The Internal Revenue Service issued guidance July 24 for emitters to claim tax credits for carbon utilization, or projects that use captured CO₂ for industrial purposes or to make fuel and other products.

Specifically, the notice provided instructions for taxpayers on submitting a lifecycle analysis (LCA) of a project's greenhouse gas emissions to the IRS and US Department of Energy.

The 45Q tax credit program awards emitters up to $60 per metric ton of CO₂ captured and repurposed, up from $35 before the Inflation Reduction Act of 2022. Direct air capture facilities that pull CO₂ from the atmosphere are eligible for $130 per metric ton.

Before any tax credits are issued, the IRS and DOE must certify a project's LCA report.

However, carbon utilization projects account for only a fraction of the carbon capture projects under development in the US, according to the Global CCS Institute. The rest plan to bury CO₂, encouraged by even higher 45Q tax credits for permanent storage.

"While this guidance does not make any significant changes to the process and timeline of the LCA submission, review, and approval, it does provide more clarity and transparency of the application process," Jessie Stolark, executive director of the industry advocacy group Carbon Capture Coalition, said in a July 25 statement.

Industry watchers continue to await updated guidance for claiming carbon storage credits and on other aspects of the 45Q program. This includes clarity on several changes to the program authorized in 2022, such as a provision requiring CCS projects at power plants to be capable of capturing at least 75% of emissions.

"Looking ahead, we remain eager to see the prompt issuance of additional guidance related to the historic enhancements made to 45Q under the Inflation Reduction Act," Stolark said.