What’s New

Credit rates and applicable dollar amounts. The sections 45Q(a)(1) and (a)(2) credit rates for Part III are adjusted for inflation and increased, per Notice 2025-25. The applicable dollar amounts for Part III are established by linear interpolation between statutory dollar amounts and increased, per Notice 2018-93. The new applicable dollar amounts for Part III are established by the Inflation Reduction Act of 2022 (IRA 2022). See 2025 inflation adjusted credit rates and applicable dollar amounts , later.

New credit rate for facilities or equipment placed in service after July 4, 2025. Public Law 119-21, commonly known as the One Big Beautiful Bill Act, standardized the base credit amount at $17 per metric ton for facilities that capture carbon dioxide for different uses and utilization of qualified carbon oxide. For facilities or equipment placed in service after July 4, 2025, and before 2027, the credit is $17 per metric ton of qualified carbon oxide.

Prohibited foreign entities. No carbon oxide sequestration production credit is allowed for any tax year beginning after July 4, 2025, if the taxpayer is a specified foreign entity as defined in section 7701(a)(51)(B). No carbon oxide sequestration credit is allowed for any tax year beginning after July 4, 2025, if the taxpayer is a foreign-influenced entity as defined in section 7701(a)(51) (D), without regard to clause (i)(iii).

Form 7220, Prevailing Wage and Apprenticeship (PWA) Verification and Corrections. For each qualified facility for which you produced qualified carbon oxide and are claiming the increase credit amount for meeting the prevailing wage and apprenticeship requirements, you must file a separate Form 7220. For more information, see the Instructions for Form 7220.

Displacement factor. The displacement factor (DF) measures the amount of carbon oxide equivalent displaced per unit of carbon oxide captured and utilized. The difference between the two is limited by the DF and limits the credit. See Line 3g , later.