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Thursday, August 13, 2009

Tax Aspects of Greenhouse Gas Legislation - H.R. 1424

H.R. 1424, passed in the House recently, is the cap and trade proposal to help reduce greenhouse gas emissions. This bill is over 1,400 pages long! There are a variety of tax issues associated with carbon offsets and emission allowances. For example, is an emission allowance, which can be traded on an exchange, a financial instrument or an amortizable Section 197 intangible? Hopefully, the answers to the various tax issues, including whether the receipt of emission allowances from the government for free constitutes taxable income, will be addressed in the final legislation since that would be quicker than the IRS providing such guidance or the IRS finding out that statutory changes are needed to allow for the guidance.

I have a short article from the AICPA Tax Insider on the basics of HR 1424 and its few tax provisions and the tax issues it raises.

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