December 13, 2021


The Infrastructure Investment and Jobs Act of 2021 (the “Infrastructure Act”) provides issuers with the ability to issue two new categories of private activity bonds after January 1, 2022, and will provide an increase of the national amount available for bonds issued for qualified highway and surface freight transportation facilities (generally used for P3 transportation projects throughout Texas) to $30 billion, effectively providing for a renewed $15 billion cap given the existing cap is close to being fully allocated by the Department of Transportation.  We expect the Treaury Department to promulgate rules related to the application of these two new categories of private activity bonds.

CO2 Capture Facilities.  Projects intended to capture carbon dioxide (CO2) could qualify for tax-exempt financing if they are “Direct Air Capture Facilities” and “Components of Industrial CO2 Facilities” (“DAC and ICO2 Facilities”).  Volume cap limitations apply only with respect to 25% of the issue price of the bonds, thereby exempting from volume cap 75% of the bond issuance. 

DAC Facilities are very broadly defined as any facility which uses carbon capture equipment to capture CO2 directly from ambient air.  In order to prevent double dipping of tax benefits, borrowers that bond finance DAC Facilities will have a new limitation apply on the amount of tax credits otherwise available to them under IRC sec. 45Q(e)(1). 

Generally, eligible equipment may be financed if it captures CO2 that was released as a waste product of an industrial process as well as certain petroleum or biomass-based energy processes.  Specifically, an eligible component is any equipment which is used to capture, treat and purify, compress, transport, or store onsite CO2, in any facility that emits CO2 as a result of fuel combustion, gasification, bioindustrial, fermentation or any manufacturing industrial process relating to chemical, fertilizers, glass, steel, petroleum residues, forest byproduct and other processes.  Equipment for disposal or further utilization of CO2 is not eligible.  

In addition, an eligible component includes any equipment that is integral or functionally related and subordinate to a process (a “conversion process”) which converts a solid or liquid product (“byproduct”) into synthesis gas (aka syngas).  The byproduct must be derived from coal, petroleum residue, biomass  (such as agricultural or plant waste, wood or papermill byproduct other than recycled paper), or other materials converted for their energy or feedstock value into syngas.  The syngas must be (i) composed primarily of carbon dioxide and hydrogen and (ii) produced for direct use or subsequent chemical or physical conversion. 

Notably, limitations on the amount of tax-exempt bonds that may be issued apply to ICO2 Facilities that are not efficient in capturing CO2 (namely, facilities that capture less than 65% of CO2 released at the facility). 

Broadband Projects.  Private activity bonds will be available to projects that are intended to provide faster and more stable internet connections to certain “underserved” areas.  These areas include blocks with residential households that do not have fixed or terrestrial broadband service or service that has relatively slow upload (3 Mbps) and download (25 Mbps) speeds.  The speed of the new service must be 20 Mbps for uploads and 100 Mbps for downloads.  Certain notification requirements apply to existing broadband service providers.  Except for projects that are governmentally owned, similar volume cap limitation exceptions (75%) apply to this new category of bonds.

For additional information and a more in-depth analysis of any particular fact situation, please contact Stefano Taverna at (214) 754‑9277 or, or Hal Flanagan at (214) 754‑9273 or

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This Tax Law Update was provided by McCall’s Tax Department.  It is intended for informational and marketing purposes only, and it is not to be construed as legal advice to any person or with regard to any matter.  While we hope that this Update is helpful to you, McCall is not responsible for any specific transaction or reporting position taken by any person after review hereof.

© 2021 McCall, Parkhurst & Horton L.L.P.. ALL RIGHTS RESERVED.

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