Notice 2014-40 - Inflation adjustment factor (2014) for carbon dioxide sequestration under section 45Q 

June 11:  The IRS today released an advance copy of Notice 2014-40 providing the inflation adjustment factor for 2014 with respect to the credit for carbon dioxide (CO2) sequestration under section 45Q.

Notice 2014-40 [PDF 12 KB] provides:

  • The inflation adjustment factor for calendar year 2014 is 1.0754.
  • The section 45Q credit for calendar year 2014 is $21.51 per metric ton of qualified CO2 under section 45Q(a)(1), and $10.75 per metric ton of qualified CO2 under section 45Q(a)(2).


Section 45Q provides that a credit for CO2 sequestration is generally available to a taxpayer that captures qualified CO2 at a qualified facility and disposes of the CO2 in secure geological storage within the United States, effective for CO2 captured after October 3, 2008.

As originally enacted, the credit is $20 per metric ton of qualified CO2 that is captured and disposed of in secure geological storage, and a credit of $10 per metric ton of qualified CO2 that is captured and used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project (EOR project).

Additional requirements (effective after February 17, 2009) provide that for purposes of the $20 per metric ton credit, the qualified CO2 must not be used as a tertiary injectant; and that for purposes of the $10 per metric ton credit, the qualified CO2 used as a tertiary injectant must be disposed of in secure geological storage.

The credit is attributable to the person that captures and physically or contractually provides for the disposal of or the use as a tertiary injectant of the qualified CO2, except to the extent provided in regulations.

For tax years beginning in a calendar year after 2009, the dollar amount of the credit under section 45Q can be adjusted for inflation. Also, the section 45Q credit will apply with respect to qualified CO2 before the end of the calendar year in which the Treasury Secretary, in consultation with EPA, certifies that 75 million metric tons of qualified CO2 have been taken into account.

Notice 2014-40 states that based on annual reports filed with the IRS, as of June 1, 2014, the aggregate amount of qualified CO2 taken into account for purposes of section 45Q is 27,114,815 metric tons.

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