45Q Repeal Act of 2025
- Bill Number
- H.R. 1946
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-03-06: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-07-10T08:06:33Z
AI-Generated Summary
Purpose
The "45Q Repeal Act of 2025" (H.R. 1946) aims to eliminate a specific tax incentive in the U.S. tax code that encourages the capture and storage of carbon dioxide (a greenhouse gas) from industrial sources. This credit, known as the carbon oxide sequestration credit, was designed to promote technologies that reduce carbon emissions contributing to climate change.
Key Provisions
- Repeal of Section 45Q: The bill directly removes Section 45Q from the Internal Revenue Code of 1986, which provided tax credits for capturing and securely storing or using carbon oxide (primarily CO2) to prevent its release into the atmosphere.
- Conforming Amendments: Adjusts related sections of the tax code to eliminate references to Section 45Q, including:
- Removing it from lists of general business credits (Section 38).
- Updating rules for clean electricity credits (Sections 45V, 45Y, 45Z) to exclude reliance on the repealed credit.
- Modifying investment tax credits for energy property (Sections 48, 48C, 48E) and transferability provisions (Sections 6417, 6418).
- Preserving certain definitions and regulations for carbon storage in other credits, referencing the pre-repeal version of Section 45Q.
- Effective Date: The changes apply to taxable years (annual tax periods for businesses and individuals) beginning after December 31, 2025, allowing current credits to continue until then.
Significant Changes to Existing Law
- Elimination of Incentive: Ends the tax credit that allowed businesses to claim up to $50 per metric ton of carbon oxide sequestered (or higher amounts for direct air capture), which was expanded in prior laws like the Inflation Reduction Act of 2022 to boost carbon capture and storage projects.
- Ripple Effects on Related Credits: Removes Section 45Q from eligibility for credit transfers or elective payments (where businesses can sell credits or receive direct refunds), and adjusts emission calculation rules for other clean energy incentives to no longer depend on it.
- Preservation of Core Concepts: Retains regulatory frameworks for secure geological storage (e.g., in deep saline formations or depleted oil reservoirs) in other tax sections, but without the standalone credit.
Potential Impacts
- On Government Agencies: The Internal Revenue Service (IRS) will see reduced administrative burdens from processing Section 45Q claims, but the Treasury Department may face lower tax revenues as the credit's repeal could decrease investments in carbon capture, indirectly affecting federal budgets tied to energy and climate programs. The Environmental Protection Agency (EPA) and Department of Energy may need to adapt regulations for ongoing projects.
- On Citizens and Businesses: Companies in energy, manufacturing, and carbon capture industries lose a financial incentive, potentially slowing adoption of green technologies and increasing costs for emission reduction. Everyday citizens may see indirect effects through higher energy prices or slower progress on climate goals, though it simplifies the tax code for non-participants.
- On International Relations: Could signal a U.S. shift away from aggressive carbon mitigation policies, potentially straining relations with allies focused on global climate agreements like the Paris Accord, or affecting trade in clean energy tech.
Main Stakeholders Affected
- Energy and Industrial Companies: Firms involved in fossil fuels, cement production, or direct air capture (e.g., oil and gas operators using sequestration for enhanced recovery) who relied on the credit for project funding.
- Environmental and Clean Tech Groups: Organizations advocating for or investing in carbon removal technologies, which may face funding challenges.
- Taxpayers and Investors: Businesses eligible for related clean energy credits, now altered, and investors in green infrastructure who planned around the incentive.
- Government Entities: IRS for enforcement, EPA and Department of Energy for regulatory oversight of storage sites.
Notable Legal, Constitutional, or Political Implications
- Legal: The repeal is straightforward under Congress's authority to amend tax laws (Article I, Section 8 of the U.S. Constitution), but could lead to lawsuits from businesses with ongoing projects claiming reliance on the credit, potentially invoking contract or takings clause arguments if investments were made expecting its continuation.
- Constitutional: No direct challenges anticipated, as tax policy adjustments are a core legislative power, but it highlights tensions between federal fiscal incentives and state-level climate regulations.
- Political: Introduces by bipartisan sponsors (Reps. Perry and Khanna), it reflects debate over the role of tax subsidies in climate policy—critics may view it as undermining U.S. emission reduction commitments, while supporters argue it reduces unnecessary government spending on unproven technologies. This could influence broader energy legislation in the 119th Congress.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (2)
Rep. Khanna, Ro [D-CA-17], Rep. Higgins, Clay [R-LA-3]
Recent Actions
- 2025-03-06: Referred to the House Committee on Ways and Means.
- 2025-03-06: Introduced in House
- 2025-03-06: Introduced in House
Bill Versions
- 45Q Repeal Act of 2025 — issued 2025-03-06 — PDF (5 pages)