n-11-50.pdf

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Part III - Administrative, Procedural, and Miscellaneous

Credit for Carbon Dioxide Sequestration
2011 Section 45Q Inflation Adjustment Factor

Notice 2011-50

SECTION 1. PURPOSE

This notice publishes the inflation adjustment factor for the credit for carbon
dioxide (CO
2
) sequestration under § 45Q of the Internal Revenue Code (§ 45Q credit)
for calendar year 2011. The inflation adjustment factor is used to determine the amount
of the credit allowable under § 45Q. The calendar year 2011 inflation-adjusted credit
applies to the amount of qualified CO
2
captured by a taxpayer at a qualified facility and
disposed of in secure geological storage.
SECTION 2. BACKGROUND
Section 45Q(a)(1) allows a credit of $20 per metric ton of qualified CO
2
that is
captured by the taxpayer at a qualified facility, disposed of by the taxpayer in secure
geological storage, and not used by the taxpayer as a tertiary injectant. Section
45Q(a)(2) allows a credit of $10 per metric ton of qualified CO
2
that is captured by the
taxpayer at a qualified facility, used by the taxpayer as a tertiary injectant in a qualified
enhanced oil or natural gas recovery project (EOR project), and disposed of by the
taxpayer in secure geological storage.

Section 45Q(b)(1) defines the term “qualified carbon dioxide” as CO
2
captured
from an industrial source that would otherwise be released into the atmosphere as
industrial emission of greenhouse gas (GHG), and that is measured at the source of
capture and verified at the point of disposal or injection. Qualified CO
2
includes the
initial deposit of captured CO
2
used as a tertiary injectant but

does not include CO
2
that
is re-captured, recycled, or otherwise re-injected as part of the enhanced oil and natural
gas recovery process.
Section 45Q(c) defines the term “qualified facility” as an industrial facility that is
owned by the taxpayer, where carbon capture equipment is placed in service, and
where at least 500,000 metric tons of CO
2
is captured during the taxable year.
Section 45Q(d)(2) provides that the Secretary, in consultation with the
Administrator of the Environmental Protection Agency (EPA), the Secretary of Energy,
and the Secretary of the Interior, shall establish regulations for determining adequate
security measures for the geological storage of CO
2
under paragraph (1)(B) or (2)(C) of
subsection (a) such that the CO
2
does not escape into the atmosphere. See section 5
of Notice 2009-83, 2009-44 I.R.B. 588, for procedures regarding secure geological
storage.
Section 45Q(d)(5) allows the § 45Q credit to the person that captures and
physically or contractually ensures the disposal of or the use as a tertiary injectant of the
qualified CO
2,
except to the extent provided in regulations prescribed by the Secretary.
Under § 45Q(d)(7), for taxable years beginning in a calendar year after 2009, the
dollar amount contained in § 45Q(a) must be adjusted for inflation by multiplying such

dollar amount by the inflation adjustment factor for such calendar year determined
under § 43(b)(3)(B), determined by substituting “2008” for “1990.”
Section 43(b)(3)(B) defines “inflation adjustment factor” as, with respect to any
calendar year, a fraction the numerator of which is the GNP implicit price deflator for the
preceding calendar year and the denominator of which is the GNP implicit price deflator
for 1990. For purposes of § 45Q(d)(7), with respect to 2011 calendar year, the inflation
adjustment factor is a fraction the numerator of which is the GNP implicit price deflator
for 2010 (110.654) and the denominator of which is the GNP implicit price deflator for
2008 (108.626).
Section 45Q(e) provides that the § 45Q credit will apply with respect to qualified
CO
2
before the end of the calendar year in which the Secretary, in consultation with the
EPA, certifies that 75,000,000 metric tons of qualified CO
2
have been taken into account
in accordance with § 45Q(a).
SECTION 3. INFLATION ADJUSTMENT FACTOR
The inflation adjustment factor for calendar year 2011 is 1.0187. The 45Q credit
for calendar year 2011 is $20.37 per metric ton of qualified CO2 under § 45Q(a)(1) and
$10.19 per metric ton of qualified CO2 under § 45Q(a)(2).
SECTION 4. DRAFTING INFORMATION
The principal author of this notice is Jennifer C. Bernardini of the Office of
Associate Chief Counsel (Passthroughs & Special Industries). For further information
regarding this notice contact Jennifer C. Bernardini on (202) 622-3110 (not a toll-free
call).