On December 19, the US Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) announced they have provided a safe harbor for taxpayers who capture and store carbon in dedicated saline geologic formations, thereby enabling a path forward for the continued election of the Section 45Q tax credit in 2025. Under this interim guidance, taxpayers using Subpart RR to substantiate volumes of CO2 stored for the purposes of enhanced oil recovery (EOR) must rely on alternative compliance methods recognized by Treasury, namely the International Standards Organization (ISO) standard for EOR.
This statement may be attributed to Jessie Stolark, Executive Director of the Carbon Capture Coalition, a collaboration of companies, labor unions, and nonprofits working to build support for carbon management policies.
“Since the EPA announced the potential repeal of the US Greenhouse Gas Reporting Program (GHGRP) earlier this year, the Carbon Capture Coalition has been communicating to the administration and policymakers that the GHGRP serves as the regulatory backbone of the federal Section 45Q tax credit, underpinning the integrity, transparency, and accountability of the program.
“In November, the Coalition submitted comments to EPA on the proposed reconsideration of the GHGRP, opposing the elimination of subparts relevant to carbon management within the program. In parallel, the Coalition worked with stakeholders to propose near-term solutions to the administration, to allow the continued election of the tax credit in the absence of the GHGRP before a permanent mechanism is established.
“We are pleased to see Treasury and IRS act with urgency to issue a safe harbor to allow taxpayers who capture and store carbon in dedicated saline geologic formations to claim the tax credit for the taxable year 2025. That said, it remains crucial that this safe harbor guidance is available to current taxpayers conducting all types of permanent geologic storage, including in oil and gas fields, to avoid disruptions to accounting and monitoring requirements. Under the newly issued safe harbor, taxpayers storing CO2 in saline geologic formations for the purposes of secure geologic storage must continue to use the robust reporting elements contained in GHGRP’s Subpart RR, and have the information subsequently certified by an independent engineer or geologist, thereby maintaining the integrity of the tax credit.
“To be clear, the 45Q tax credit continues to be the single most important driver of carbon management technologies, which are, in turn, a vital contributor to American energy, environmental, and economic leadership. This safe harbor announcement is both welcome and necessary.
“Looking forward, we stand ready to work with Congress and the administration to craft long-term solutions to allow carbon management and geologic storage projects to continue to be responsible stewards of taxpayer dollars in the possible absence of the GHGRP.”
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The Carbon Capture Coalition is a nonpartisan collaboration of more than 100 companies, unions, conservation and environmental policy organizations, building federal policy support to enable economywide, commercial-scale deployment of carbon capture and storage technologies. This includes carbon capture, removal, transport, reuse, and storage from industrial facilities, power plants, and the ambient air.