Inflation Reduction Act Tracker

Sabin Center for Climate Change Law
Environmental Defense Fund

IRA Section 13104 – Tax Credit for Carbon Oxide Sequestration

Section 13104 extends and expands the tax credit for carbon capture and sequestration in Section 45Q of the IRC. Previously, in order to qualify for the credit, carbon capture facilities had to commence construction prior to January 1, 2023. Section 13104 of the IRA extended the “commence construction” window to January 1, 2033. Section 13104 of the IRA also reduced the amount of carbon dioxide that facilities must capture in order to be eligible for the credit and increased the amount of the credit.

Projects that capture carbon dioxide at electric generating plants or industrial facilities and sequester it in geologic formations are now eligible for a base credit of $17 per metric ton for carbon oxide captured and geologically sequestered, and $85 per metric ton for facilities that meet apprenticeship requirements and pay prevailing wages during construction as well as the first 12 years of operation, a five-fold increase of the base rate.

For projects that capture carbon dioxide via direct air capture facilities and sequester it in geologic formations, the base credit is $36 per metric ton of carbon oxide captured and geologically sequestered and $180 per metric ton for facilities meeting prevailing wage and apprenticeship requirements, a five-fold increase of the base rate.

The Treasury Department must issue regulations and guidance on the facility, wage, apprenticeship and equipment requirements to qualify for the increased tax credit.

 

Eligible Entities:

Corporate Entity

Current Status:

Repealed or Modified by Congress

Section 70522 of the One Big Beautiful Act of 2025 (Public Law 119-21) applies “prohibited foreign entity” restrictions for those applying for the carbon capture and sequestration credit under IRA section 13104.

Implementation Status at End of Biden Administration:

Complete

IRS issued notice 2024-60 detailing how to apply for 45Q tax credits for carbon oxide sequestration, in particular requirements for a life-cycle analysis.

Program Stakes:

Prior to Section 45Q’s enhancement, Treasury and the Congressional Budget Office reported that companies claimed $1 billion in Section 45Q credits from 2010-2019. The Congressional Research Service expects taxpayers to claim $2.4 billion in section 45Q tax credits by 2026 and $30.3 billion by 2032.