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Taxpayers claiming Section 45Q carbon capture credits received welcome relief from the IRS this month. In Notice 2026-50, released Aug. 14, the IRS expanded and extended a temporary safe harbor that helps taxpayers substantiate credit claims while U.S. Environmental Protection Agency (EPA) greenhouse gas reporting requirements remain uncertain. The notice broadens the relief to additional project types and extends its availability beyond 2025.
Current Section 45Q regulations generally rely on reporting under EPA Subpart RR and an approved Monitoring, Reporting and Verification (MRV) plan to substantiate secure geological storage. In September 2025, the EPA proposed eliminating certain Subpart RR reporting requirements, creating uncertainty regarding how taxpayers would satisfy existing substantiation requirements for the tax credit.
In response, the IRS issued Notice 2026-1, which established a temporary safe harbor. Under the safe harbor, if the EPA did not launch its electronic Greenhouse Gas Reporting Tool (e-GGRT) by June 10, 2026, taxpayers could satisfy certain Section 45Q substantiation, certification and recapture requirements for 2025 by:
- Preparing an annual report consistent with Subpart RR
- Obtaining an EPA-approved MRV plan for the project
- Securing certification from an independent qualified engineer or geologist registered in any state confirming that the annual report complies with Subpart RR
Expanded safe harbor
This month’s notice expands and extends that relief. Most notably, the guidance extends relief to qualified carbon oxide used as a tertiary injectant in qualified enhanced oil recovery (EOR) and enhanced gas recovery (EGR) projects. These projects were not covered under the original notice. The notice also expands the safe harbor to cover Section 45Q recapture determinations.
Taxpayers may now rely on the safe harbor when measuring:
- Qualified carbon oxide that has been securely stored
- Qualified carbon oxide that has leaked into the atmosphere for recapture purposes
Longer applicability period
The original safe harbor was limited to secure geological storage occurring during calendar year 2025. Notice 2026-50 extends the relief to storage occurring on or after Jan. 1, 2025, through the end of the calendar year in which Treasury and the IRS issue additional interim guidance or proposed regulations addressing secure geological storage requirements.
This extension provides additional certainty for projects with long investment horizons and reduces concerns about transitioning to alternative reporting frameworks before future guidance is released.
The expanded safe harbor reduces a significant compliance concern that arose following the EPA’s proposed changes to Subpart RR reporting. By broadening the relief to EOR/EGR projects and extending its duration beyond 2025, the IRS has provided taxpayers with a practical path to continue claiming Section 45Q credits while federal reporting requirements remain unsettled.
Taxpayers currently claiming or planning to claim Section 45Q credits should review whether they are relying on Subpart RR-based substantiation methods and evaluate how the expanded safe harbor may affect both current credit claims and future recapture exposure.
The notice includes a request for comments, which suggests Treasury and the IRS recognize the need for a longer-term framework, but questions regarding future measurement, reporting and verification requirements will remain until there is additional guidance or regulations issued.
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