The Internal Revenue Service and the Treasury Department issued a notice extending a safe harbor for carbon capture and sequestration technology.
The latest notice modifies and amplifies another notice issued last December,
The carbon capture industry welcomed the news.
"We are grateful to Treasury and IRS for providing greater certainty to taxpayers electing the 45Q tax credit with today's notice and extension of the safe harbor," said Jessie Stolark, executive director of the Carbon Capture Coalition, a group of over 70 companies, labor unions, and nonprofits working to build support for carbon management policies, in a statement last Friday. "Long-term certainty regarding Section 45Q eligibility is essential to reaching final investment decisions; even short-term gaps in guidance can create material uncertainty and deter investment. Today's notice provides important clarity in several areas of the regulations governing the 45Q tax credit."
The Trump administration has been working to eliminate many green energy initiatives, including tax credits for solar and wind power, but has been friendlier toward carbon capture technology, even though the technology has
The Environmental Protection Agency has been rolling back support for environmental programs such as the Greenhouse Gas Reporting Program, leading to requests by the carbon capture industry for expanding the earlier safe harbor provided by the IRS and the Treasury.
"Since the EPA announced the potential repeal of the US Greenhouse Gas Reporting Program last year, the Carbon Capture Coalition has been communicating to the administration and policymakers on both sides of the aisle that the GHGRP serves as the regulatory backbone of the federal Section 45Q tax credit, underpinning the integrity, transparency, and accountability of the program," said Stolark. "Therefore, EPA's proposed repeal of the GHGRP created an urgent need for new guidance from the Treasury and IRS on requirements to quantify and verify secure geologic storage to qualify for the Section 45Q tax credit. With this in mind, the Coalition, in collaboration with others in the stakeholder community, proposed pragmatic solutions to the administration that would allow for the continued election of the tax credit in the absence of the GHGRP.
"Today's issuance of Notice 2026-50 aligns with many of our earlier recommendations and provides critical continuity and long-term certainty to taxpayers conducting all types of permanent geologic storage," she added. "While the EPA has long been a key component in verifying amounts of CO2 captured and stored, the safe harbor guidance importantly maintains the integrity of the tax credit through certification by an independent engineer or geologist.
"Specifically, the notice extends the applicability date of the earlier safe harbor, allows [enhanced oil recovery] operators to continue using the Subpart RR methodology, and addresses important recapture provisions."
However, the industry would like to see further guidance.
"Notably, today's notice does not address the development, submission, certification, or revision of a Subpart RR monitoring, reporting, and verification (MRV) plan," said Stolark. Subpart RR MRV plans are an important component of the regulatory framework of geologic storage and require monitoring for any potential surface leakage. We are pleased to see the Treasury and IRS act with urgency to ensure that the robust reporting elements contained in GHGRP's Subpart RR are maintained through this safe harbor. We look forward to engaging with the agency to preserve the long-term integrity of these vital reporting mechanisms, which support the further development and deployment of these essential technologies."
