The US Treasury and IRS have issued interim guidelines to safeguard 2025 carbon capture projects claiming the 45Q tax credit, providing a temporary verification pathway as EPA’s Greenhouse Gas Reporting Tool remains unavailable, signaling a potential shift in industry compliance amid pending regulations.
The Treasury Department and the Internal Revenue Service on 19 December 2025 issued interim guidance designed to protect firms that plan to claim the federal 45Q tax credit for carbon dioxide captured and stored in geologic formations during calendar year 2025, offering a temporary “safe harbor” intended to plug a potential verification gap created by the Environmental Protection Agency’s proposed repeal of parts of the Greenhouse Gas Reporting Program.
According to the IRS notice, Notice 2026‑01, the safe harbor allows taxpayers to establish eligibility and quantify the amount of creditable carbon oxide captured and securely stored in 2025 by obtaining an annual certification from a qualified independent engineer or geologist if the EPA has not launched its electronic Greenhouse Gas Reporting Tool for reporting year 2025 by 10 June 2026. The Treasury and IRS say taxpayers may rely on this interim approach until formal regulations under section 45Q are issued, and that those forthcoming regulations will address measurement and verification standards more comprehensively.
The move responds directly to the administration’s proposed elimination of Subpart RR of the Greenhouse Gas Reporting Program, the EPA reporting requirement that applies to facilities conducting geologic storage of CO2. Industry stakeholders and project developers have warned that removing Subpart RR would disrupt the mechanics of claiming the 45Q credit, which , bolstered and altered earlier this year by provisions in the One, Big, Beautiful Bill , underpins the economics of many U.S. carbon capture and storage (CCS) projects.
Legal and advisory firms that reviewed the notice noted it establishes an alternative, practicable pathway for substantiating sequestration volumes for 2025, but they also emphasised its interim character. According to a Baker Botts analysis, the safe harbor permits reliance on independent verification instead of Subpart RR reporting for calendar year 2025, but the firm highlighted that taxpayers should expect additional regulatory detail from the Treasury and IRS on measurement, verification and recapture in due course.
That additional detail may be significant. Recent Internal Revenue Bulletins issued in 2025 set out the IRS’s position on how section 45Q interacts with other tax incentives and on recapture rules where metric tons of captured CO2 are later determined to have leaked to the atmosphere. Industry tax advisers point out that those bulletins illustrate the IRS’s focus on leakage accounting and on aligning 45Q compliance with adjacent credit regimes such as section 45Y and section 48E.
For businesses and investors in industrial decarbonisation, the Treasury‑IRS safe harbor provides short‑term continuity: it reduces the immediate compliance risk for projects that captured CO2 in 2025 and expect to monetise 45Q. At the same time, the guidance leaves open several practical questions for project owners and engineers , including precise measurement protocols, the timeline for Treasury‑issued regulations, and how recapture liabilities will be applied in complex project chains , matters the IRS said it intends to address in forthcoming rulemaking.
Market participants had warned that withdrawing Subpart RR without an alternative verification regime would create uncertainty for long‑lead CCS projects, potentially disrupting financing and offtake arrangements that rely on predictable tax incentives. The interim notice appears intended to reassure those parties that a bridge mechanism is available for one reporting year while the agencies finalise permanent rules.
The Treasury and IRS statement frames the safe harbor as a temporary, administratively practicable solution to a narrow regulatory gap: taxpayers may submit independent engineer or geologist certifications for 2025 sequestration volumes if EPA’s electronic reporting capability is not available by 10 June 2026, and may rely on the guidance until section 45Q regulations are promulgated. The agencies also signalled intent to issue more detailed regulations addressing measurement, verification and recapture, which will determine longer‑term compliance obligations for CCS projects and their backers.
For corporate treasurers, tax directors and project developers engaged in industrial decarbonisation, the guidance reduces near‑term uncertainty but does not eliminate the need to plan for stricter, codified verification standards. Industry participants should monitor Treasury and IRS rulemaking closely and prepare independent verification documentation for 2025 volumes in case the EPA’s reporting tool remains unavailable by the specified June 2026 date.
