Notice 2026-50 (Notice), released on August 14, 2026, modifies and amplifies Notice 2026-1 to expand the scope and duration of the existing safe harbor for the IRC Section 45Q credit for carbon oxide sequestration. The Notice also clarifies that the safe harbor may be used for purposes of determining the amount of qualified carbon oxide subject to the IRC Section 45Q recapture rules.

Background

The IRC Section 45Q credit is available to certain taxpayers for the capture and sequestration of qualified carbon oxides. The credit has undergone multiple legislative changes, most recently through the One, Big, Beautiful Bill Act (OBBBA), which provided for parity in credit values regardless of which qualified end use is deployed for carbon capture equipment placed in service after July 4, 2025 (for details, see Tax Alert 2025-1434).

Under existing regulations, secure geological storage generally requires compliance with EPA reporting requirements under subpart RR of 40 CFR Part 98. Facilities subject to subpart RR must maintain an EPA-approved monitoring, reporting, and verification (MRV) plan and submit annual reports on carbon dioxide injection and storage activities.

In September 2025, the EPA proposed removing subpart RR reporting obligations for reporting years after 2024 and extending the reporting deadline for reporting year 2025. The EPA subsequently finalized an additional extension of the reporting deadline to October 30, 2026. Because taxpayers historically have relied on subpart RR reporting to satisfy certain IRC Section 45Q requirements, the proposed regulatory changes created uncertainty about continued compliance.

In December 2025, the IRS released Notice 2026-1, establishing a safe harbor for qualified carbon oxide that is captured and disposed in secure geological storage during calendar year 2025. That notice, however, did not extend relief to projects involving qualified carbon oxide used as a tertiary injectant in enhanced oil or natural gas recovery projects. According to Notice 2026-50, stakeholders subsequently informed Treasury and the IRS that transitioning to alternative reporting standards could be difficult, costly and time-consuming for those projects. They also highlighted concerns about the limited duration of the original safe harbor and uncertainty regarding recapture calculations.

Notice 2026-50

Notice 2026-50 expands the safe harbor established in Notice 2026-1 in three significant ways. First, it extends the safe harbor to qualified carbon oxide used as a tertiary injectant in qualified enhanced oil or natural gas recovery projects. Second, it allows taxpayers to rely on the safe harbor in determining the amount of qualified carbon oxide securely stored and the amount leaked into the atmosphere for purposes of the recapture rules. Third, it broadens the applicability period beyond calendar year 2025.

Taxpayers may use the safe harbor to satisfy the reporting, certification and recapture requirements otherwise tied to subpart RR if the EPA does not make the e-GGRT reporting system available by March 31 of the calendar year immediately following the relevant reporting year. If e-GGRT becomes available by that date, the safe harbor will not be available for that reporting year.

The Notice's safe harbor also expressly covers certain oil reservoirs that do not qualify as enhanced oil or natural gas recovery projects under IRC Section 43(c)(2) (e.g., because first tertiary injection occurred before 1991 or a petroleum engineer's certification was not timely filed), assuming all other requirements are met.

Qualifying for the safe harbor

To qualify for the safe harbor, taxpayers generally must:

• Comply with subpart RR requirements as in effect on December 31, 2025
• Have received an EPA-approved MRV plan applicable to the storage activity
• Prepare and submit an annual report containing all information and documentation that would have been required under subpart RR to an independent engineer or geologist for certification

The certifying engineer or geologist must be registered or certified in any state and must certify both compliance with the applicable subpart RR requirements and the accuracy and completeness of the annual report. The certification must include an affidavit establishing the professional's independence from the taxpayer and, where applicable, from any credit claimant. Certifications must be made under penalties of perjury.

For recapture purposes, taxpayers may rely on an annual report certified under the safe harbor to determine both the quantity of qualified carbon oxide securely stored during the reporting year and any amount leaked into the atmosphere.

The Notice also clarifies that taxpayers must complete all required documentation and obtain the necessary certification by the time they timely file the tax return on which the IRC Section 45Q credit is claimed. Under IRC Section 6001, taxpayers must retain the supporting records.

Finally, the Notice extends the safe harbor's applicability. Rather than being limited to storage occurring during calendar year 2025, the relief now applies to secure geological storage occurring on or after January 1, 2025, and through the end of the calendar year in which Treasury and the IRS issue future interim guidance or proposed regulations addressing IRC Section 45Q measurement, reporting and verification requirements.

Treasury and IRS are specifically requesting comments on whether the International Organization for Standardization's standard 27914:2026 — Carbon dioxide capture, transportation and storage — Geological storage (Ed. 2, 2026), or a different process or methodology, could become a replacement standard for demonstrating compliance with IRC Section 45Q secure geological storage.

Implications

Notice 2026-50 provides meaningful certainty for the full range of IRC Section 45Q projects — including enhanced oil and gas recovery operations — that have historically relied on subpart RR for compliance. Taxpayers should fully evaluate compliance in advance of return filing deadlines. Stakeholders should strongly consider submitting comments by October 30, 2026, on the proposed alternative standards of compliance and ought to closely monitor EPA actions.