2. Who Qualifies for it

To fill out Form 8933 in application for Carbon Dioxide Sequestration Credit, know who is eligible to claim it.

To claim the carbon dioxide sequestration credit, ensure you meet the following criteria:

• Capture qualified carbon oxide from a qualified facility and dispose of it in secure geological storage, use it as a tertiary injectant in an enhanced oil or natural gas recovery project, or utilize it in certain ways that result in permanent removal from the atmosphere.
  • Qualified carbon oxide means any carbon dioxide (CO2) or carbon monoxide (CO) from an industrial source or the atmosphere that goes into the atmosphere as an industrial emission or through the burning of fuel in a trade or business.
  • Qualified facility describes your personally owned industrial facility as a taxpayer, if it captures qualified carbon oxide using carbon capture equipment that was first put to use at that facility on or after February 9, 2018.
  • Secure geological storage includes storing certified carbon oxide in deep saline formations, oil and gas reservoirs, or unminable coal seams that meet EPA or DOI long-term storage standards.
  • Tertiary injectant means any qualified carbon oxide that you inject into an oil or natural gas reservoir to increase the recovery of oil or natural gas.
  • Utilization refers to the various ways in which qualified carbon oxide can be put to use, such as in the production of chemicals, plastics, cement, or algae. These applications not only result in the permanent removal of carbon oxide from the atmosphere but also help to displace carbon oxide rather than emit it.
• Begin the construction of the qualified facility and the carbon capture equipment by December 31, 2025, and place them in service within a reasonable period of time.
• Capture at least 500,000 metric tons of qualified carbon oxide during the tax year at each qualified facility.
• Pay or incur the wages for the construction, installation, and operation of the qualified facility and the carbon capture equipment at rates not less than the prevailing wage rate for the locality where the work is going on and provide qualified apprenticeship programs for the workers.
• Lower the credit amount by a certain percentage based on how much carbon dioxide you or someone else stops capturing, dumping, or using during the recapture period. This is the five-year period that starts on the date that the taxpayer first captures qualified carbon dioxide.
• Choose under section 45Q(f)(9) of the Internal Revenue Code to let someone else claim the credit for the qualified carbon oxide that you capture and that other person then gets rid of, uses, or puts to use; or you can get the credit from someone else who captures the qualified carbon oxide and gives it to you to get rid of, uses, or puts to use.

Take a look at these examples and scenarios to understand how the eligibility criteria and the credit amount vary depending on the type of facility and the use of carbon oxide.

• Example 1: You own and operate a coal-fired power plant that captures 1 million metric tons of CO2 per year using carbon capture equipment that was placed in service in 2020. You dispose of the CO2 in a deep saline formation that meets the EPA requirements for secure geological storage. You pay the prevailing wage rate for the workers and provide qualified apprenticeship programs. You do not make any section 45Q (f) (9) election. You are eligible to claim the credit for the CO2 that you capture and dispose of, and the credit rate for 2022 is $50 per metric ton.
• Example 2: You own and operate a direct air capture facility that captures 600,000 metric tons of CO2 per year using carbon capture equipment that was placed in service in 2023. You use the CO2 to produce algae, which displaces the use of fossil fuels. You pay the prevailing wage rate for the workers and provide qualified apprenticeship programs. You make a section 45Q (f) (9) election to transfer the credit to the algae producer. You are eligible to claim the credit for the CO2 that you capture and utilize, and the credit rate for 2022 is $35 per metric ton. However, you cannot claim the credit yourself, but you can transfer it to the algae producer, who can claim the credit for the CO2 that they receive and utilize from you.
• Example 3: You own and operate a steel mill that captures 400,000 metric tons of CO per year using carbon capture equipment that was placed in service in 2024. You use the CO to produce methanol, which results in permanent removal of the CO from the atmosphere. You pay the prevailing wage rate for the workers and provide qualified apprenticeship programs. You do not make any section 45Q (f) (9) election. You are not eligible to claim the credit for the CO that you capture and utilize because you do not meet the minimum threshold of 500,000 metric tons of qualified carbon oxide per year at your facility.