The IRS has released Notice 2024-60, providing crucial guidance under Section 45Q of the Internal Revenue Code for the utilization of carbon dioxide and other carbon oxides. This long-awaited notice, issued on July 24, 2024, outlines the procedures and requirements for submitting a life cycle analysis (LCA) report, a key component for taxpayers seeking to claim the tax credit for carbon utilization. This guidance comes more than six years after Section 45Q was amended to include utilization as a qualifying activity.

The Notice specifies the detailed information that must be included in an LCA Report, which assesses the greenhouse gas emissions associated with carbon utilization activities. Taxpayers must submit separate LCA Reports for each facility, and these reports must be prepared in accordance with the DOE’s latest guidance. The LCA must be verified by an independent third party, and the IRS, in collaboration with the Department of Energy (DOE), will review the submissions. The review process includes both a Conformance Review, ensuring the report meets applicable standards, and potentially a Critical Review, which involves a more in-depth technical assessment.

Approval of an LCA is valid for the taxable year in which it is submitted and the following two years, after which taxpayers must seek re-approval if they wish to continue claiming the credit. The Notice sets a clear timeline for the review process but emphasizes that incomplete or deficient reports could lead to denial unless rectified promptly. This guidance is a significant step forward for industries looking to leverage the Section 45Q tax credit in their carbon management strategies.

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