WASHINGTON, D.C. – U.S. Senator Bob Menendez (D-N.J.), a senior member of the Senate Finance Committee that sets national tax policy, today urged Internal Revenue Service (IRS) Commissioner Charles P. Rettig to audit claimants of the clean air tax credits under section 45Q of the Internal Revenue Code. An investigation by the Treasury Inspector General for Tax Administration (TIGTA), requested by Sen. Menendez in 2019, found that fossil fuel companies improperly claimed nearly $1 billion in clean air tax credits.
Section 45Q of the Internal Revenue Code provides tax credits on a per-ton basis to companies that successfully trap, sequester and store carbon emissions, preventing them from entering the atmosphere, in compliance with the Environmental Protection Agency’s Subpart RR monitoring, reporting, and verification (MRV) requirements.
During a hearing today in the Senate Finance Committee featuring Rettig, Sen. Menendez urged the Commissioner to take actions to remediate this issue. Rettig declined to commit to auditing all previous claimants of the 45Q credit to ensure that they are in compliance or initiate a campaign to ensure compliance going forward.
“Mr. Rettig, if the facts that I’ve discussed here today, supported by an investigation by the Inspector General, don’t constitute proper justification and documentation, I don’t know what does. I understand that the IRS has limited resources, but it seems clear to me that ensuring compliance with 45Q carries a significant return on investment for the American taxpayer,” said Sen. Menendez to Commissioner Retting.
On April 29, Sen. Menendez called on the IRS to take a series of steps, including conducting an audit of every fossil fuel company that previously claimed more than $10,000 in value of the Section 45Q credit, and retroactively deny any credits that were not in compliance with necessary EPA regulations. Additionally, he requested that the IRS conduct a campaign to examine future claims of the 45Q tax credit in order to ensure compliance.
In their response, the IRS declined Sen. Menendez’s request to disclose the names of all companies that have claimed the credit since tax year 2010, as well as the amount of carbon dioxide each company has claimed to have sequestered, and the value of any credits claimed.
April 22, 2021