Who is Eligible?
Eligible projects include:
- Direct air capture facilities.
- Industrial facilities that capture carbon oxide for secure geological storage or for use in enhanced oil or gas recovery.
- Electricity generating facilities that meet minimum capture thresholds.
To qualify, carbon capture equipment must be placed in service at a qualified facility, and the project must meet minimum annual capture requirements.
How Does the Credit Work?
- Credit Amounts: The credit rate depends on how the carbon oxide is used and whether the project meets prevailing wage and apprenticeship requirements.
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- Secure geological storage: Base rate per ton, with a significant bonus rate for projects meeting labor requirements.
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- Direct air capture: Higher base and bonus rates per ton.
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- Enhanced oil or gas recovery: Lower base rate, with a bonus for labor compliance.
- Duration: The credit is available for a 12-year period beginning when the carbon capture equipment is placed in service.
- Refundable & Transferable: The credit is transferable and refundable to businesses, with pre-registration required for these options.
- Filing: The credit is claimed on the annual federal tax return, starting the year the project is operational.
Key Compliance Requirements
- Prevailing Wage & Apprenticeship: Projects must meet these requirements to receive the higher bonus credit rate.
- Minimum Capture Thresholds:
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- Direct air capture: At least 1,000 metric tons per year.
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- Electricity generation: At least 18,750 metric tons per year and 75% capture design capacity.
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- Other industrial processes: At least 12,500 metric tons per year.
Reporting & Documentation: Detailed records of captured carbon oxide, storage or utilization, and compliance with labor requirements are required.
Recent Legislative and Regulatory Updates
- The credit is available for facilities that begin construction before January 1, 2033.
- The latest law introduces new restrictions on eligibility for projects with significant foreign ownership or influence, including “prohibited foreign entity” rules. These rules are designed to prevent entities with substantial foreign control or material assistance from claiming the credit.
- Transferability of the credit is now prohibited to certain foreign entities.
- The law brings parity to the credit rates for carbon oxide used in enhanced oil recovery and other commercial uses, aligning them with the rates for secure geological storage.
Why Work with CFO Services?
CFO Services provides comprehensive support for 45Q projects, including:
- Eligibility analysis and project structuring.
- Guidance on prevailing wage, apprenticeship, and permitting compliance.
- Documentation and substantiation for IRS filings.
- Strategic advice on transferability, refundability, and compliance with foreign entity rules.
- Audit defense and ongoing compliance support.
Contact CFO Services for a complimentary consultation and compliance review.
