GAO Report Flags Delays, Oversight Gaps In 45Q

A new report from the Government Accountability Office (GAO) is putting a spotlight on administrative bottlenecks in the Section 45Q Carbon Oxide Sequestration Credit, even as the program's use keeps climbing. The credit's claims more than tripled between 2019 and 2023, according to IRS data cited in the report.

First enacted in 2008 and expanded under the 2022 Inflation Reduction Act, the 45Q credit rewards companies for capturing carbon at industrial sites or directly from the air and either storing it underground or turning it into products like concrete and jet fuel. As of March 2026, the US had 33 operating carbon capture facilities, with more in the pipeline.

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Where The Friction Points Are

The report, published August 6, credits the IRS with taking real steps to administer the credit and guard against noncompliance. But taxpayers converting captured carbon into products, rather than storing it permanently, are running into the toughest road: heavy compliance demands, long approval waits, and uncertainty over how claims will be judged.

GAO pointed to the review process shared between the IRS and the Department of Energy as the source of much of that friction. Its fix involves clarifying which datasets taxpayers can use to calculate displaced carbon, and setting clearer timeframes for when companies can start claiming the credit rather than waiting until systems have run for a full year.

A Credit Congress Can't Fully Measure

Beyond the paperwork slog, GAO raised a bigger structural concern: no single agency is responsible for tracking whether 45Q is actually delivering on its environmental and economic goals. The law never set explicit benchmarks or named a lead agency for evaluation, which makes it hard to weigh the credit's cost-effectiveness against other climate policy tools.

To close that gap, GAO recommended Congress direct agencies to analyze three things: how well the credit is meeting its goals, how efficiently it's being administered, and how it stacks up against alternative approaches. Notably, the One Big Beautiful Bill Act, signed into law in mid-2025, already created parity in credit values across different uses of captured carbon, a change that reflects some of the same equity concerns GAO is now formalizing.

Agencies Push Back On Most Recommendations

GAO issued four recommendations to the IRS and two to the DOE aimed at easing the utilization review process without opening the door to noncompliance. Of the six, the agencies disagreed with five and only partially agreed with one. GAO stood by its findings regardless, arguing the changes are still needed to cut down on taxpayer friction as the carbon capture sector keeps growing.

About the Government Accountability Office

The Government Accountability Office is a nonpartisan, independent agency that works for Congress, auditing federal programs and spending to help lawmakers oversee how taxpayer dollars are used. It reviews everything from tax expenditures to infrastructure spending across the federal government.