The principal author of this revenue ruling is Casey R. Conrad of the Office of the Associate Chief Counsel (Procedure and Administration). For further information regarding this revenue ruling, contact Mr. Conrad at (202) 317-6844 (not a toll-free number).

* The asterisk reflects the interest factors for daily compound interest for annual rates of 0.5 percent published in Appendix A of this Revenue Ruling.

This document contains amendments to the Regulations on Employment Taxes and Collection of Income Tax at the Source (26 CFR part 31) under section 3406 of the Internal Revenue Code (Code). The final regulations are issued under the authority conferred by section 3406(i) of the Code, which provides the Secretary of the Treasury or the Secretary’s delegate (Secretary) with authority to “prescribe such regulations as may be necessary or appropriate to carry out the purposes of [section 3406].”

The final regulations are also issued pursuant to section 7805(a) of the Code, which authorizes the Secretary to “prescribe all needful rules and regulations for the enforcement of [the Code], including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.”

This document contains amendments to regulations under 26 CFR part 31. On January 9, 2026, the Department of the Treasury (Treasury Department) and the IRS published in the Federal Register (91 FR 934) a notice of proposed rulemaking (REG-112829-25) proposing amendments to the regulations governing backup withholding on third party network transactions under section 3406 (proposed regulations) to reflect the statutory changes made to section 3406(b) by section 70432 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). No public hearing was requested or held with respect to the proposed regulations.

The Treasury Department and the IRS received eight comments in response to the proposed regulations. After consideration of these comments, the proposed regulations are adopted without change. To the extent not inconsistent with the Summary of Comments section of this preamble, the Explanation of Provisions section of the preamble to the proposed regulations is incorporated in this document.

One commenter suggested that the changes to the final regulations take place prospectively only. The final regulations do not adopt this comment. The changes to section 3406 made by section 70432(b)(1) of the OBBBA apply to calendar years beginning after December 31, 2024. These final regulations remove provisions from the existing regulations that conflict with section 3406, as amended by the OBBBA, and implement the changes to section 3406 made by the OBBBA. Thus, to prevent taxpayer confusion that might arise from a conflict between the statutory text of section 3406 and the text of the regulations, and to adhere to the effective date prescribed in the OBBBA by Congress for the changes made to section 3406, the applicability date for these final regulations mirrors the effective date of section 70432(b)(1) of the OBBBA (that is, the final regulations apply with respect to payments made in calendar years beginning after December 31, 2024), consistent with the proposed regulations.

One commenter expressed general support for the proposed regulations but recommended that the Treasury Department and the IRS include additional information in the preamble to this Treasury decision. The commenter recommended the Treasury Department and the IRS add a compliance-and-enforcement-implications section to this preamble to reduce tax controversy disputes and clarify that: (1) the taxability of income is not affected by the absence of a Form 1099-K, Payment Card and Third Party Network Transactions, or the absence of backup withholding on payments made in settlement of third party network transactions; (2) the new de minimis threshold for backup withholding does not create a safe harbor for structuring, account-splitting, or other conduct intended to avoid information reporting or backup withholding; and (3) that the IRS may use enforcement tools during an examination to confirm the amount of a taxpayer’s income regardless of whether a taxpayer exceeds the de minimis third party settlement organization (TPSO) reporting or backup withholding threshold.

Although these recommendations are outside of the scope of these regulations, the Treasury Department and the IRS agree that it is important to emphasize that the taxability of payments and the reportability of income on an income tax return are not determined by whether the IRS or the taxpayer receives a Form 1099-K, or by whether backup withholding is required with respect to a third party network transaction.

This commenter also recommended that the Treasury Department and the IRS clarify that TPSOs are responsible for internally aggregating multiple accounts with identical identifying information indicating common beneficial ownership or the same taxpayer identification number. Although this comment is also outside of the scope of these regulations, the Treasury Department and the IRS agree that it is helpful to clarify that the de minimis TPSO reporting and backup withholding thresholds referenced throughout this Treasury decision apply with respect to each participating payee, as defined by section 6050W(d)(1).

Three commenters expressed concerns that the proposed regulations were confusing or could be drafted more clearly, but none suggested any alternative language or clarifying edits. The final regulations do not make any changes with respect to these comments, as the final regulations merely implement statutory changes in response to changes made by section 70432(b)(1) of the OBBBA.