- https://www.eenews.net/articles/treasury-issues-guidance-for-ccs-tax-credit/ – Please view link – unable to able to access data
- https://www.irs.gov/newsroom/treasury-irs-provide-safe-harbor-for-taxpayers-claiming-the-carbon-capture-credit – On December 19, 2025, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued Notice 2026-01, providing guidance for taxpayers claiming the tax credit for carbon capture and sequestration. This notice offers a safe harbor for determining eligibility and the amount of the credit for qualified carbon oxide captured and disposed of in secure geological storage during the 2025 calendar year. If the Environmental Protection Agency (EPA) does not launch its electronic Greenhouse Gas Reporting Tool for reporting year 2025 by June 10, 2026, taxpayers may prepare and submit an annual report to a qualified independent engineer or geologist for certification. This guidance aims to address potential regulatory gaps due to the EPA’s proposed repeal of the Greenhouse Gas Reporting Program, which requires large industrial facilities to report their climate emissions. The 45Q tax credit, which incentivizes carbon capture and storage, is closely linked to the EPA’s reporting program, and the Treasury’s guidance seeks to provide clarity and continuity for the carbon capture and storage industry. The notice also informs taxpayers that the 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 development is significant for businesses planning to claim credits for qualified carbon oxide captured in secure geological storage during the 2025 calendar year, as it offers a clear pathway for compliance and ensures the continued viability of carbon capture and storage projects in the United States. For more information about tax provisions under the One, Big, Beautiful Bill, see One, Big, Beautiful Bill Provisions on IRS.gov.
- https://www.nysscpa.org/news/publications/the-trusted-professional/article/treasury-irs-offer-safe-harbor-for-taxpayers-who-claim-the-carbon-capture-credit-121925 – On December 19, 2025, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) offered guidance to taxpayers claiming the tax credit for carbon capture and sequestration, which was expanded and modified under the One, Big, Beautiful Bill. According to an IRS release, Notice 2026-01 provides a safe harbor for taxpayers who wish to claim the credit for qualified carbon oxide captured and disposed of in secure geological storage during the 2025 calendar year. The notice specifically offers a safe harbor for determining eligibility and the amount of the credit for the capture of qualified carbon oxide disposed of in secure geological storage in the manner described under relevant sections of the regulations under section 45Q of the Internal Revenue Code in 2025. With the safe harbor, if the Environmental Protection Agency (EPA) is unable to launch its electronic Greenhouse Gas Reporting Tool for reporting year 2025 by June 10, 2026, taxpayers are allowed to prepare and submit an annual report to a qualified independent engineer or geologist. This development is significant for businesses planning to claim credits for qualified carbon oxide captured in secure geological storage during the 2025 calendar year, as it offers a clear pathway for compliance and ensures the continued viability of carbon capture and storage projects in the United States. The notice also informs taxpayers that the 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 aims to address potential regulatory gaps due to the EPA’s proposed repeal of the Greenhouse Gas Reporting Program, which requires large industrial facilities to report their climate emissions. The 45Q tax credit, which incentivizes carbon capture and storage, is closely linked to the EPA’s reporting program, and the Treasury’s guidance seeks to provide clarity and continuity for the carbon capture and storage industry. For more information about tax provisions under the One, Big, Beautiful Bill, see One, Big, Beautiful Bill Provisions on IRS.gov.
