Code of Federal Regulations · Section

§ 1.45Q-3 — q-3 Secure Geological Storage

26 C.F.R. § 1.45Q-3

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(a) In general. To qualify for the section 45Q credit, a taxpayer must either physically or contractually dispose of captured qualified carbon oxide in secure geological storage in the manner provided in paragraph (b) of this section, or utilize qualified carbon oxide in a manner conforming with section 45Q(f)(5) of the Internal Revenue Code and § 1.45Q-4. Secure geological storage includes, but is not limited to, storage at deep saline formations, oil and gas reservoirs, and unminable coal seams.

(b) Requirements for secure geological storage. For purposes of the section 45Q credit, qualified carbon oxide is considered disposed of by the taxpayer in secure geological storage such that the qualified carbon oxide does not escape into the atmosphere if the qualified carbon oxide is—

(1) Injected into a well that

(i) Complies with applicable Underground Injection Control or other regulations, located onshore or offshore under submerged lands within the territorial jurisdiction of States or federal waters, and

(ii) Is not used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, in compliance with applicable requirements under 40 CFR part 98 subpart RR; or

(2) Injected into a well that

(i) Complies with applicable Underground Injection Control or other regulations, is located onshore or offshore under submerged lands within the territorial jurisdiction of States or federal waters, and

(ii) Is used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and stored in compliance with applicable requirements under 40 CFR part 98 subpart RR, or the International Organization for Standardization (ISO) standards endorsed by the American National Standards Institute (ANSI) under CSA/ANSI ISO 27916:2019, Carbon dioxide capture, transportation and geological storage—Carbon dioxide storage using enhanced oil recovery (CO2-EOR) (CSA/ANSI ISO 27916:2019).

(c) Documentation. Documentation must be filed in accordance with Form 8933.

(d) Certification. For qualified enhanced oil or natural gas recovery projects in which the taxpayer reported volumes of carbon oxide to the Environmental Protection Agency pursuant to 40 CFR part 98 subpart RR, the taxpayer may self-certify the volume of qualified carbon oxide claimed for purposes of section 45Q. For qualified enhanced oil or natural gas recovery projects in which the taxpayer determined volumes pursuant to CSA/ANSI ISO 27916:2019, a taxpayer may prepare documentation as outlined in CSA/ANSI ISO 27916:2019 internally, but all such documentation must be provided to a qualified independent engineer or geologist, who then must certify that the documentation provided, including the mass balance calculations as well as information regarding monitoring and containment assurance, is accurate and complete. The qualified independent engineer or geologist certifying a project must be duly registered or certified in any State. The certification must contain an affidavit from the certifying engineer or geologist stating that he or she is independent from the taxpayer (and if a section 45Q(f)(3)(B) election has been made, the affidavit must state that he or she is independent from both the electing taxpayer and the credit claimant). Certifications must be made annually and under penalties of perjury. For any leaked amount of qualified carbon oxide (as defined in § 1.45Q-5(c)) that is determined pursuant to CSA/ANSI ISO 27916:2019, the certification must also include a statement that the quantity was determined in accordance with sound engineering principles. Taxpayers that capture qualified carbon oxide giving rise to the section 45Q credit must file Form 8933 with a timely filed Federal income tax return or Form 1065, including extensions or for the purpose of this rule, amendments to Federal income tax returns, Forms 1065, or on AARs, as applicable. Taxpayers that dispose of, inject, or utilize qualified carbon oxide must also file Form 8933 with a timely filed Federal income tax return or Form 1065, including extensions or for the purpose of this rule, amendments to Federal income tax returns, Forms 1065, or on AARs, as applicable. If the volume of carbon oxide certified and reported is a negative amount, see § 1.45Q-5 for rules regarding recapture.

(e) Failure to submit complete documentation or certification. No section 45Q credit is allowed for any taxable year for which the taxpayer (including credit claimants) has failed to timely submit complete documentation and certification that is required by this regulation or Form 8933. The credit will be allowed only for a taxable year for which complete documentation and certification has been timely submitted. Certifications for each taxable year must be submitted by the due date of the federal income tax return or Form 1065 on which the section 45Q credit is claimed, including extensions. However, if a section 45Q credit is claimed on an amended Federal income tax return, an amended Form 1065, or an AAR, as applicable, certifications may also be submitted with such amended Federal income tax return, amended Form 1065, or AAR. Further, if a section 45Q credit was claimed on a timely filed Federal income tax return or Form 1065 for a taxable year ending on or after January 1, 2018, and beginning on or before January 13, 2021, for which certifications were not submitted, such certifications may be submitted with a timely filed amended Federal income tax return, an amended Form 1065, or an AAR, as applicable, for such taxable year.

(f) Applicability date. This section applies to taxable years beginning on or after January 13, 2021. Taxpayers may choose to apply this section for taxable years beginning on or after January 1, 2018, provided the taxpayer applies this section and §§ 1.45Q-1, 1.45Q-2, 1.45Q-4, and 1.45Q-5 in their entirety and in a consistent manner.

26 C.F.R. § 1.45Q-2 26 C.F.R. § 1.45Q-4

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