Section 45Q – Carbon Sequestration Tax Credit

ACCORDING TO THE IRS:

Section 45Q Credit Amount. (a) The amount of the § 45Q credit is equal to 

the sum of:  

 (i)  $20 per metric ton of qualified CO2 if the qualified CO2 is not used as a tertiary 

injectant in an EOR project; and 

 (ii)  $10 per metric ton of qualified CO2 if the qualified CO2 is used as a tertiary 

injectant in an EOR project.   

Pursuant to § 45Q(d)(5), a taxpayer that captures and physically or contractually 

ensures the disposal of or the use as a tertiary injectant of qualified CO2 is eligible to 

claim the § 45Q credit. 

(b) Inflation Adjustment.  The § 45Q credit amount will be adjusted for inflation for 

any taxable year beginning in a calendar year after 2009.  The Service will announce in later guidance the applicable inflation adjustment for the amount of § 45Q credit for a given taxable year. 

.03 Carbon Dioxide Measured by Weight. (a)  In order to claim a § 45Q credit, 

the amount of CO2 must be measured at the source of capture and verified either at the point of disposal in secure geological storage or at the point of injection as a tertiary injectant in an EOR project.  The amount of qualified CO2 for purposes of the § 45Q credit is presumed to be the lesser of the amount measured at capture and the amount verified at disposal or injection, unless the taxpayer can establish to the satisfaction of the Secretary that the greater amount is the correct amount.   

(b)  For the purpose of calculating the § 45Q credit, a metric ton of CO2 includes 

only the contained weight of the CO2.  The weight of any other substances, such as 

 water or impurities, is not included in the calculation.  For example, if a metric ton of a substance that is bought and sold as “CO2” is 95 percent pure CO2 by weight, for purposes of the § 45Q credit, 1.0526 tons (equivalent to 1 divided by 0.95) of the 95 percent pure substance is considered to be one metric ton of CO2.   

.04 Captured and Disposed of or Used within the United States.  Section 45Q 

credit applies only to qualified CO2 that is captured and disposed of or used as a tertiary injectant within the United States (as defined in § 638(1)) or a possession of the United States (as defined in § 638(2)). 

 .05 Taxpayers Eligible to Claim the § 45Q Credit. (a) To be eligible to claim the  

§ 45Q credit, a person must (i) own an industrial facility at which carbon capture 

equipment is placed in service, (ii) capture not less than 500,000 metric tons of qualified 

CO2 during the taxable year at such industrial facility, and (iii) physically or contractually 

ensure that the qualified CO2 is securely stored in a geologic formation, including where 

such CO2 is captured and transported for use in an EOR project.  In the case of 

qualified CO2 that is used as a tertiary injectant in an EOR project, requirement (iii) 

above applies only to CO2 captured after February 17, 2009.   

Each industrial facility for which the § 45Q credit is claimed must be equipped 

with carbon capture equipment and must capture not less than 500,000 metric tons of 

qualified CO2 during the taxable year.  Additionally, a person that buys the captured 

CO2 at the point of transit or disposal but does not own the industrial facility at which the 

CO2 is captured does not meet the qualified facility requirement of § 45Q(c) and is 

therefore ineligible to claim the § 45Q credit.