Carbon Capture Projects Face New Risks Associated with 45Q Reporting Uncertainties
April 6, 2026
By: Ray Cheatham
EPA delays and IRS fallback guidance are reshaping how companies verify carbon sequestration volumes, potentially shifting risk to third-party verification and tightening timelines for action.
Key takeaways
- EPA extended the 2025 GHGRP deadline to October 30, 2026, while proposing to eliminate Subpart RR reporting
- IRS Notice 2026-01 introduces a safe harbor that could replace GHGRP system reporting with third-party certification by a licensed geologist or engineer
- Limited availability of qualified certifiers may become the primary constraint on claiming 45Q credits and early engagement is necessary to be properly prepared
Regulatory uncertainty is changing the rules mid-cycle
On February 27, 2026, the U.S. Environmental Protection Agency (EPA) extended the Greenhouse Gas Reporting Program (GHGRP) deadline for reporting year 2025 from June 10, 2026, to October 30, 2026. This applies to taxpayers who are claiming 45Q carbon sequestration tax credits under subpart RR of the GHGRP. Subpart RR reports are used by the IRS to document sequestered carbon dioxide volumes that are used to calculate the per-ton tax credit.
At the same time, EPA has proposed eliminating Subpart RR entirely. This could create a near-term reporting gap for carbon capture and storage (CCS) operators that rely on GHGRP to substantiate tax credits.
In response, the Internal Revenue Service (IRS) issued Notice 2026-01, establishing a temporary safe harbor. This guidance preserves eligibility for 2025 tax credits but replaces EPA GHGRP system reporting validation with reporting tied to independent expert certification.
A shift from digital reporting to expert validation
IRS Notice 2026-01 indicates that if EPA reporting systems are unavailable or Subpart RR is removed, companies must follow a new process to claim 45Q credits:
- Prepare a full GHGRP-compliant annual report based on standards in effect as of December 31, 2025
- Submit the report to an independent licensed geologist or engineer
- Obtain certification confirming compliance with GHGRP requirements
- Use that certification to support the tax filing
This approach keeps credits accessible but increases complexity. Companies must now demonstrate compliance without relying on EPA infrastructure, shifting accountability to internal teams and third-party reviewers.
Certification capacity may become the limiting factor
The safe harbor introduces a practical constraint. Independent engineers and geologists must validate:
- Mass balance calculations
- Monitoring and reporting data
- Subsurface containment assurance
They must also certify work they did not produce, increasing professional liability and review time.
This level of scrutiny aligns with existing Subpart RR expectations, but demand for qualified professionals to certify reports may exceed supply if delays continue. Early signs point to a tightening market for certification services, particularly for complex CCS projects.
What this means for CO2 Emitters seeking 45Q Tax Credits
The safe harbor provides continuity, but not flexibility. Companies that delay preparation risk:
- Limited access to qualified certifiers
- Delays in tax credit claims
- Increased scrutiny of incomplete or inconsistent data
The shift to third-party validation makes documentation quality and timing central to financial outcomes.
Actions to take now
- Engage licensed geologists or engineers with GHGRP experience
- Review monitoring, reporting and data systems against 2025 standards
- Resolve data gaps before third-party certification begins
- Align certification timelines with tax filing deadlines
The bottom line
Regulatory timelines are moving, but expectations remain high. The transition from EPA-managed reporting to expert-certified validation would introduce new risks across compliance, cost and timing.
Organizations that prepare early will be better positioned to secure certification, protect eligibility and maintain access to 45Q tax credits.
For companies that need third-party verification services aligned with ISO 14064-3, Montrose has a team of professionals who have been verifying GHG statements and inventories. The team has the technical skills to evaluate both Subpart RR annual reports for CCS as well as general inventories and emission factors.
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Ray Cheatham
Energy Market Sector Leader
Ray brings more than 35 years of experience in the energy and environmental consulting space, supporting major industrial and energy organizations. His expertise includes carbon capture and sequestration, site characterization and remediation, corporate environmental program development, capital project permitting, facility compliance, and legislative and regulatory strategy.