One commenter submitted three separate comments and attached documents. In one comment, the commenter requested that the IRS transmit the commenter’s comment and all related materials to the Office of Management and Budget (OMB), the Office of Information and Regulatory Affairs (OIRA), the Government Accountability Office (GAO), and the Department of the Treasury Office of Inspector General for independent review under the Paperwork Reduction Act, the Administrative Procedure Act, the Regulatory Flexibility Act, and various Executive Orders governing regulatory review, economic impact, and burden reduction. The commenter suggested that the Treasury Department and the IRS failed to comply with relevant administrative requirements in promulgating the proposed regulations, or at the least understated the expected burden and economic impact on taxpayers.

The Treasury Department and the IRS complied with all relevant administrative laws, including the Paperwork Reduction Act, the Administrative Procedure Act, the Regulatory Flexibility Act, and applicable Executive Orders in the promulgation of the proposed regulations and these final regulations. The description of the Treasury Department and the IRS’s compliance with these administrative requirements can be found in the Special Analyses section of the proposed regulations and the Special Analyses section in this Treasury decision.

The commenter also submitted thirty attachments that consisted of requests and demands, the substantial majority of which were outside of the scope of the proposed regulations. For example, the commenter requested that the Treasury Department and the IRS coordinate with the Commodity Futures Trading Commission (CFTC) to issue joint guidance clarifying that CFTC commodity classification governs the section 3406 backup withholding treatment of digital commodity settlement payments. The commenter also requested that the Treasury Department and the IRS exempt certain types of payments from all backup withholding, including patent royalty payments, dividend payments, and payments for defense-related goods and services to defense technology companies registered under International Traffic in Arms Regulations (22 CFR parts 120 through 130). No changes were made based on these comments because these final regulations are limited to backup withholding on third party network transactions, not any broader issues related to backup withholding.

The remaining comments were tangentially related to the subject matter of the proposed regulations on their face but are nonetheless outside of the scope of these regulations. For example, one commenter requested that the Treasury Department and the IRS analyze the impact of adopting different section 6050W de minimis TPSO reporting thresholds and adopt the commenter’s desired threshold of $200,000 in payments and 10,000 transactions. The Treasury Department and the IRS lack the authority to change the statutorily prescribed amount of the de minimis TPSO reporting threshold in these final regulations. Instead, the final regulations implement the statutory requirement under section 3406, as amended by section 70432(b)(1) of the OBBBA, to align the backup withholding threshold for third party network transactions with the de minimis TPSO reporting threshold under section 6050W.

To the extent a comment, or portion of a comment, was not discussed in this preamble, the Treasury Department and the IRS determined that the comment, or portion of the comment, pertained to topics outside of the scope of these final regulations.

IRS Revenue Rulings, Revenue Procedures, Notices, and other guidance cited in this document are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov.

The principal author of these final regulations is the Office of Associate Chief Counsel (Procedure and Administration). However, other personnel from the Treasury Department and the IRS participated in their development.

Employment taxes, Income taxes, Penalties, Pensions, Railroad retirement, Reporting and recordkeeping requirements, Social security, Unemployment compensation.

Accordingly, the Treasury Department and the IRS amend 26 CFR part 31 as follows:

Paragraph 1. The authority citation for part 31 continues to read in part as follows:

Authority: 26 U.S.C. 7805.

* * * * *

Par. 2. Section 31.3406(a)-1 is amended by revising paragraphs (a) and (c), and adding paragraph (e) to read as follows:

(a) Overview. Under section 3406 of the Internal Revenue Code (Code), a payor must deduct and withhold an amount equal to the product of the fourth lowest rate of tax applicable under section 1(c) of the Code and a reportable payment if a condition for withholding exists. Reportable payments mean interest and dividend payments (as defined in section 3406(b)(2)) and other reportable payments (as defined in section 3406(b)(3)). The conditions described in paragraph (b)(1) of this section apply to all reportable payments, including reportable interest and dividend payments. The conditions described in paragraph (b)(2) of this section apply only to reportable interest and dividend payments.

* * * * *

(c) Exceptions. The requirement to withhold does not apply to certain de minimis payments as described in §§31.3406(b)(3)-1(b)(3), 31.3406(b)(3)-5(b)(2), and 31.3406(b)(4)-1 or to payments exempt from withholding under §§31.3406(g)-1 through 31.3406(g)-3.

* * * * *

(e) Applicability date. The provisions of this section apply with respect to payments made in calendar years beginning after December 31, 2024.

