JPMorgan Chase & Co.

Long-time Quiver followers may remember content covering Bill Gates’ land purchases in 2022 and 2021. Since then, there’s been an increasing number of reports of land acquisitions by the ultra-rich, and asset managers alike. Most recently, JP Morgan (JPM) stepped up and purchased a 250,000-acre timberland property for $500 million. While some may quickly praise this trend as an environmental conservation initiative, the data suggests a more monetary motivation might be behind it.

Buried in the 300-page Inflation Reduction Bill passed in August of 2022, a small section covered something called the 45-Q Tax Credit. While many might overlook this, passing it as just another mundane, bureaucratic rule change, further inspection reveals that the economic impact of the credit could have ripple effects across not just the land market in the United States but the financial one as well.

This is because the 45-Q Tax Credit substantially increases the tax credits for different types of carbon-capture and offset programs. For instance, under the old law, for every ton of carbon captured, it would equate to $50 in tax deductions. However, this incentive was increased under the new ruling to $130 per metric carbon ton.

As a result of this, JP Morgan's land, which absorbs approximately 500,000 tons of carbon a year, will be eligible for roughly $65 million in tax deductions, as opposed to just $25 million under the old ruling. For the real-estate savvy people reading, that’s a 13% cap rate, assuming no additional revenue is generated utilizing the land. Not too shabby if you ask me!

However, before you go out and buy yourself that 2-acre plot of land in the middle of nowhere, I have some bad news: To be eligible for the tax deduction, you must reach the carbon-capture threshold, which is 12,500 tons of carbon a year (Or about 4.4 million trees). So alas, it seems this tax deduction is only available for 0.001% of the population.

Nevertheless, there might still be a way for the average Joe to get in on the the 45-Q Tax Credit action: A little-known company called Origin Materials (ORGN).

Utilizing Quiver’s lobbying data, we found that Origin was one of the companies lobbying the most for the 45-Q tax credit last year. Doing some digging, we can see that this is because Origin has developed a carbon-negative production method for materials like plastic, asphalt, textiles, and rubber. While the company is still in its pre-revenue phase, recent presentations have the first of eight manufacturing plants slated to start production as soon as next month.

When you consider that just one of these plants will have twice the carbon-offset potential of JP Morgan's $500 million land does, alongside their $9.8 billion manufacturing backlog from companies who have made pledges to achieve carbon-neutral status in the coming years, it makes you wonder if Origin Materials is one way to get in on the 45-Q action?

Origin, a company that's been developing its technology for over a decade, will finally be able to put it to the test this year as its first plant is slated to start production in the coming months. While it’s yet to be seen whether they can successfully commercialize this technology, if successful, Origin will have changed the precedent on a trillion-dollar total address market, making it a company to keep an eye on in the coming months.

Disclosure: The content is for informational purposes only; you should not construe any such information as investment, financial, or other advice. I/We have no business relationship with any company whose stock is mentioned in this article.