OBBB changes reviewed: Over the next few weeks CFO Services will go through the business credits and incentives impacted by the bill.
| Week 1 | Week 2 | Week 3 | Week 4 | Week 5 | Week 6 | Week 7 | Week 8 |
| OBBB Overview | 174 Research Expenses | 48D Semi Incentives | 48E/45Y Clean Energy | 45V Clean Hydrogen | 45Z Clean Fuel Production | 45Q Carbon Capture | 45X and Buy/Sell |
In Brief
The One Big Beautiful Bill Act (OBBB, P.L. 119-21), signed into law on July 4, 2025, brings targeted changes to the Section 45Q Carbon Capture Credit. While the core structure and value of 45Q remains intact, OBBB introduces new restrictions on foreign ownership, modifies transferability rules, and aligns credit rates for different carbon utilization pathways. These changes have significant implications for project sponsors, investors, and compliance teams.
Key OBBB Changes to 45Q Carbon Capture Credit
1. Eligibility Restrictions: Foreign Entities
- Specified Foreign Entities: As of the date of enactment, projects owned by “specified foreign entities” (as defined in IRC §7701(a)(51)(B)) are ineligible for the 45Q credit.
- Foreign-Influenced Entities: For tax years beginning two years after enactment, projects owned by “foreign-influenced entities” (as defined in IRC §7701(a)(51)(D)) are also ineligible
- Transferability: Unlike the House bill, the Senate-enacted OBBB does not repeal elective transferability, but it does prohibit transfers to specified foreign entities upon enactment. .
2. Parity in Credit Rates
The OBBB brings parity to the credit rates for carbon oxide used in enhanced oil recovery (EOR) and other commercial uses, aligning them with the rates for secure geological storage. This increases the base rate for these uses to match the secure storage rate for facilities placed in service after enactment.
3. Direct Pay and Monetization
- Direct Pay: The direct pay option for 45Q remains available for the first five years a facility is in service, regardless of whether the taxpayer is a tax-exempt entity
- Transferability: Transfer of the credit is still allowed (except to specified foreign entities), providing continued flexibility for project financing
4. Minimum Capture Thresholds and Compliance
- Thresholds remain unchanged:
- Direct air capture: ≥1,000 metric tons/year
- Electricity generation: ≥18,750 metric tons/year and 75% capture design capacity
- Other industrial: ≥12,500 metric tons/year
- Prevailing Wage & Apprenticeship: Projects must meet these requirements to receive the higher bonus credit rate
- Reporting: Detailed records of captured carbon oxide, storage/utilization, and labor compliance are required
Key Changes, Deadlines, and Restrictions
| Feature | Prior Law (IRA) | OBBB (as Enacted) |
| Max Credit Rate (Secure Storage) | $85/ton (bonus) | $85/ton (bonus, parity for EOR/commercial use) |
| Direct Pay | Yes (first 5 years) | Yes (first 5 years) |
| Transferability | Yes | Yes (not to specified foreign entities) |
| Foreign Entity Restrictions | None | Specified/foreign-influenced entities ineligible |
| Construction Start Deadline | 1/1/2033 | 1/1/2033 |
| Capture Thresholds | Unchanged | Unchanged |
| Bonus Rate (PWA compliance) | Yes | Yes |
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