Carbon Capture Tax Credit: Actions Needed to Improve Fede...

Overview

The Government Accountability Office (GAO) found that the Carbon Oxide Sequestration Credit (45Q) has been amended several times, including by the Inflation Reduction Act (IRA) and the One Big Beautiful Bill Act, and that IRS administration and DOE interactions are central to whether taxpayers can reliably claim the credit. As of March 2026 there were 33 carbon capture facilities in the U.S., and 45Q claims more than tripled from 2019 to 2023, illustrating rapid growth and fiscal exposure. GAO found that the IRS has taken actions to administer the credit but that taxpayers using captured carbon to produce products face compliance burdens, delays, and uncertainty in claiming 45Q. GAO identified opportunities for IRS and DOE to reduce compliance burden and increase certainty (for example, by clarifying acceptable datasets and streamlining approval steps). GAO also highlighted that multiple potential goals, unclear assignment of evaluation responsibility, and data limitations complicate congressional oversight and that Congress may need agencies to analyze how well and how efficiently the credit is working and how it compares to other policy tools. Contractors with capture, utilization, monitoring, or reporting roles should treat this as a critical event requiring immediate preparedness and data-readiness.

Immediate Actions (This Week)

[ ] Inventory projects and proposals that currently rely on or may pursue the Carbon Oxide Sequestration Credit (45Q); mark those that involve using captured carbon to produce products.
[ ] Gather and catalog existing datasets and measurement methods used to calculate carbon displaced or stored for each affected project (document formats, sources, timestamps, and responsible parties).
[ ] Assign an internal lead (tax/compliance point-of-contact) to monitor IRS, DOE, and EPA communications related to 45Q and to track GAO follow-ups.
[ ] Begin a gap assessment against current approval or certification steps you expect for carbon utilization approvals (identify where documented uncertainty or delays exist).
[ ] Subscribe to event and policy monitoring (e.g., Cabrillo Signals War Room) and set up alerts for new IRS/DOE guidance or GAO follow-ons.

Short-Term Actions (30 Days)

[ ] Standardize templates for the datasets and documentation you will provide to IRS/DOE for carbon utilization approvals (including data provenance, calculations, and assumptions).
[ ] Engage tax and technical advisors (internal or external) to validate calculation approaches you plan to use for carbon displaced and to prepare FAQ-style narratives addressing likely IRS/DOE questions.

Long-Term Actions (90+ Days)

[ ] Implement an auditable data-management process for 45Q claims: versioned datasets, retained raw measurements, calculation scripts, and sign-offs from technical leads.
[ ] Prepare for potential congressional or agency reviews by documenting program performance metrics your organization can report (e.g., amounts captured, uses of captured carbon, timelines, verification methods).
[ ] Build or refine capture-to-use workflows to reduce steps that GAO identified as causing delays; pilot streamlined submissions to reduce agency processing time where possible.

Compliance Checklist

Compliance scope TBD — re-evaluate when official guidance is published.

[ ] Maintain auditable records for all 45Q-claim-related calculations, including source data, methods, assumptions, and personnel approvals.
[ ] Retain correspondence and approvals from IRS and DOE related to carbon utilization determinations and any dataset acceptability clarifications.

Resources

45Q / Carbon Oxide Sequestration Credit — monitor IRS.gov for statute and guidance text related to the Carbon Oxide Sequestration Credit (45Q).
GAO report and follow-ups — search GAO.gov for the referenced GAO report on 45Q administration and evaluation.
DOE and EPA guidance pages — monitor official Department of Energy and Environmental Protection Agency guidance for technical and programmatic criteria related to carbon storage and utilization.
Internal Cabrillo guidance:
Winning Federal Contracts Guide (/insights/winning-federal-contracts)
CMMC (Cybersecurity Maturity Model Certification) Compliance Guide (/insights/cmmc-compliance-guide)
CUI (Controlled Unclassified Information)-Safe CRM Guide (/insights/cui-safe-crm-guide)

How Cabrillo Club Automates This

Cabrillo Signals War Room — Already detected this event and delivered this briefing within minutes. War Room continuously monitors IRS, DOE, EPA, GAO, and other federal sources for regulatory changes and policy reports relevant to 45Q. For subscribers, War Room will push alerts when GAO follow-ups, new IRS guidance, or DOE technical criteria appear so your compliance lead can act immediately.
Cabrillo Signals Match Engine — When events like this shift the competitive or policy landscape, the Match Engine automatically rescopes and rescores your opportunity pipeline. It updates match scores and keyword relevance in real time for opportunities tied to carbon capture, carbon utilization, tax-credit-driven projects, or agency solicitations affected by 45Q developments.
Cabrillo Signals Intelligence Hub — The Intelligence Hub tracks affected agencies and lets you save searches for follow-on solicitations and guidance (for example, new DOE or IRS pages or GAO products). Configure saved searches to alert when SAM.gov (System for Award Management) or agency sites publish guidance, application forms, or approval processes that match this event’s profile.
Proposal Studio (Proposal OS) — Proposal OS generates compliance matrices and first-draft technical approaches tailored to opportunities affected by 45Q changes. It pulls relevant past performance language and produces draft narratives describing measurement methods, data provenance, and risk mitigation for carbon utilization claims to reduce drafting time and ensure consistent messaging to agencies.
Proposal Studio Workflow Tracker — The Workflow Tracker enforces a 9-gate capture process for opportunities impacted by 45Q, routing compliance and legal reviews automatically, tracking dataset approvals, and assembling audit-ready documentation packages (including retained datasets and sign-offs) required for reliable tax-credit claims.

Explore these features in your Cabrillo dashboard to automate monitoring, rescoring, and proposal production specific to 45Q-related work and to ensure your documentation is audit-ready.

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