Is Your Company Eligible for 45Q Tax Credits?

Is Your Company Eligible for 45Q Tax Credits?

The US government introduced Section 45Q of the US Internal Revenue Code to encourage businesses to be eco-friendlier. How exactly does 45Q encourage eco-friendliness, and who is eligible for 45Q tax credits? Read on for answers to these questions and more.

What is Section 45Q?

Section 45Q of the Internal Revenue Code introduces a new law that aims to reduce carbon emissions. The law offers performance-based tax credits to organizations—such as power plants, construction companies, and industrial facilities—that don’t release their carbon waste into the atmosphere. Instead, these companies capture and store their carbon waste.

To be eligible for the tax credit, your company must do one of the following:

  • Store its captured carbon dioxide (CO2) waste in oil fields, saline formations, or other geologic formations.
  • Recycle its captured CO2 or carbon monoxide (CO) to produce chemicals, fuels, and other products. The production must occur in a manner that keeps your emission reduction process within federal requirements.

Is My Company Eligible for a 45Q Tax Credit?

You cannot claim 45Q tax credits unless you have the necessary equipment for capturing carbon waste. You must be contractually or physically responsible for the use and/or storage of the carbon waste you collect.

How much carbon emission you collect within a year and your company type will also determine your eligibility. For example:

  • 25,000 to 500,000 metric tons of C02/CO for companies executing beneficial use projects besides enhanced oil recovery (EOR) projects.
  • Minimum of 100,000 metric tons of C02/CO for industrial facilities besides those that use electric generating units.
  • Minimum of 500,000 metric tons of C02/CO for companies with electric generating units.

Eligible projects that launch before January 1, 2024 can claim a 45Q credit for a maximum of 12 years after commencing operations. Also, the captured carbon type can include all carbon oxides.

The tax credit amount you earn depends on your project type. You can earn $35 per ton if you store CO geologically through enhanced oil recovery projects or convert the CO into fuels or other beneficial products. Companies that store their carbon emission waste in geologic formations can earn $50 per ton.

Get a 45Q Tax Credit

The 45Q tax credit gives companies in various industries more reasons to have eco-friendly operations. If you are uncertain about the eligibility of your company for this tax credit, our experts at MKS&H can provide you with all the assistance you need.

Contact us today for tax consultation services and let us serve your construction or property development company the right way.

About Author


MKS&H is committed to providing personalized tax and accounting services while developing a deep understanding of you, your culture, and your business goals. Our full view of financial systems and the people behind them allow us create and evolve the best solution that will help you and your business thrive. The accounting experts and consulting professionals at MKS&H work together to help you achieve the financial results you want.

Related posts

Understanding Construction Accounting Standards: Compliance and Best Practices

Overview of Construction Accounting Standards In the dynamic realm of construction, the bedrock of financial success and legal compliance often rests upon well-implemented accounting standards. Navigating this complex landscape requires not only a comprehensive understanding of these standards but also a dedication to strict adherence and optimization...

Read More