Carbon Offset Credits Issued by California Are Income, IRS Says

Carbon offset credits from California are considered income, the IRS said in a memo released Wednesday.

The California Air Resources Board issues offset credits, which are transferable credits for projects that reduce or remove one metric ton of carbon dioxide. The credits are part of California’s “cap-and-trade program,” which aims to reduce greenhouse gas emissions in the state.

The legal advice memo from the IRS Office of Chief Counsel said that project operators who receive the credits must include the value of the credits in their gross income.

• An operator who receives the offset credit “has undeniable accession to wealth,” ...