Treasury expands the §45Q safe harbor in positive news for carbon capture tax credits

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On August 14, 2026, the US Department of the Treasury and the Internal Revenue Service (IRS) released Notice 2026-50, expanding the safe harbor for the §45Q carbon capture, utilization, and sequestration (CCUS) tax credit first established in Notice 2026-1 on December 19, 2025.

The updated guidance contains several positive updates for CCUS project developers:

Extends the prior certification safe harbor to carbon oxide used as a tertiary injectant in enhanced oil and natural gas recovery (EOR) projects, which the original notice excluded.
Covers recapture determinations under § 1.45Q-5 in addition to credit eligibility.
Allows developers to rely on the safe harbor until the IRS issues further guidance or regulations, rather than for 2025 storage only.

This article examines the gaps left by previous guidance as well as the implications of the new IRS notice.

Key takeaways:

Notice 2060-50 fills critical gaps left by previous guidance, including a certification path for carbon oxide used as a tertiary injectant in enhanced oil recovery (EOR) projects, recapture determinations, and the extension of the safe harbor beyond 2025.
Developers with EOR projects now have a clearer path to substantiate the §45Q tax credit, allowing more projects to qualify — and ultimately generating more tax credits.
Tax investors have a framework for underwriting recapture risk due to leakage and storage-volume determinations, streamlining the diligence process and reducing transaction risk tied to §45Q transactions.
The extension of the safe harbor provides regulatory certainty to projects generating tax credits in 2026 and beyond.

What is §45Q?

Section 45Q provides a per-ton tax credit for qualified carbon oxide that's captured at a qualifying facility and disposed of in secure geological storage, used as a tertiary injectant in enhanced oil or natural gas recovery, or utilized in a qualifying manner such as conversion into fuels, chemicals, or other products. Congress substantially expanded the credit in the Bipartisan Budget Act of 2018 and again in the Inflation Reduction Act of 2022, which raised credit values, added a direct air capture tier with higher per-ton rates, and made the credit available for transfer to unrelated parties under §6418.

Before the One Big Beautiful Bill (OBBB), the credit paid a lower rate for EOR and other utilization pathways than for permanent geologic storage — inflation-adjusted 2024 values were $85 per ton for storage versus $60 per ton for reuse from point-source capture, with $180 and $130 respectively for direct air capture.

The OBBB eliminated that gap, bringing EOR projects to parity with sequestration projects. A facility can claim the credit for each ton of qualified carbon oxide captured and disposed of, injected, or utilized during the 12-year period beginning when the facility is originally placed in service.

Crux has observed pricing for §45Q in the transfer market in the $0.85–0.92 range, depending on project size and sponsor creditworthiness (among other factors). Roughly $1 billion in §45Q tax credits are generated annually based on existing capacity. However, the majority of credits generated today are likely retained by large companies with tax liabilities.

Background on the prior §45Q safe harbor

Section 1.45Q-3(b) directs taxpayers to verify secure geological storage using the US Environmental Protection Agency’s (EPA) Subpart RR reporting framework, which requires taxpayers to report stored volumes and related monitoring data annually. Facilities report through the EPA's electronic Greenhouse Gas Reporting Tool (e-GGRT).

In September 2025, the EPA proposed removing Subpart RR reporting obligations for most facilities after the 2024 reporting year — part of a broader rollback of Greenhouse Gas Reporting Program requirements — and pushed the 2025 reporting deadline from March 31 to June 10, 2026. If finalized, that would leave 2025 storage with no functioning e-GGRT to report through, even though § 1.45Q-3(b) still points to Subpart RR as the compliance standard.

Notice 2026-1 addressed this in December 2025: if the EPA didn't launch e-GGRT for 2025 reporting by June 10, 2026, taxpayers could satisfy the Subpart RR and certification requirements by having an independent, state-registered engineer or geologist certify an annual report instead of filing through e-GGRT.

However, this notice left three notable gaps:

It excluded carbon oxide used as a tertiary injectant in EOR projects.
It said nothing about recapture determinations under § 1.45Q-5.
It applied to 2025 storage only.

What Notice 2026-50 changes

EOR projects and Class II wells are now covered

Carbon oxide used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project can now rely on the same independent-engineer certification path. The EPA's Underground Injection Control program permits dedicated geologic sequestration under Class VI, while most EOR injection runs through Class II wells, the standard permit for injecting CO2 to recover oil or gas. Notice 2026-1's safe harbor only reached Class VI-permitted storage — including reservoirs that converted from Class II to Class VI after ceasing oil production, per § 1.45Q-2(h)(5) — leaving the large population of active Class II EOR wells without a fallback.

Recapture determinations are explicitly in scope

The safe harbor now covers the §1.45Q-5(a) and (c) determinations — how much qualified carbon oxide is securely stored versus how much has leaked to the atmosphere in a given year — using the same certified annual report.

Prior to the guidance, the process for measuring and determining whether any stored CO2 leaked, and thus triggering a recapture event, wasn’t explicit in the regulations. The safe harbor expansion to use the independent certification process to determine stored volumes clarifies a key item for investors and tax credit buyers evaluating deals, reducing diligence friction.

The safe harbor extends beyond 2025 tax credits

Notice 2026-1 applied only to calendar-year 2025 storage. Notice 2026-50 extends applicability to any secure geological storage occurring on or after January 1, 2025, and running through December 31 of whatever year Treasury and the IRS eventually publish further interim guidance or proposed regulations addressing Subpart RR's replacement.

Implications for project developers and investors

For developers with EOR projects — particularly those involving Class II wells — the guidance provides a clear path to substantiate the §45Q tax credit that Class VI, non-EOR storage projects already had for 2025 volumes, allowing more projects to qualify and more tax credits to be generated.

For tax-oriented investors, the explicit recapture coverage gives underwriting teams a framework for the leakage and storage-volume determinations that drive recapture exposure, streamlining the diligence process and reducing the risk tied to §45Q transactions.

Additionally, the extension of the safe harbor until Treasury issues new guidance or regulations provides certainty to projects generating 2026-vintage and later tax credits, rather than limiting the protections to 2025-vintage credits.

What’s next?

Treasury and the IRS have requested public comments, due October 30, 2026, on what standard should eventually replace Subpart RR — including whether the newly published ISO 27914:2026 storage standard could serve that role. Developers and investors relying on this safe harbor should plan for an eventual transition to whatever standard Treasury proposes and keep documentation practices flexible enough to accommodate either Subpart RR-style reporting or an ISO-based framework.

Crux will continue to monitor updates from Treasury. To keep up with the latest insights and changes affecting clean energy project finance, subscribe to our newsletter.