The Internal Revenue Service (IRS) and the Department of the Treasury have launched new guidance aimed at simplifying compliance for businesses claiming carbon capture tax credits. On December 19, 2023, they introduced a temporary safe harbor for taxpayers under Section 45Q of the Internal Revenue Code. This initiative is part of a broader effort to enhance tax compliance while supporting environmental initiatives.
The new guidelines allow businesses to claim the federal tax credit for carbon capture and sequestration for activities conducted in the calendar year 2025, even if the Environmental Protection Agency (EPA) does not activate its Greenhouse Gas Reporting Tool by June 10, 2026. Under this safe harbor provision, affected taxpayers can submit an annual report to a qualified independent engineer or geologist. This professional must certify that the carbon capture and storage activities conform to federal greenhouse gas reporting requirements effective as of December 31, 2025.
Taxpayers may rely on this guidance until formal regulations are issued. This includes future rules regarding measurement and verification standards. The primary beneficiaries of this guidance are businesses engaged in carbon capture projects aiming to claim the credit for their activities in 2025.
Digital Whistleblower Tool Enhances Reporting Efficiency
In a separate move, the IRS Whistleblower Office has unveiled a digital version of Form 211, which allows individuals to report tax noncompliance and apply for whistleblower awards electronically. This shift from paper filings to a digital format aims to streamline the reporting process, enabling tips to be submitted securely from a phone or computer.
Acting Whistleblower Office Director Erick Martinez emphasized that this modernization is designed to reduce errors and processing costs, making it easier for whistleblowers to participate in tax law enforcement. Since 2007, whistleblowers have contributed to the collection of over $7.86 billion in tax revenue, with the IRS awarding more than $1.4 billion to those who provided valuable information.
Officials indicated that this digital enhancement is part of a comprehensive strategy to bolster voluntary compliance and reinforce the consequences of tax evasion. While the IRS will continue to accept paper submissions of Form 211, it encourages individuals to use the new electronic filing option for efficiency.
Both initiatives are effective immediately and reflect the administration’s commitment to combining expanded tax incentives with enhanced enforcement capabilities and digital modernization across the federal tax system. These efforts are aimed at ensuring that compliance with tax regulations is both accessible and effective, aligning with broader environmental and fiscal objectives.
