Details of Public Law 117-58, section 80402 , Infrastructure Investment and Jobs Act, Carbon Dioxide Capture Facilities

This section adds “qualified carbon dioxide capture facilities,” as defined, to the list of tax exempt facility bonds when net proceeds are used to provide for qualified carbon dioxide capture facilities. Seventy-five (75) percent of a tax exempt facility bond issued for qualified carbon dioxide capture facilities would not count towards the authority’s volume cap. The sale of carbon dioxide produced by a qualified carbon dioxide facility owned by a government unit would not be considered private business use and does not need to meet the 10 percent test for a private activity bonds.

The carbon dioxide sequestration credit would be reduced for projects financed by tax exempt private activity bonds. The amount of credit would be reduced by the amount which is the product of the amount and the lesser of half or a fraction generally determined by:

The numerator which is a sum of the taxable year and all prior taxable years used to finance the project and

The denominator which is the aggregate amount of the additions to the capital account for the taxable year and all prior taxable years.

Under the Personal Income Tax Law (PITL), California does not conform to IRC section 142 or 146, regarding interest on governmental obligations. For California purposes, bond interest from certain sources such as California state bonds, municipal bonds issued by a county, city, town, or other local government in the state, or housing authority bonds for projects in the state, including private activity bond interest is not taxed. Under the Corporation Tax Law (CTL), California requires all interest received from federal, state, municipal, or other bonds to be included in gross income. California does not conform to the new designation for tax exempt facility bonds issued for qualified carbon dioxide capture facilities.

Tax exempt facility bonds are administered through the California State Treasurer’s Office who would be responsible for monitoring the volume cap. Therefore, the volume cap does not impact Franchise Tax Board.

California does not conform to IRC section 45Q, relating to the carbon oxide sequestration credit, and thus does not conform to the reduction of that credit.