Section 45Q - Information and Resources
What is Section 45Q?
Section 45Q of the US tax code provides a performance-based tax credit for carbon management projects which capture carbon oxides (carbon dioxide and its precursor, carbon monoxide) from eligible industry and power facilities, as well as directly from the atmosphere.
To apply for the credit requires IRS form 8933.
The IRS issues updated guidance on Section 45Q, the most recent update was released in July of 2024.
The recent notice describes information that must be included in a written report known as the lifecycle analysis (LCA) report and provides the procedures a taxpayer must follow to submit the report along with required supporting information to the IRS and the Department of Energy for review.
Before any credit is determined, the IRS must approve the lifecycle analysis of greenhouse gas emissions documented in the LCA report with respect to carbon capture property placed in service on or after Feb. 18, 2018.
Accordingly, the IRS must approve the taxpayer’s LCA before the taxpayer may claim the utilization of carbon oxide credit.
More information may be found on the Inflation Reduction Act of 2022 page on IRS.gov.
Lifecycle greenhouse gas emissions and lifecycle analysis
The term “lifecycle greenhouse gas emissions” means the aggregate quantity of greenhouse gas emissions (including direct emissions and significant indirect emissions such as significant emissions from land use changes) related to the full product lifecycle, including all stages of product and feedstock production and distribution, from feedstock generation or extraction through the distribution and delivery and use of the finished product to the ultimate consumer, where the mass values for all greenhouse gases are adjusted to account for their relative global warming potential according to Table A-1 of 40 CFR Part 98 subpart A. The amount of lifecycle greenhouse gas emissions measured by a lifecycle greenhouse gas analysis (LCA) is expressed in carbon dioxide equivalents (CO2-e).
Measurement
The measurement and written LCA report must be performed by or verified by an independent third party. The LCA report must be prepared in conformance with, and contain documentation that conforms to, the International Organization for Standardization (ISO) 14040:2006, Environmental Management—Life Cycle Assessment—Principles and Framework and ISO 14044:2006, Environmental Management—Life Cycle Assessment—Requirements and Guidelines, as well as a statement documenting the qualifications of the independent third party, including proof of appropriate U.S. or foreign professional license, and an affidavit from the third party stating that it's independent from you."
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