Two US policy organizations have urged the Internal Revenue Service (IRS) to strengthen how it administers the federal 45Q tax credit, warning that weaknesses in oversight could expose taxpayers to rising costs without clear evidence of climate benefits.
In a joint letter sent to Treasury Secretary Scott Bessent, Taxpayers for Common Sense and The Heartland Institute requested detailed information on how the credit is being implemented and verified.
The groups argue that despite decades of federal support, carbon capture and storage (CCS) projects have struggled to consistently deliver measurable and permanent emissions reductions.
Under the current structure of the 45Q incentive, credits increase with the volume of carbon dioxide captured and claimed as stored, without requiring recipients to demonstrate verified climate impact or long-term storage integrity.
Rising Costs and Compliance Gaps
The letter points to past audits as evidence of systemic weaknesses. An IRS review covering claims between 2010 and 2019 found that a small number of taxpayers accounted for nearly all 45Q credits claimed, with most failing to meet Environmental Protection Agency reporting requirements. According to the groups, nearly $900 million in credits were claimed without sufficient documentation confirming that CO2 remained securely stored underground.
Concerns have intensified following recent legislative changes that expanded the value of the credit.
The One Big Beautiful Bill Act equalized credit levels for enhanced oil recovery and geological storage, a move estimated by the Joint Committee on Taxation to add $14 billion in costs over the next decade. Combined with existing projections, total taxpayer exposure is expected to exceed $40 billion, making 45Q one of the largest federal energy tax expenditures.
Relevant: Over 100 Western Officials Demand End To 45Q Carbon Capture Credit
The organizations also flagged potential verification challenges if the EPA’s Greenhouse Gas Reporting Program is repealed, noting that the IRS currently relies heavily on EPA data to confirm compliance. Without a robust reporting framework, they argue, ensuring permanence and accuracy will become increasingly difficult.
Beyond fiscal concerns, the letter raises alarms over private property rights and public safety. Some CCS developers have sought “common carrier” status to justify the use of eminent domain for CO2 pipelines, a practice critics say benefits private interests while limiting landowner protections.
The groups conclude that stricter monitoring, transparency and accountability are essential to maintaining public trust as federal support for carbon capture continues to expand.
Read more: Senate Largely Preserves 45Q Credit But Inflation Concerns Emerge
