The Facts: There Is Robust Regulatory Oversight For 45Q 

This statement may be attributed to Carbon Capture Coalition executive director Jessie Stolark in light of recent press reports on 45Q:  

“The federal Section 45Q tax credit is regulated by one of the most rigorous, transparent reporting mechanisms in existence in the US tax code, and as a matter of law and design, it cannot be used as a subsidy by companies that fail to capture, store, or utilize CO₂. The 45Q tax credit is performance-based, meaning it is only awarded to projects after they successfully demonstrate the capture and subsequent secure geological storage of CO₂ or utilization in the production of low-carbon products that permanently isolate or displace emissions of CO₂.  

“To aid in understanding the reporting requirements for entities capturing and storing CO₂ at the US Environmental Protection Agency (EPA), and subsequently claiming the tax credit and filing reports with the Internal Revenue Service (IRS), the Carbon Capture Coalition has prepared a 45Q Frequently Asked Questions document. This FAQ details the robust accountability measures in place at the US EPA and IRS and how information provided to the EPA is publicly reported. It is important to note that the criteria that qualify a taxpayer to claim the 45Q tax credit are based on publicly reported information to EPA and are more transparent than most other tax credits.  

“EPA must verify and publicly report the quantity of CO₂ stored regardless of whether 45Q tax credits are claimed. This information is then shared with the IRS by companies to verify stored amounts of CO₂ for the purposes of claiming the tax credit. Companies are not allowed to take the tax credit for any year in which they fail to submit complete documentation; additionally, both agencies have audit powers over their respective reporting mechanisms and can enforce penalties for violations.   

“The 2020 Treasury Inspector General for Tax Administration Report (IG Report), which concerns the years 2010 to 2019, revealed that the current system of oversight is working. The Carbon Capture Coalition supported these efforts as reinforcing our interest in ‘robust transparency and accountability in monitoring, reporting and verification (MRV) of secure geologic storage to claim the 45Q tax credit’.  

“The 2020 IG Report found that specific companies were not following the required monitoring, reporting, and verification mechanisms in place at the EPA between 2010 and 2019. Prior to the Inspector General Report, the IRS had already begun disallowing credits improperly claimed and began enforcement as early as 2013. Additionally, this report considered years before final regulations were issued in 2021. These 2021 final regulations, which were subject to a public comment process, reaffirmed and clarified the strong monitoring, reporting, and verification requirements to claim the 45Q tax credit.  

“The Carbon Capture Coalition has long supported the robust and transparent reporting mechanisms in place at EPA, and we continue to support Treasury exercising its audit authority over 45Q. Policymakers and the public must have full confidence in the program to ensure 45Q can fulfill its full emissions reduction potential and put us on a path to meet midcentury climate goals.” 

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Convened by the Great Plains Institute, 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 management technologies. This includes carbon capture, removal, transport, utilization, and storage from industrial facilities, power plants, and ambient air.