The infrastructure bill that made it to the President’s desk earlier in the week contained a provision allowing for a new type of tax exempt private activity bond (Section 142(a)) for carbon dioxide capture facilities.

The bill allows for financing facilities and eligible components of facilities that are used for the purpose of capture, treatment and purification, compression, transportation, or on-site storage of carbon dioxide.

The general rule requires such a facility or component to have at least a 65% capture and storage percentage, but permits for an alternative calculation:

`(C) Capture and storage percentage.--

                ``(i) In general.--Subject to clause (ii), the capture 

            and storage percentage shall be an amount, expressed as a 

            percentage, equal to the quotient of--

                    ``(I) the total metric tons of carbon dioxide 

                designed to be annually captured, transported, and 

                injected into--

                        ``(aa) a facility for geologic storage, or

                        ``(bb) an enhanced oil or gas recovery well 

                    followed by geologic storage, divided by

                    ``(II) the total metric tons of carbon dioxide 

                which would otherwise be released into the atmosphere 

                each year as industrial emission of greenhouse gas if 

                the eligible components were not installed in the 

                industrial carbon dioxide facility.

This should provide a boost to carbon sequestration development.

The House Ways and Means committee draft of the infrastructure bill is out, and it contains a number of provisions at the intersection of tax and technology. One such provision, the Credit for Operation and Maintenance Costs of Government-owned Broadband, provides for credits to governmental entities that incur costs for “qualified broadband expenses,” which are amounts paid or incurred for the provision of broadband services to qualified households. Qualified households being those low-income households (as defined under Section 45D(e)) that did not have access to said services prior to the start of the taxable year.

This reliance on Section 45D effectively ties the broadband program on to the New Market Tax Credits program. One potential issue here is that there have been several high profile examples of “low-income” tracts actually being anything but — the Blackstone Hotel in downtown Chicago comes to mind. Attention will need to be paid to the program moving forward to ensure it remains in line with its legislative purpose.

If you’re interested in matters at the intersection of tax, law, and technology consider signing up for our mailing list at TaxMailingList.com. No spam, we promise.

If you have specific questions regarding the qualified opportunity zones, please don’t hesitate to get in touch. This “checklist” should not be relied upon, and is not being presented as, legal advice. This is a complex area of tax law and you cannot base your decisions on a cursory overview of the topic, such as this one.

Under the Tax Cuts and Jobs Act (Pub. L. No. 115-97 (2017)), additions were made to the Internal Revenue Code (the “Code”) to provide for tax benefits for investors that invest in Qualified Opportunity Zones (QOZs). These benefits include:

·         Deferred recognition of capital gains for Qualified Opportunity Funds (“QOFs”);

·         Reduction in amount of recognized deferred capital gains by an increase in basis; and

·         Exemptions from taxation of appreciation in QOFs if requirements are met.

In the attached we have outlined some of the pertinent aspects of QOZ regulations and requirements in order to more succinctly present a checklist of requirements for the creation of a real-estate only QOF.

For clarity, we have omitted any reference or analysis to forming and capitalizing a QOF with an eligible gain, as this is outside the scope of this paper series. We have also not outlined the process of offering QOF investments for sale, for the same reason. These will be the subject of future writing series.

Download the Checklist for Real Estate Only Qualified Opportunity Zones

As previously discussed, the Modi government of India is overhauling the country's tax code -- replacing taxes levied on businesses by the central government as well as the individual states with one unified GST.

The GST is a massive tax reform, indeed likely the largest since India gained independent in 1947. India is comprised of 29 states and 7 union territories. Previous to the GST, each state and union territory had an independent tax schema that any would-be national startup would have to contend with. So, placing yourself in the shoes of a national Indian startup, you would need to consider how to pay:

• Union Government Sales Tax
• State Government Sales Tax
• Service Tax
• Value Added Tax
• Custom duty & Octroi
• Excise Duty
• Anti Dumping Duty
• Professional Tax
• Municipal Tax
• Entertainment Tax
• Stamp Duty, Transfer Tax
• Education Cess Surcharge
• Gift Tax
• Wealth Tax
• Toll Tax
• Swachh Bharat Cess (Service tax)
• Krishi Kalyan Cess (Service tax)
• Infrastructure Cess
• Entry Tax

Under the GST, there is one consolidated tax for state and national governments, akin to that found in France, which would subsume most of the above. The GST will be payable at the point of consumption (point of sale, essentially) and, as previously mentioned, falls along a schedule with brackets ranging from 5% to 28%. 

The GST will assist startups in that it will permit entrepreneurs transacting with multiple states to calculate one tax rate for the State-GST and the Central-GST. The transaction costs for a startup in expanding from a single state to multiple, at least at the tax level, are thus substantially reduced. Additionally, unifying the tax system will permit India to explore new technologies, such as blockchain. 

"Now, [the Modi government] is instituting the country’s biggest tax overhaul since independence. On Saturday, a nationwide sales tax replaces the current hodgepodge of business taxes that vary from state to state and are seen as an impediment to growth. It is expected to unify in a single market 1.3 billion people spread over 29 states and seven union territories in India’s $2 trillion economy."

NYTimes

The new tax system, the Goods & Services Tax (GST) is intended to simplify business taxes and spur growth, replacing taxes levied on businesses by the central government as well as the individual states. The GST will be divided in to Central Goods & Services Tax, State Goods & Services Tax and Integrated Goods & Services Tax. A constitutional amendment has already been passed by Parliament and approvals have been ascertained by India's 29 states. The current rate schedule includes 5, 12, 18 and 28% and a host of exceptions, subsuming dozens of brackets in to four. 

Ahead of the roll out, the Indian government developed a technology portal, the GST Network, which is intended to allow business owners to register their companies and pay their taxes online. While the system and the portal is not without its detractors, it does appear to have had at least some positive economic effect. Hyundai and Nissan have announced a decrease in automobile prices to pass on savings under the GST -- 5.9% and 3%, respectively. 

Update 2:43PM: There is a video session in which the Revenue Secretary, Ministry of Finance, Government of India answers questions regarding the GST roll out.