S. 425, the Enhancing Energy Recovery Act, modifies the federal tax credit for carbon dioxide capture and storage under Section 45Q of the Internal Revenue Code. The bill streamlines the credit structure by consolidating different uses of captured carbon dioxide—including permanent geological storage, use in oil and gas recovery projects, and other utilization methods—under a single credit framework with equal treatment. The credit amount would be $17 per metric ton for most uses through 2026, increasing to $36 per metric ton for carbon dioxide used in enhanced oil or natural gas recovery, with amounts indexed for inflation after 2026. The changes apply to taxable years beginning after December 31, 2024, and aim to encourage carbon capture investments by ensuring consistent tax incentives across different end uses of the captured carbon.
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