Par. 3. Section 31.3406(b)(3)-5 is amended by revising paragraphs (b) and (e) to read as follows:

* * * * *

(b) Amount subject to backup withholding–(1) In general. The amount described in paragraph (a) of this section that is subject to withholding under section 3406 is the amount subject to reporting under section 6050W.

(2) Third party network transactions. In the case of payments made in settlement of third party network transactions, the amount subject to withholding under section 3406 is determined with regard to the exception for de minimis payments by third party settlement organizations in section 6050W(e). A payment is treated as a reportable payment under paragraph (a) of this section only if, during the calendar year, the aggregate number of transactions with respect to the participating payee exceeds the number of transactions specified in section 6050W(e)(2) and the aggregate amount of all reportable payment transactions with respect to such participating payee exceeds the dollar amount specified in section 6050W(e)(1). The amount subject to withholding is the entire amount of the transaction that causes either the total number of transactions to exceed the number of transactions specified in section 6050W(e)(2), or the entire amount of the transaction that causes the total amount paid to the participating payee to exceed the dollar amount specified in section 6050W(e)(1) at the time of such payment, whichever occurs later, and the amount of any subsequent transactions made to the participating payee during the calendar year.

(3) Exception. Paragraph (b)(2) of this section does not apply with respect to payments to any participating payee during any calendar year if one or more payments in settlement of third party network transactions made by the payor to the participating payee during the preceding calendar year were reportable payments.

(4) Examples. The provisions of this paragraph (b) are illustrated by the following examples:

(i) Example 1. Platform A is a third party settlement organization (as defined in §1.6050W-1(c)(2) of this chapter) and Y is a participating payee (as defined in §1.6050W-1(a)(5)(i)(B) of this chapter). A complies with all the requirements to solicit a taxpayer identification number (TIN) from Y, but Y does not provide its TIN to A. During calendar year 2026, A makes 201 payments in settlement of third party network transactions that total $20,000.01. A must backup withhold under paragraph (b)(2) of this section on the entire amount of the 201st transaction because that transaction caused Y to exceed the de minimis reporting threshold for calendar year 2026 of 200 transactions and $20,000 in gross payments.

(ii) Example 2. The facts are the same as in paragraph (b)(4)(i) of this section (Example 1). During calendar year 2027, A makes 199 payments in settlement of third party network transactions that total $18,000.00. A must backup withhold on each payment made to Y in settlement of a third party network transaction during 2027 under paragraph (b)(3) of this section because one or more payments in settlement of third party network transactions made by A to Y during the preceding calendar year (2026) were reportable payments.

(iii) Example 3. The facts are the same as in paragraph (b)(4)(ii) of this section (Example 2). During calendar year 2028, A makes four payments in settlement of third party network transactions that total $2,000.00. A must backup withhold on each payment made in settlement of a third party network transaction during 2028 under paragraph (b)(3) of this section because one or more payments in settlement of third party network transactions made by A to Y during the preceding calendar year (2027) were reportable payments.

(iv) Example 4. The facts are the same as in paragraph (b)(4)(iii) of this section (Example 3). During calendar year 2029, A made no payments in settlement of third party network transactions, and during calendar year 2030, A makes 199 payments in settlement of third party network transactions that total $18,000.00. A is not required to backup withhold on any payment made in settlement of third party network transactions during calendar year 2030 because A did not make any reportable payments to Y during the preceding calendar year (2029), and A did not make payments in settlement of third party network transactions that exceed the de minimis reporting threshold.

* * * * *

(e) Applicability date. The provisions of this section apply with respect to payments made in calendar years beginning after December 31, 2024.

Frank J. Bisignano, Chief Executive Officer.

Approved: July 23, 2026.

Kenneth J. Kies. Assistant Secretary of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register August 7, 2026, 8:45 a.m., and published in the issue of the Federal Register for August 10, 2026, 91 FR 51391)

.01 Section 45Q.

(1) Section 45Q was added to the Code by § 115 of Division B of the Energy Improvement and Extension Act of 2008, Pub. L. 110-343, 122 Stat. 3765, 3829 (Oct. 3, 2008). Section 45Q was amended a number of times thereafter, including most recently by § 70522 of Public Law 119-21, 139 Stat. 72, 279 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA).²

(2) Section 45Q(a)(1) allows a credit of $20 per metric ton of qualified carbon oxide (i) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before February 9, 2018; (ii) disposed of by the taxpayer in secure geological storage; and (iii) neither used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project nor utilized in a manner described in § 45Q(f)(5).

