Notice 2026-1 provided a safe harbor

for determining eligibility for the § 45Q credit for qualified carbon oxide that is captured and disposed of in secure geological storage and not used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, but did not address eligibility for qualified carbon

oxide that is used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project because there were other available reporting standards that could be used to claim the § 45Q credit for 2025. Stakeholders have explained, however, that taxpayers claiming the § 45Q credit for a qualified enhanced oil or natural gas recovery project are potentially unable to transition from the subpart RR standard to other available reporting standards in time to claim the § 45Q credit for 2025, or would incur significant costs, timeline constraints, and compliance issues in trying to do so. Other stakeholders have explained that the limited applicability of the safe harbor to the storage of qualified carbon oxide that occurs in calendar year 2025 is creating uncertainty for projects with long investment horizons. Finally, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) have received inquiries as to whether taxpayers claiming the § 45Q credit may rely upon the safe harbor provided in Notice 2026-1 to determine the amount of qualified carbon oxide securely stored in geological storage and the amount of qualified carbon oxide leaked into the atmosphere for purposes of determining the amount of qualified carbon oxide subject to recapture under § 1.45Q-5(a) and (c).

In view of the unique circumstances resulting from the proposed removal of subpart RR of the GHGRP, and in consultation with the Administrator of the EPA, the Secretary of Energy, and the Secretary of the Interior, the Treasury Department and the IRS are extending and expanding the safe harbor provided in Notice 2026-1 in the manner specified in this notice.