequestration of carbon oxide. If enacted, the bill would include a direct pay election that would allow taxpayers to treat tax credits that they have earned as a payment of taxes. The legislation would also extend the date by which construction of carbon capture projects must begin in order to be eligible for the credit. Similar, but less favorable, provisions had been included in the GREEN Act passed by the House on July 1, 2020. Read our prior alert on the GREEN Act here.


Investor Pool for Carbon Capture Projects Would Increase

To implement the direct pay option, the bill would add a new Code section 6431, entitled “Elective Payment for Carbon Oxide Sequestration,” pursuant to which taxpayers could elect, as to any portion of the section 45Q credit they would otherwise receive, to be treated as having made a payment against their tax liability. The elected payment is to be treated as having been made on the later of the due date of the return of tax for such taxable year or the date on which such return is filed. This elective mechanism allows a taxpayer to treat earned tax credits as a payment of taxes including estimated tax payment obligations or, importantly, as an overpayment of taxes in cases in which the taxpayer does not have a tax liability.

Tax credits have historically been successful in supporting clean energy project investment, as seen with the extensive development of wind and solar projects financed with tax credits. In the context of an economic slowdown such as that brought on by the pandemic, however, tax equity markets for tax credits retract since tax liabilities may shrink. A direct pay provision allowing taxpayers to treat the credits as an overpayment of tax would mean that cash in the form of a refund for overpayment could go to a claimant that did not have a tax liability. With enactment of such a provision, the pool of possible investors in carbon capture projects could see a sizeable increase as the tax equity market would not be restricted to those who had a tax liability against which to use the credit. 


Impact of Construction Delays Would Be Lessened

Under the bill, the beginning of construction deadline would be extended by 10 years, from the end of 2023 to the end of 2033. The section 45Q credit is widely recognized as the single-most useful tax tool in incentivizing the reduction of carbon emissions but recent events have limited the impact of the credit. Delays in IRS issuance of detailed guidance regarding the credit have had a chilling effect on investment by tax equity investors. Final section 45Q regulations are expected early in 2021 and their release should provide the needed certainty regarding availability of the credit.

In the meantime, the effects of the COVID-19 pandemic have also contributed to delays in construction even for those projects with respect to which financing has been secured and a go-forward decision has been made. Carbon capture projects are large-scale, capital-intensive projects that require years to plan, engineer, permit and finance but they are key to achieving emission reduction goals, as well as increasing infrastructure investment and creating jobs as they are implemented. By extending the date for projects to begin construction, the legislation would provide security to developers that their projects can meet the deadline despite such delays.

As was the case with the GREEN Act, uncertainty remains about ultimate passage of the ACCESS 45Q Act even though it is a bipartisan proposal. With the Biden Administration intent to move climate issues to center stage, however, the bill is unlikely to languish.

We continue to monitor the progress of this and other related legislation. If you have any questions about the proposal, please contact any of the authors of this update.


Baker Botts’ multidisciplinary teams are at the forefront of CCUS developments and activities. We assist clients with CCUS-related projects and transactions around the world, and have been involved in the development of the regulatory framework for CCUS at the federal and state level in the United States. For more information about this practice, visit the CCUS Practice Group page at

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