(3) Section 45Q(a)(2) allows a credit of $10 per metric ton of qualified carbon oxide (i) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before February 9, 2018; and (ii) either (A) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage; or (B) utilized by the taxpayer in a manner described in § 45Q(f)(5).

(4) Section 45Q(a)(3) allows a credit of the applicable dollar amount (as determined under § 45Q(b)(1)) per metric ton of qualified carbon oxide captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after February 9, 2018, during the 12-year period beginning on the date the equipment was originally placed in service, and (i) disposed of by the taxpayer in secure geological storage, (ii) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or (iii) utilized by the taxpayer in a manner described in § 45Q(f)(5).

(5) Section 45Q(f)(2) directs the Secretary of the Treasury or the Secretary’s delegate (Secretary), in consultation with the EPA, the Secretary of Energy, and the Secretary of the Interior, to establish regulations for determining adequate security measures for the geological storage of qualified carbon oxide under § 45Q(a) such that the qualified carbon oxide does not escape into the atmosphere. Section 45Q(f)(2) further provides that the term “geological storage of qualified carbon oxide” includes storage at deep saline formations, oil and gas reservoirs, and unminable coal seams under such conditions as the Secretary may determine under such regulations.

(6) On June 2, 2020, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-112339-19) in the Federal Register (85 F.R. 34050) under § 45Q. After consideration of all comments received in response to the proposed regulations, on January 15, 2021, the Treasury Department and the IRS, in consultation with the EPA, Department of Energy, and the Department of the Interior, published final regulations in the Federal Register under § 45Q. See T.D. 9944; 86 F.R. 4728, as corrected in 86 F.R. 16530 (March 30, 2021).

(7) Section 1.45Q-3(a) provides that, in general, to qualify for the § 45Q credit, a taxpayer must either physically or contractually dispose of captured qualified carbon oxide in secure geological storage in the manner provided in § 1.45Q-3(b), or utilize qualified carbon oxide in a manner conforming with § 45Q(f)(5) and § 1.45Q-4. Secure geological storage includes, but is not limited to, storage at deep saline formations, oil and gas reservoirs, and unminable coal seams.

(8) Section 1.45Q-3(b) provides that for purposes of the § 45Q credit, qualified carbon oxide is considered disposed of by the taxpayer in secure geological storage such that the qualified carbon oxide does not escape into the atmosphere if the qualified carbon oxide is (1) injected into a well that (i) complies with applicable Underground Injection Control (UIC) or other regulations, located onshore or offshore under submerged lands within the territorial jurisdiction of States or federal waters, and (ii) is not used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, in compliance with applicable requirements under subpart RR ; or (2) injected into a well that (i) complies with applicable UIC or other regulations, is located onshore or offshore under submerged lands within the territorial jurisdiction of States or Federal waters, and (ii) is used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and stored in compliance with applicable requirements under subpart RR, or the International Organization for Standardization (ISO) standards endorsed by the American National Standards Institute (ANSI) under CSA/ANSI ISO 27916:2019, Carbon dioxide capture, transportation and geological storage—Carbon dioxide storage using enhanced oil recovery (CO₂-EOR) (CSA/ANSI ISO 27916:2019). Collectively, the storage of qualified carbon oxide at a project complying with the requirements of § 1.45Q-3(b)(1) or (2) is hereinafter referred to in this notice as “secure geological storage.”

(9) Section 1.45Q-2(h)(5) provides that, in general, carbon oxide that is injected into an oil reservoir that is not a qualified enhanced oil recovery project under § 43(c)(2) of the Code due to circumstances such as the first injection of a tertiary injectant occurring before 1991, or because a petroleum engineer’s certification was not timely filed, cannot be treated as qualified carbon oxide, disposed of in secure geological storage, or utilized in a manner described in § 45Q(f)(5). Section 1.45Q-2(h)(5) does not apply to an oil reservoir if: (i) the reservoir has permanently ceased oil production; (ii) the operator has obtained a UIC Class VI permit; and (iii) the operator complies with subpart RR.