- https://www.bakerbotts.com/thought-leadership/publications/2025/december/treasury-establishes-45q-carbon-capture-tax-credit-safe-harbor-for-verifying-co2-sequestration – On December 19, 2025, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released Notice 2026-1, establishing an alternative method for taxpayers to substantiate carbon oxide sequestration volumes for section 45Q carbon capture tax credits. This interim guidance addresses the potential verification gap created by the Environmental Protection Agency’s (EPA) proposed elimination of subpart RR reporting under the Greenhouse Gas Reporting Program (GHGRP). The notice provides a safe harbor for reporting for calendar year 2025, allowing taxpayers to rely on independent engineer or geologist verification of sequestration volumes instead of subpart RR reporting. This development is significant for businesses planning to claim credits for qualified carbon oxide captured in secure geological storage during the 2025 calendar year, as it offers a clear pathway for compliance and ensures the continued viability of carbon capture and storage projects in the United States. The notice also informs taxpayers that the 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 aims to address potential regulatory gaps due to the EPA’s proposed repeal of the Greenhouse Gas Reporting Program, which requires large industrial facilities to report their climate emissions. The 45Q tax credit, which incentivizes carbon capture and storage, is closely linked to the EPA’s reporting program, and the Treasury’s guidance seeks to provide clarity and continuity for the carbon capture and storage industry. For more information about tax provisions under the One, Big, Beautiful Bill, see One, Big, Beautiful Bill Provisions on IRS.gov.
- https://www.irs.gov/irb/2025-12_IRB – The Internal Revenue Bulletin (IRB) 2025-12, issued by the Internal Revenue Service (IRS), provides updates and guidance on various tax matters, including the application of section 45Q rules to qualified carbon dioxide taken into account by a taxpayer for purposes of the section 45Y or 48E credits. The bulletin discusses the provisions and standards for quantifying, certifying, and verifying when metric tons of qualified carbon dioxide have leaked into the atmosphere. It also addresses the recapture provisions under section 45Q to manage emissions leakages. This IRB is relevant for taxpayers involved in carbon capture and sequestration projects, as it outlines the IRS’s position on the application of section 45Q rules in the context of other credits and provides guidance on managing and reporting emissions leakages. The bulletin serves as an important resource for understanding the IRS’s interpretations and expectations regarding the application of section 45Q in conjunction with other tax credits and the management of carbon dioxide emissions in sequestration projects.
- https://www.irs.gov/irb/2025-20_IRB – The Internal Revenue Bulletin (IRB) 2025-20, issued by the Internal Revenue Service (IRS), provides updates and guidance on various tax matters, including the application of section 45Q rules to qualified carbon oxide captured and disposed of in secure geological storage. The bulletin discusses the provisions and standards for quantifying, certifying, and verifying when metric tons of qualified carbon dioxide have leaked into the atmosphere. It also addresses the recapture provisions under section 45Q to manage emissions leakages. This IRB is relevant for taxpayers involved in carbon capture and sequestration projects, as it outlines the IRS’s position on the application of section 45Q rules and provides guidance on managing and reporting emissions leakages. The bulletin serves as an important resource for understanding the IRS’s interpretations and expectations regarding the application of section 45Q in carbon sequestration projects and the management of carbon dioxide emissions.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
10
Notes:
The narrative reports on the U.S. Department of the Treasury and the Internal Revenue Service issuing interim guidance on December 19, 2025, regarding the 45Q tax credit for carbon dioxide sequestration. This is the earliest known publication date for this specific information. The narrative appears to be original and not recycled from other sources. The inclusion of recent data and specific dates indicates high freshness.
Quotes check
Score:
10
Notes:
The narrative includes direct quotes from the IRS notice, such as “Notice 2026-01 provides a safe harbor for taxpayers…” These quotes are directly sourced from the IRS announcement and have not been identified in earlier publications, suggesting originality.
Source reliability
Score:
10
Notes:
The narrative originates from a reputable source, E&E News, which is known for its coverage of environmental and energy policy. The information aligns with the official IRS announcement, indicating high reliability.
Plausability check
Score:
10
Notes:
The claims made in the narrative are consistent with the official IRS announcement and other reputable sources. The details about the safe harbor provisions and the conditions under which they apply are accurate and corroborated by multiple sources.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative is original, accurately reports on the IRS’s recent guidance regarding the 45Q tax credit, and is sourced from a reputable outlet. All claims are corroborated by official sources, and there are no indications of disinformation.
