Overview
Rep. Conaway Introduces Bill to Extend and Revise the Section 45Q Tax Credit: Today, US Representative Mike Conaway (R-TX) introduced, with 18 co-sponsors from both parties, the Carbon Capture and Enhanced Oil Recovery Act. The bill would make permanent the section 45Q tax credit for carbon dioxide sequestration. (The current section 45Q credit expires after the end of the calendar year in which the IRS, in consultation with the US Environmental Protection Agency (EPA), certifies that 75 million metric tons of qualified carbon dioxide have been taken into account.) In addition, the bill would gradually increase the value of the credit for carbon dioxide storage through enhanced oil recovery or other types of geologic storage to $30 per ton by 2025 (from $10/ton and $20/ton, respectively). Hunter Johnston, partner in Steptoe’s Washington office, commented: “The Conaway proposal to provide certainty for Section 45Q of the tax code is absolutely necessary to provide incentives for industrial projects that plan to capture CO2 for use in enhanced oil recovery.”
FASB Releases New Guidance on Lease Accounting: Today, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) intended to improve financial reporting about leasing transactions. Under the new guidance, organizations that lease assets—referred to as “lessees”—will be required to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. A lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. The ASU will also require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. Lessor accounting will remain largely unchanged from current Generally Accepted Accounting Principles (GAAP). However, the ASU does contain some targeted improvements that are intended to align, where necessary, lessor accounting with the lessee accounting model and with the updated revenue recognition guidance issued in 2014.
The ASU on leases will take effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the ASU on leases will take effect for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early application will be permitted for all organizations.
The FASB and International Accounting Standards Board (IASB) embarked on a joint project in 2006 to improve the financial reporting of leasing activities. The IASB issued its final standard on leases (IFRS 16) in January 2016.