(10) Section 1.45Q-3(d) provides that for a qualified enhanced oil or natural gas recovery project in which the taxpayer reported volumes of carbon oxide to the EPA pursuant to subpart RR, the taxpayer may self-certify the volume of qualified carbon oxide claimed for purposes of § 45Q. For a qualified enhanced oil or natural gas recovery project in which the taxpayer determined volumes pursuant to CSA/ANSI ISO 27916:2019, a taxpayer may prepare documentation as outlined in CSA/ANSI ISO 27916:2019 internally, but all such documentation must be provided to a qualified independent engineer or geologist, who then must certify that the documentation provided, including the mass balance calculations as well as information regarding monitoring and containment assurance, is accurate and complete. The qualified independent engineer or geologist certifying a project must be duly registered or certified in any State. The certification must contain an affidavit from the certifying engineer or geologist stating that he or she is independent from the taxpayer (and if an election under § 45Q(f)(3)(B) has been made, the affidavit must state that he or she is independent from both the electing taxpayer and the credit claimant). Certifications must be made annually and under penalties of perjury. For any leaked amount of qualified carbon oxide (as defined in § 1.45Q-5(c)) that is determined pursuant to CSA/ANSI ISO 27916:2019, the certification must also include a statement that the quantity was determined in accordance with sound engineering principles. Taxpayers that capture and dispose of qualified carbon oxide giving rise to the § 45Q credit must file Form 8933, Carbon Oxide Sequestration Credit, with a timely filed Federal income tax return or Form 1065, U.S. Return of Partnership Income, including extensions or amendments to Federal income tax returns, Forms 1065, or on administrative adjustment requests under § 6227 (AARs), as applicable.

(11) Section 1.45Q-5(a) provides that a recapture event occurs when qualified carbon oxide for which a § 45Q credit has been previously claimed ceases to be disposed of in secure geological storage or used as a tertiary injectant during the recapture period. The amount of such carbon oxide that is securely stored in the current year is determined according to the applicable requirements of subpart RR or CSA/ANSI ISO 27916:2019.

(12) Section 1.45Q-5(c) provides that the metric tons of qualified carbon oxide that has leaked to the atmosphere must be quantified pursuant to the requirements of subpart RR or CSA/ANSI ISO 27916:2019.

.02 EPA Regulations.

(1) Under the Safe Drinking Water Act and regulations promulgated thereunder, injection of carbon dioxide into any underground reservoir requires the operator to comply with UIC program regulations and to obtain the appropriate UIC well permits. The UIC program is designed to protect underground sources of drinking water from underground injection. Under 40 CFR 146.5 (Classification of injection wells), Class II may be an appropriate UIC well permit for wells that inject fluids (including carbon dioxide) brought to the surface in connection with conventional oil or natural gas production and which may be commingled with waste waters from gas plants that are an integral part of production operations, unless those waters are classified as a hazardous waste at the time of injection, and for wells which inject fluids (including carbon oxides) for enhanced recovery of oil or natural gas. Class VI is an appropriate UIC well permit for wells that are not experimental in nature and that are used for geologic sequestration of carbon dioxide beneath the lowermost formation containing an underground source of drinking water; for wells used for geologic sequestration of carbon dioxide that have been granted a waiver of the injection depth requirements pursuant to requirements at 40 CFR 146.95; or for wells used for geologic sequestration of carbon dioxide that have received an expansion to the areal extent of an existing Class II enhanced oil recovery or enhanced gas recovery aquifer exemption pursuant to 40 CFR §§ 146.4 and 144.7(d).

(2) Operators that inject carbon dioxide underground are also subject to the EPA’s GHGRP requirements set forth at 40 CFR Part 98. Under 40 CFR Part 98, facilities that inject carbon dioxide underground for long-term containment of carbon dioxide in subsurface geologic formations are specifically subject to subpart RR (Geologic Sequestration of Carbon Dioxide source category). Facilities that are subject to subpart RR must report basic information on carbon dioxide received for injection, develop and implement an EPA-approved site-specific Monitoring, Reporting, and Verification Plan (MRV Plan), and report the amount of carbon dioxide geologically sequestered using a mass balance approach and annual monitoring activities. Facilities that are subject to subpart RR include UIC Class VI wells and those UIC Class II wells that have opted into being subject to subpart RR by submitting a proposed MRV Plan to, and receiving approval from, the EPA. Such facilities are required to prepare and submit reports on a calendar year basis (Annual Reports).

