The Internal Revenue Service (IRS) and the Department of the Treasury have released new guidance aimed at facilitating compliance for businesses claiming tax credits under the carbon capture initiative. Announced on December 19, 2023, the guidance introduces a temporary safe harbor for taxpayers who wish to claim the federal tax credit for carbon capture and sequestration as outlined in Section 45Q of the Internal Revenue Code.
Under this new framework, businesses can proceed with claiming the tax credit for qualified carbon oxide captured and securely stored during the calendar year 2025, even if the Environmental Protection Agency (EPA) does not activate its electronic Greenhouse Gas Reporting Tool by the deadline of June 10, 2026. This provision is crucial for companies involved in carbon capture projects, allowing them to demonstrate compliance without waiting for the EPA’s systems to be operational.
The safe harbor stipulates that affected taxpayers must submit an annual report certified by a qualified independent engineer or geologist. This certification will confirm that the carbon capture and storage activities meet federal greenhouse gas reporting requirements as of December 31, 2025. The IRS and Treasury have stated that taxpayers can rely on this notice until formal regulations are enacted, which will include future rules regarding measurement and verification standards.
Digital Whistleblower Tool Launched
In a separate but related initiative, the IRS Whistleblower Office has introduced a digital version of Form 211, which individuals use to report tax noncompliance and apply for whistleblower awards. This modernization allows for electronic submission of tips, replacing the previous paper filing system.
Acting Whistleblower Office Director Erick Martinez highlighted that the new digital form is designed to streamline the process, making it easier for individuals to securely submit information from their phones or computers. Additionally, this move is expected to reduce errors and processing costs associated with paper submissions.
The IRS has emphasized the critical role whistleblowers play in tax enforcement, noting that over $7.86 billion has been collected since 2007 from cases linked to whistleblower information. During this same period, the agency has awarded more than $1.4 billion to whistleblowers as incentives for their contributions.
Officials have stated that these initiatives reflect a broader effort to enhance voluntary compliance with tax laws. By reinforcing the consequences of tax evasion and improving access to reporting tools, the IRS aims to create a more efficient and transparent tax system. While paper submissions of Form 211 will still be accepted, the IRS encourages electronic filing to expedite the reporting process.
Both the carbon capture safe harbor and the digital whistleblower tool are effective immediately, showcasing the administration’s commitment to integrating expanded tax incentives with enhanced enforcement and technological modernization throughout the federal tax system.
