ACA Submits Recommendations on Section 45Q Guidance
The American Carbon Alliance recently submitted comments to the U.S. Department of the Treasury and Internal Revenue Service regarding the 2026–2027 Priority Guidance Plan for Section 45Q.
ACA’s comments focus on the need for regulatory certainty surrounding carbon capture and sequestration projects, particularly if the Environmental Protection Agency modifies or repeals current Greenhouse Gas Reporting Program requirements. Clear guidance will help provide confidence for investors, project developers, farmers, and rural communities that stand to benefit from continued carbon management and biofuels innovation.
The full comments submitted by ACA are provided below.
To Whom It May Concern:
The American Carbon Alliance (“ACA”) respectfully submits the following recommendation for inclusion in the Department of the Treasury (“Treasury”) and Internal Revenue Service (“IRS”) 2026–2027 Priority Guidance Plan pursuant to Notice 2026-23. ACA is a coalition of agricultural, biofuels, and energy stakeholders focused on advancing practical carbon management solutions, strengthening domestic energy production, and expanding market opportunities for American farmers and rural communities.
Priority Guidance Recommendation: Clarification of Monitoring, Reporting, and Verification Requirements for Secure Geological Storage under Section 45Q
ACA urges Treasury and the IRS to prioritize guidance clarifying compliance pathways for demonstrating secure geological storage under Section 45Q in the event the U.S. Environmental Protection Agency (“EPA”) repeals or materially revises Greenhouse Gas Reporting Program Subpart RR requirements.
Current IRS guidance, including IRS Notice 2026-1, provides that 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 when it is:
injected into a well that complies with applicable Underground Injection Control (“UIC”) or other applicable regulations, located onshore or offshore under submerged lands within the territorial jurisdiction of States or federal waters, and is not used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, in compliance with applicable requirements under Subpart RR.
As Treasury and IRS recognize, Subpart RR currently serves two principal functions:
- Monitoring, Reporting, and Verification (“MRV”) requirements through an EPA-approved MRV Plan; and
- Mass balance accounting demonstrating secure geological storage.
However, EPA is actively evaluating regulatory reforms, including potential repeal or revision of Subpart RR. In the absence of timely Treasury clarification, uncertainty surrounding compliance pathways for Section 45Q could disrupt financing, delay project development, and undermine confidence in carbon sequestration investments that Congress intended to support.
Recommended Guidance Framework
ACA respectfully recommends Treasury and IRS clarify that, if EPA repeals or materially revises Subpart RR, taxpayers may continue to demonstrate secure geological storage for purposes of Section 45Q through the following framework:
1. Class VI Monitoring, Reporting, and Verification Should Satisfy MRV Requirements
For carbon oxide injected into EPA-permitted Class VI wells, the monitoring, reporting, and verification requirements imposed under the Underground Injection Control (“UIC”) program should satisfy the monitoring, reporting, and verification obligations otherwise contemplated under Subpart RR.
Class VI permitting already imposes robust and highly technical standards designed to ensure long-term containment, plume monitoring, pressure management, corrective action, post-injection site care, and protection against atmospheric release. Requiring duplicative regulatory frameworks where equivalent federal safeguards already exist would create unnecessary administrative burdens without enhancing environmental integrity.
Treasury and IRS should therefore clarify that compliance with applicable Class VI monitoring and reporting requirements constitutes sufficient evidence that qualified carbon oxide is securely stored for purposes of Section 45Q.
2. Mass Balance Accounting Should Be Independently Validated and Retained for Audit Purposes
ACA further recommends Treasury and IRS clarify that, in the absence of Subpart RR, required mass balance accounting for securely stored qualified carbon oxide may be demonstrated through:
- project-level mass balance accounting maintained contemporaneously by the taxpayer or operator;
- validation by an independent licensed geologist, professional engineer, or similarly qualified technical expert; and
- maintenance of such records on-site and made available upon IRS examination or audit.
This approach preserves accountability and tax administration integrity while avoiding unnecessary duplication if EPA no longer administers Subpart RR reporting.
Importance of Timely Guidance
Providing clarity on this issue through the Priority Guidance Plan would help avoid uncertainty that could disrupt investment and project development under Section 45Q. Given the long timelines and substantial capital commitments associated with carbon capture and sequestration projects, stakeholders depend on clear and administrable qualification standards.
Clarifying an appropriate compliance pathway in the event of EPA regulatory changes would preserve Congress’s intent behind Section 45Q while maintaining rigorous standards for secure geological storage and taxpayer accountability.
ACA appreciates Treasury and IRS’s consideration of this recommendation and welcomes the opportunity to provide additional technical information or stakeholder input.
Respectfully submitted,
Tom Buis
Chief Executive Officer
American Carbon Alliance
Chief Executive Officer
American Carbon Alliance