(3) Annual Reports generally must be submitted no later than March 31 of each calendar year for greenhouse gas emissions in the previous calendar year. 40 CFR § 98.3(b). Annual Reports are required to be submitted electronically in a format specified by the Administrator of the EPA. 40 CFR § 98.5(a). The EPA generally requires Annual Reports to be submitted through the EPA’s electronic reporting system, e-GGRT. Historically, the EPA has launched the e-GGRT system in mid-February for a given reporting year. See EPA, Extending the Reporting Deadline Under the Greenhouse Gas Reporting Rule for 2024 Data, 90 F.R. 13085, 13087 (March 20, 2025). Annual Reports undergo verification by the EPA, and non-confidential data from these reports are published on the EPA’s website.

(4) On September 16, 2025, the EPA issued proposed regulations, Reconsideration of the Greenhouse Gas Reporting Program, 90 F.R. 44591, proposing to amend the GHGRP to remove program obligations for most source categories, including the obligations in subpart RR, for reporting years after 2024. The proposed regulations would also revise 40 CFR Part 98 subpart A to extend the Part 98 (including subpart RR) reporting deadline for reporting year 2025 from March 31, 2026, to June 10, 2026. The EPA has proposed that the amendments, if finalized, would become effective within sixty days of publication in the Federal Register. Because the proposed amendments would remove the reporting obligations under subpart RR following reporting year 2024, reporters would cease submitting Annual Reports within sixty days of publication of the final rule in the Federal Register. 90 F.R. at 44603.

(5) On February 27, 2026, the EPA issued a final rule extending the deadline for Annual Reports for reporting year 2025 to October 30, 2026. See Extending the Reporting Deadline Under the Greenhouse Gas Reporting Rule for 2025, 91 F.R. 9712.

.02 Modification of Section 3 of Notice 2026-1. This section 3.02 modifies and amplifies section 3 of Notice 2026-1 by revising sections 3.01 and 3.02(1), (2), and (3), and adding new section 3.02(4). These changes expand the applicability of the safe harbor provided in Notice 2026-1 to (1) qualified carbon oxide that is stored (i) at a qualified enhanced oil or natural gas recovery project for which the taxpayer received an EPA-approved MRV plan, and (ii) in compliance with the applicable requirements of subpart RR as in effect on December 31, 2025, and (2) the determination of the amount of qualified carbon oxide securely stored, and the amount of qualified carbon oxide that has leaked into the atmosphere, for purposes of satisfying the recapture requirements of § 1.45Q-5(a) and (c). As so modified and amplified, section 3 of Notice 2026-1 now reads as follows:

.01 In General. This section describes a safe harbor (Safe Harbor) that taxpayers may use for certain reporting years in which secure geological storage occurs (relevant reporting year) to satisfy the requirements of § 1.45Q-3(b)(1)(ii), § 1.45Q-3(b)(2)(ii), or § 1.45Q-2(h)(5)(iii), as applicable, § 1.45Q-3(d), and § 1.45Q-5(a) and (c), in the event the EPA does not launch the e-GGRT by March 31 of the calendar year immediately following the relevant reporting year (e-GGRT Unavailability). The Safe Harbor does not apply in the event the EPA launches the e-GGRT for the relevant reporting year by March 31 of the calendar year immediately following the relevant reporting year.

.02 Safe Harbor for Secure Geological Storage.

(1) In General. Taxpayers following the guidance set forth in section 3.02(2), (3), and (4) of this notice will be considered to have satisfied: (i) the requirements in § 1.45Q-3(b)(1)(ii), § 1.45Q-3(b)(2)(ii), or § 1.45Q-2(h)(5)(iii), as applicable, related to subpart RR (§ 45Q Subpart RR Requirements); (ii) the requirements of § 1.45Q-3(d) (Certification Requirements); and (iii) the requirements of § 1.45Q-5(a) and (c) related to determining the amount of qualified carbon oxide securely stored and the quantity of qualified carbon oxide leaked to the atmosphere (Recapture Requirements).

(2) Compliance with § 45Q Subpart RR Requirements. In the case of e-GGRT Unavailability for a relevant reporting year, the taxpayer performing secure geological storage in such reporting year will be considered to have satisfied the § 45Q Subpart RR Requirements for such reporting year if: (i) such storage complies with the applicable requirements of subpart RR as in effect on December 31, 2025; (ii) the taxpayer received an EPA-approved MRV plan for such project and the MRV plan is applicable to the dates of such storage; and (iii) instead of submitting the Annual Report for the relevant reporting year with respect to such storage through the e-GGRT pursuant to 40 CFR §§ 98.3 and 98.5, the taxpayer prepares and submits the Annual Report to an independent engineer or geologist, who certifies the Annual Report, in the manner specified in section 3.02(3)(A) and (B) of this notice. The Annual Report must contain all of the information and documentation, including mass balance accounting calculations and monitoring and containment assurance, that would have been required under subpart RR as in effect on December 31, 2025.

