The FLARE Act (Facilitating Lower Atmospheric Released Emissions Act) would amend the Internal Revenue Code to permanently allow 100% expensing (bonus depreciation) for costs tied to flaring and venting mitigation systems—referred to as applicable energy property. These systems are intended to capture natural gas that would otherwise be flared or vented and to use that gas in various value-added activities. The bill defines what qualifies as a flaring and venting mitigation system and lists permissible uses for the captured gas, ranging from fuel production and petrochemicals to electricity, computational power, and even digital asset mining. A key protection disallows the benefit for property placed in service by a foreign entity of concern. The provision would apply to property placed in service after December 31, 2025, and would require a conforming amendment to the existing bonus depreciation rules. In short, the measure aims to incentivize investments in methane capture and gas utilization by providing a permanent, 100% upfront tax deduction for the associated capital costs, with a policy restriction tied to foreign ownership.
Key Points
- 1Creates permanent 100% expensing (full deduction in the year placed in service) for costs related to flaring and venting mitigation systems.
- 2Expensing applies specifically to “applicable energy property” that is a flaring and venting mitigation system, defined as systems that intake natural gas and separate, collect, utilize, or combust methane and heavier hydrocarbons for various end uses.
- 3Permissible uses of captured gas include: fuel use or transportation, petrochemical or fertilizer production, conversion to liquid fuels, electricity generation or grid power, computation power, mining for digital assets, and powering other oilfield equipment.
- 4Prohibits the bonus expensing for property placed in service by a foreign entity of concern (as defined in the bill, using the R&D, Competition, and Innovation Act framework).
- 5Applies to property placed in service after December 31, 2025 (not retroactive).
- 6Includes a conforming amendment to extend the new expensing to 168(k)(11) by inserting it alongside existing 168(k) provisions.