The Treasury and IRS have issued guidance on claiming the expanded carbon capture and sequestration tax credit for 2025, providing a safe harbour for reporting and certification while final regulations under section 45Q are pending.
The US Department of the Treasury and the Internal Revenue Service provided guidance on 19 December 2025 for taxpayers claiming the tax credit for carbon capture and sequestration, which was expanded and modified in the One, Big, Beautiful Bill.
Notice 2026-01 provides a safe harbour for taxpayers that wish to claim the credit for qualified carbon oxide captured and disposed of in secure geological storage occurring during calendar year 2025.
Safe harbour
Specifically, Notice 2026-01 provides a safe harbour for determining eligibility for and the amount of the credit for the capture of qualified carbon oxide, which is disposed of in secure geological storage in the manner described in the relevant sections of the regulations under section 45Q of the Internal Revenue Code during calendar year 2025.
Under the safe harbour, if the Environmental Protection Agency does not launch its electronic Greenhouse Gas Reporting Tool for reporting year 2025 by 10 June 2026, taxpayers may prepare and submit an annual report to a qualified independent engineer or geologist. The engineer or geologist must then certify that the capture and disposal described in the annual report is in compliance with relevant greenhouse gas reporting program requirements as in effect on 31 December 2025, in the manner specified in this guidance.
This notice also informs taxpayers that Treasury and IRS intend to issue regulations under section 45Q, including with respect to measurement and verification standards, and that taxpayers may rely on this guidance until the regulations are issued.
This guidance primarily affects businesses planning to claim credits for qualified carbon oxide captured in secure geological storage occurring during calendar year 2025.