(3) Compliance with Certification Requirements. In the event of e-GGRT Unavailability for a relevant reporting year, the taxpayer performing secure geological storage will be considered to have satisfied the Certification Requirements if the taxpayer satisfies the requirements of section 3.02(3)(A) and (B) of this notice with respect to such storage.

(A) The taxpayer must submit the Annual Report for the relevant reporting year to a qualified independent engineer or geologist. The qualified independent engineer or geologist certifying the information must be duly registered or certified in any State.

(B) The qualified independent engineer or geologist must certify that (i) the capture and disposal described in § 1.45Q-3(b)(1), § 1.45Q-3(b)(2), or § 1.45Q-2(h)(5), as applicable, is in compliance with subpart RR as in effect on December 31, 2025, and (ii) the information and documentation contained in the Annual Report for the relevant reporting year is accurate and complete based upon the requirements under subpart RR as in effect on December 31, 2025. The certification must contain an affidavit from the certifying engineer or geologist stating that he or she is independent from the taxpayer (and if an election under § 45Q(f)(3)(B) has been made, the affidavit must state that he or she is independent from both the electing taxpayer and the credit claimant). The certification must be made under penalties of perjury.

(4) Compliance with Recapture Requirements. In the event of e-GGRT Unavailability for a relevant reporting year, a taxpayer will be considered to have satisfied the Recapture Requirements with respect to any secure geological storage subject to the Recapture Requirements if the Annual Report for reporting year 2025 or later, certified in the manner specified in section 3.02(3) of this notice, includes the following determinations pursuant to the applicable requirements of subpart RR as in effect on December 31, 2025: (i) the quantity of qualified carbon oxide that is securely stored for the calendar year; and (ii) the quantity, if any, in metric tons of qualified carbon oxide that has leaked into the atmosphere in such reporting year.

.03 Timely reporting. Taxpayers that capture and dispose of qualified carbon oxide giving rise to the § 45Q credit must file a Form 8933 with a timely filed Federal income tax return or Form 1065, including extensions, or amendments to Federal income tax returns, Forms 1065, or on AARs, as applicable. To rely upon the Safe Harbor, a taxpayer must complete all documentation and obtain the certification described in section 3.02(2) and (3) of this notice by the time it (or, if an election under § 45Q(f)(3)(B) has been made, any credit claimant) timely files its relevant tax return, as described in the preceding sentence. Taxpayers should retain the documentation and certification described in section 3.02(2) and (3) of this notice in their books and records pursuant to § 6001. See also T.D. 9944; 86 F.R 4728, 4758-59.

.03 Modification of Section 5 of Notice 2026-1. This section 3.03 modifies and amplifies section 5 of Notice 2026-1 by extending the applicability of the Safe Harbor to secure geological storage occurring on or after January 1, 2025, and on or before December 31 of the calendar year in which the Treasury Department and the IRS publish further interim guidance in the Internal Revenue Bulletin or forthcoming proposed regulations in the Federal Register addressing compliance with measurement, reporting, and verification requirements under § 45Q for secure geological storage. As so modified and amplified, section 5 of Notice 2026-1 now reads as follows:

This notice applies to secure geological storage occurring on or after January 1, 2025, and on or before December 31 of the calendar year in which the Treasury Department and the IRS publish further interim guidance in the Internal Revenue Bulletin or forthcoming proposed regulations in the Federal Register addressing compliance with requirements under § 45Q for secure geological storage. Taxpayers claiming the § 45Q credit for secure geological storage occurring on or after January 1, 2025, and on or before December 31 of the calendar year in which the Treasury Department and the IRS publish such guidance or forthcoming proposed regulations may rely upon this notice to satisfy the requirements of § 1.45Q-3(b)(1)(ii), 1.45Q-3(b)(2)(ii), or 1.45Q-2(h)(5)(iii), as applicable, § 1.45Q-3(d), and §1.45Q-5(a) and (c).