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The IRS has issued interim guidance (Notice 2026-1) (PDF - 169 KB) establishing a safe harbor for taxpayers claiming the Section 45Q credit for qualified carbon oxide captured and disposed of in secure geological storage during calendar year 2025. The safe harbor was provided in response to the Environmental Protection Agency’s (EPA) proposed removal of subpart RR reporting obligations and applies only if the EPA does not release the electronic Greenhouse Gas Reporting Tool (e-GGRT) for reporting under subpart RR for reporting year 2025 by June 10, 2026.
Specifically, taxpayers may use the safe harbor to satisfy:
- Subpart RR requirements under Treas. Reg. Sec. 1.45Q-3(b)(1)(ii) for carbon oxide disposed of in secure geological storage that is not used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and Treas. Reg. Sec. 1.45Q-2(h)(5)(iii) for carbon oxide that is injected into an oil reservoir that is not a qualified enhanced oil recovery project, as applicable, and
- Certification requirements under Treas. Reg. Sec. 1.45Q-3(d)
Under the safe harbor, a taxpayer will be considered to have satisfied the subpart RR requirement and the certification requirements if its secure geological storage complies with applicable subpart RR requirements in effect on Dec. 31, 2025, and the taxpayer prepares an annual report with specified subpart RR information, certified by an independent engineer or geologist. The taxpayer must complete all documentation and obtain the certification by the time it timely files its federal income tax return.
Section 45Q and the regulations allow a per-metric-ton credit for qualified carbon oxide that is captured and either disposed of in secure geological storage or utilized, including through fixation via photosynthesis or chemosynthesis or through certain other approved chemical conversion processes. Qualified carbon oxide is considered disposed of in secure geological storage if the storage complies with EPA reporting requirements under 40 CFR part 98, subpart RR, which requires annual reporting of certain information pertaining to carbon dioxide injected underground for geologic sequestration.
These annual reports must be submitted electronically through the EPA’s electronic reporting system, e-GGRT. On Sept. 16, 2025, the EPA issued proposed regulations that would remove the subpart RR reporting requirements and extended the reporting deadline to June 10, 2026, for reporting year 2025.
Grant Thornton insight:
The EPA’s proposed removal of subpart RR reporting obligations has created uncertainty for taxpayers claiming the Section 45Q credit for qualified carbon oxide disposed of in secure geological storage. The safe harbor in Notice 2026-01 clarifies 2025 reporting requirements in the event that the EPA does not launch its e-GGRT reporting system by June 10, 2026.
Although this date is still several months away, taxpayers who have not yet engaged an independent engineer or geologist to certify their documentation may not want to delay until then to avoid potential timing constraints.
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