Wildfire Reduction and Carbon Removal Act of 2025

Bill Number

S. 1842

Origin Chamber

Senate

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-05-21: Read twice and referred to the Committee on Finance.

Last Updated

2025-06-23T18:28:49Z

AI-Generated Summary

Purpose

The Wildfire Reduction and Carbon Removal Act of 2025 aims to incentivize the removal and long-term storage of carbon dioxide from forest residues produced during wildfire prevention and ecological restoration activities. By creating a new tax credit, it encourages the use of biomass (organic material from forests) to reduce wildfire risks while contributing to climate change mitigation through carbon sequestration (storing carbon to keep it out of the atmosphere).

Key Provisions

• New Tax Credit (Section 45BB of the Internal Revenue Code): Provides a credit for capturing and storing carbon dioxide equivalent from qualified forest residue biomass. The credit is part of the general business credit and applies to equipment placed in service after the bill's enactment.
• Credit Amounts: $36 per metric ton for storage in secure geological formations (e.g., underground injection or burial lasting at least 1,000 years); $12 per metric ton for long-duration utilization (e.g., biochar or durable building materials lasting at least 100 years). Amounts adjust annually for inflation starting in 2027.
• Bonus Credit: Up to 5 times the base amount for projects that meet labor standards, such as paying prevailing wages and hiring apprentices (modeled after rules in existing carbon capture credits).
• Qualified Biomass: Limited to residues from thinning trees no larger than 8 inches in diameter at breast height, limbs, and bark from wildfire hazard reduction or restoration activities in high-risk areas, as identified by the U.S. Forest Service or Bureau of Land Management plans. Must meet sustainability standards to minimize environmental harm.
• Project Requirements: Projects must store at least 1,000 metric tons annually; multiple sites can be combined. Carbon must be measured using lifecycle analysis (full accounting of emissions from sourcing to storage) and verified through monitoring, reporting, and independent checks.
• Storage and Equipment Rules:
• "Biomass equipment" includes tools for disposing of residues to capture carbon.
• No credit for using captured carbon in oil/gas recovery or if it overlaps with other credits (e.g., clean energy production credits, unless energy is used on-site).
• Credit only for activities within the U.S. or its possessions; recapture (clawback) if stored carbon escapes.
• Owners of equipment get the credit, but they can elect to transfer it to storage providers.
• Elective Payment and Transfer: Taxpayers can opt for direct payments instead of credits (useful for non-profits or governments) or sell/transfer credits to others.
• Rulemaking and Guidance:
• Treasury Department (with input from Agriculture, Interior, Energy, and EPA) must issue regulations by early 2026 on sustainability standards (e.g., protecting soil, biodiversity, water), lifecycle emissions analysis, verification protocols, and secure storage methods.
• Includes public comment periods (at least 60 days) and reviews every 5 years to update based on new science.
• Effective Date: Applies to tax years beginning after December 31, 2025; guidance due by January 1, 2026.

Significant Changes to Existing Law

• Adds a new section (45BB) to the Internal Revenue Code, expanding tax incentives for carbon removal beyond industrial sources (like Section 45Q for factory emissions) to focus on forest biomass.
• Builds on but modifies existing carbon capture rules (e.g., borrowing labor bonus provisions from 45Q) while prohibiting double-dipping with other clean energy or investment credits.
• Introduces tailored definitions and standards for "qualified forest residue biomass" and storage durations, which do not exist in current law, and mandates new rulemaking for biomass-specific sustainability and verification to ensure environmental integrity.

Potential Impacts

• Government Agencies: Increases administrative burden on the Treasury (for credit claims and rulemaking), IRS (for audits and recapture), and agencies like the Forest Service and EPA (for identifying eligible sites and verifying storage). Could raise federal tax expenditures (lost revenue from credits) but offset by promoting wildfire management on public lands.
• Citizens and Businesses: Provides financial incentives for forestry companies, biofuel producers, and carbon removal startups to invest in equipment and projects, potentially creating jobs in rural wildfire-prone areas. Taxpayers may see indirect benefits from reduced wildfire damages (e.g., lower insurance costs, safer communities) but could face higher taxes if credits reduce overall revenue.
• Environment and Climate: Encourages removal of wildfire fuels (reducing fire risks in high-hazard areas) and sequesters carbon, aiding U.S. greenhouse gas reduction goals. Sustainability rules aim to prevent harm like soil degradation or biodiversity loss.
• International Relations: Minimal direct impact, as the credit is U.S.-only, but it could position the U.S. as a leader in biomass carbon tech, influencing global standards for forest-based climate solutions.

Main Stakeholders Affected

• Forestry and Biomass Industries: Primary beneficiaries, including logging firms, biofuel plants, and equipment manufacturers handling residues from thinning operations.
• Federal Land Managers: U.S. Forest Service and Bureau of Land Management, which identify eligible wildfire reduction sites and ensure compliance with plans.
• Environmental and Climate Groups: Involved in public comments; benefit from carbon storage but may advocate for stricter sustainability rules.
• Taxpayers and Energy Sector: General public funds the credits indirectly; clean energy producers must avoid credit overlaps.
• Rural Communities: In wildfire-prone regions (e.g., Western U.S.), gain from hazard reduction and potential economic activity.

Notable Legal, Constitutional, or Political Implications

• Legal: Relies on Congress's taxing power (Article I, Section 8 of the Constitution) to incentivize private action, similar to other green tax credits. Introduces detailed verification and recapture mechanisms to prevent fraud, potentially leading to litigation over eligibility or standards. Coordination rules avoid unconstitutional double subsidies.
• Constitutional: No major challenges anticipated, as it fits within established tax incentive frameworks, but rulemaking could face suits if standards are seen as arbitrary or insufficiently protective of public lands.
• Political: Advances bipartisan priorities on wildfires (e.g., post-2020s fire seasons) and climate (aligning with net-zero goals), but may spark debate over subsidizing biomass vs. other renewables. Five-year review process ensures adaptability, though implementation delays could arise from inter-agency coordination or budget constraints.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Sen. Whitehouse, Sheldon [D-RI]

Cosponsors (1)

Sen. Schiff, Adam B. [D-CA]

Recent Actions

• 2025-05-21: Read twice and referred to the Committee on Finance.
• 2025-05-21: Introduced in Senate

Bill Versions

• Wildfire Reduction and Carbon Removal Act of 2025 — issued 2025-05-21 — PDF (21 pages)