This one arrived as a tax notice. It’s a project-finance story.
Treasury and the IRS issued Notice 2026-50 on August 14, modifying and amplifying Notice 2026-1, the December 2025 interim guidance on the Section 45Q carbon oxide sequestration credit. It does three things, and the third is the one nobody’s talking about.
What changed
First, it extends the safe harbor’s applicability date. The original window covered 2025 only. The new one runs from January 1, 2025 through the end of the calendar year in which Treasury issues further guidance, which is open-ended by construction.
Second, it expands the safe harbor to CO2 used as a tertiary injectant in qualified enhanced oil or natural gas recovery projects. That matters more than it reads, because the largest existing U.S. CO2 pipeline and injection infrastructure is enhanced oil recovery, and those operators were staring at a forced mid-stream switch to a different verification standard.
Third, it extends the safe harbor to recapture determinations under the regulations governing whether previously claimed credits must be repaid because stored carbon leaked.
Why the safe harbor exists at all
EPA proposed in September 2025 to strip most Greenhouse Gas Reporting Program obligations, including Subpart RR, the geologic sequestration reporting standard that existing 45Q regulations depend on. EPA already pushed the reporting-year-2025 deadline to October 30, 2026 by final rule in February.
So the credit’s verification machinery is scheduled to disappear while the credit itself remains on the books. The safe harbor triggers on what Treasury calls e-GGRT Unavailability: EPA failing to launch its electronic reporting tool by March 31 of the year following the reporting year.
To use it, a taxpayer still complies with Subpart RR as it stood on December 31, 2025, still holds an EPA-approved monitoring, reporting and verification plan, and submits the annual report to a state-registered independent engineer or geologist who certifies it under penalties of perjury, rather than filing through EPA’s system.
The part that lands on engineers
Read that last requirement again. A leak event can now be quantified against a lapsed federal standard and certified by a private engineer signing under penalties of perjury. That’s a new liability seam, and the professional-liability market has not priced it.
For the EPC side, the open-ended applicability date is what unlocks work. Carbon capture construction has been stalled on lender diligence rather than engineering, because nobody could underwrite a credit whose verification standard might cease to exist. A patch that lasts until Treasury writes proposed regulations is the first thing a sponsor can put in a model.
Credit values at stake are $20 per metric ton for pre-February 2018 equipment with geologic storage and $10 per ton for tertiary injectant or utilization, plus the applicable dollar amount for post-February 2018 equipment. Legislation in July 2025 established parity between utilization and secure-storage credit amounts for equipment placed in service after July 4, 2025.
Treasury asked whether ISO 27914:2026, published in March, could replace Subpart RR. Comments close October 30.