Carbon Capture Tax Credit: Actions Needed to Improve Federal Administration and Evaluation of Tax Expenditure

Executive Summary

Affected segments pending source review.

The GAO report highlights rapidly increasing use of the Carbon Oxide Sequestration Credit (45Q) and administrative frictions that are already creating compliance burdens, delays, and uncertainty for taxpayers—particularly those that use captured carbon to produce products. IRS has taken actions to administer 45Q and mitigate noncompliance, but GAO identifies opportunities for IRS and DOE to streamline approval processes and clarify acceptable datasets for calculating displaced carbon. The Summary also notes that the number of 45Q claims more than tripled from 2019 to 2023 and that there were 33 carbon capture facilities in the U.S. as of March 2026, signaling a growing market under increased scrutiny.

Because GAO also identified challenges in evaluating the credit’s effectiveness (including multiple potential goals, no designated evaluation lead, and data limitations), contractors should expect heightened oversight activity and possible future direction from Congress or agencies to improve evaluation and administration. Contractors with exposure to carbon capture operations or to using captured carbon in products should prioritize readiness around documentation, data methods, and engagement with IRS/DOE processes to avoid delays and to position for potential policy or procedural changes.

Impact Matrix

taxpayers using carbon to produce products

• Risk Level: Critical
• Opportunity: Continued growth in 45Q claims suggests demand for services that help calculate, document, and support credit claims; contractors that can reduce compliance burden for taxpayers may capture work. Specific opportunities TBD pending solicitation language.
• Timeline: Timeline TBD pending source review.
• Action Required: Strengthen carbon accounting and documentation practices; prepare for IRS/DOE scrutiny of methodologies for calculating displaced carbon; engage with industry stakeholders and agency guidance processes where possible; plan for potential delays in claim approvals.
• Competitive Edge: Develop rigorous, auditable methodologies and reusable documentation packages that align with datasets and process clarifications IRS/DOE might accept; offer turnkey compliance-support services to shorten approval timelines.

carbon capture facilities

• Risk Level: High
• Opportunity: Increasing number of facilities (33 as of March 2026) and tripling of claims from 2019–2023 indicate expanding market activity and demand for construction, operations, monitoring, and compliance support tied to 45Q. Specific opportunities TBD pending solicitation language.
• Timeline: As of March 2026 there were 33 carbon capture facilities; other timeline details TBD pending source review.
• Action Required: Ensure operational data collection and monitoring systems produce the datasets needed for 45Q claims; coordinate with tax teams and DOE/IRS processes to minimize delays; prepare for potential procedural changes that affect approval or documentation requirements.
• Competitive Edge: Offer integrated monitoring-and-reporting solutions that anticipate IRS/DOE documentation needs and reduce time-to-claim for facility operators.

Cross-Segment Implications

• Approval and documentation processes for carbon utilization (DOE/IRS interactions) create direct dependencies between carbon capture facilities and product-using taxpayers: delays or uncertainty in one segment can slow credit realization and investment decisions in the other.
• Data limitations and lack of a designated evaluation lead complicate long-term policy clarity; contractors across both segments face the prospect of shifting oversight requirements or new analytic demands from Congress or agencies.
• Growth in claims and facilities increases regulatory and audit attention, raising the value of robust compliance and accounting capabilities that serve both capture operators and product users.

```json:

{

"tldr": "Affected segments pending source review. The GAO report highlights rapidly increasing use of the Carbon Oxide Sequestration Credit (45Q) and administrative frictions that are already creating compliance burdens, delays, and uncertainty for taxpayers—particularly those that use captured carbon to produce products. IRS has taken actions to administer 45Q and mitigate noncompliance, but GAO identifies opportunities for IRS and DOE to streamline approval processes and clarify acceptable datasets for calculating displaced carbon. The Summary also notes that the number of 45Q claims more than tripled from 2019 to 2023 and that there were 33 carbon capture facilities in the U.S. as of March 2026, signaling a growing market under increased scrutiny.\n\nBecause GAO also identified challenges in evaluating the credit’s effectiveness (including multiple potential goals, no designated evaluation lead, and data limitations), contractors should expect heightened oversight activity and possible future direction from Congress or agencies to improve evaluation and administration. Contractors with exposure to carbon capture operations or to using captured carbon in products should prioritize readiness around documentation, data methods, and engagement with IRS/DOE processes to avoid delays and to position for potential policy or procedural changes.",

"segments": [

{

"segment": "taxpayers using carbon to produce products",

"risk_level": "critical",

"opportunity": "Continued growth in 45Q claims suggests demand for services that help calculate, document, and support credit claims; contractors that can reduce compliance burden for taxpayers may capture work. Specific opportunities TBD pending solicitation language.",

"timeline": "Timeline TBD pending source review.",

"action": "Strengthen carbon accounting and documentation practices; prepare for IRS/DOE scrutiny of methodologies for calculating displaced carbon; engage with industry stakeholders and agency guidance processes; plan for potential delays in claim approvals.",

"competitive_edge": "Develop rigorous, auditable methodologies and reusable documentation packages that align with datasets and process clarifications IRS/DOE might accept; offer turnkey compliance-support services to shorten approval timelines."

},

{

"segment": "carbon capture facilities",

"risk_level": "high",

"opportunity": "Increasing number of facilities (33 as of March 2026) and tripling of claims from 2019–2023 indicate expanding market activity and demand for construction, operations, monitoring, and compliance support tied to 45Q. Specific opportunities TBD pending solicitation language.",

"timeline": "As of March 2026 there were 33 carbon capture facilities; other timeline details TBD pending source review.",

"action": "Ensure operational data collection and monitoring systems produce the datasets needed for 45Q claims; coordinate with tax teams and DOE/IRS processes to minimize delays; prepare for potential procedural changes that affect approval or documentation requirements.",

"competitive_edge": "Offer integrated monitoring-and-reporting solutions that anticipate IRS/DOE documentation needs and reduce time-to-claim for facility operators."

}

],

"cross_implications": [

"Approval and documentation processes for carbon utilization (DOE/IRS interactions) create direct dependencies between carbon capture facilities and product-using taxpayers: delays or uncertainty in one segment can slow credit realization and investment decisions in the other.",

"Data limitations and lack of a designated evaluation lead complicate long-term policy clarity; contractors across both segments face the prospect of shifting oversight requirements or new analytic demands from Congress or agencies.",

"Growth in claims and facilities increases regulatory and audit attention, raising the value of robust compliance and accounting capabilities that serve both capture operators and product users."

]

}

```