45Q Simplified: Streamlining Carbon Capture Compliance with myTrack

Concern over global warming has led scientists and others to seek ways to reduce the trend. Carbon capture of carbon dioxide (CO2) has been pegged as a key in the fight against global warming.

This involves capturing carbon dioxide emissions from industrial sources, such as power plants and factories, and transporting it to a storage site where it is injected deep underground into rock formations to prevent it from entering the atmosphere and contributing to climate change.

The Inflation Reduction Act (IRA), signed into law in 2022, even incentivizes companies with tax credits to encourage businesses to carbon capture. However, claiming the tax credit, part of Section 45Q, is complex.

Let’s examine how myTrack can help companies overcome the challenges associated with 45Q and complete the requirements. 

What is 45Q? 

First created in September 2008 as part of the Energy Improvement and Extension Act, 45Q has been modified multiple times. However, it remains the same – incentivize companies to reduce CO2 emissions. 

Every metric ton of CO2 companies permanently store receives a tax credit. They also receive a tax credit for every ton "that is permanently stored and used as a tertiary injectant.” Under the original bill, the credit was restricted to companies that capture over “500,000 metric tons of carbon dioxide during the taxable year.”  

This restriction was lifted in 2018. Since then, credit is available“for each metric ton of carbon oxide that is captured and secured for 12 years beginning with the date that the carbon capture equipment is placed in service. The credit rate increases over time and is set based on how the taxpayer disposes of the CO.” 

With the recent passing of the IRA, 45Q underwent some significant changes, summed up here by the IRS. The changes include increasing the tax credit per ton of CO2 that is permanently stored and those used for enhanced oil recovery (EOR) and other industrial uses. The capacity requirements were also changed. 

Here are the rates:

• $85 per metric ton for CO2 that is permanently stored in secure geological storage.
• $60 per metric ton for CO2 used in enhanced oil recovery (EOR) or other industrial uses.

The Challenge of Capturing the Tax Credit 

Like all government-related things, businesses must jump through hoops to capture the tax credit related to 45Q. They are required to comply with requirements related to prevailing wages and apprenticeships.  

myTrack, which automates time tracking and can show the percentage of apprentices that companies have on hand, can help companies gather the information the government requires related to 45Q to take advantage of the Inflation Reduction Act's tax credits.  

3 Ways myTrack Helps with the 45Q Tax Credit 

Consider how myTrack helps companies report and gather the required information to secure the 45Q tax credit. 

Companies that manually complete the paperwork related to 45Q lose out in terms of speed and accuracy. For example, one large international corporation has a five-person team that gathers information relevant to 45Q. With myTrack, one employee can do the work. 

Automation also removes the guesswork from the compliance piece. There is no need to perform manual comparisons, which are time-consuming, inefficient, and stressful. However, this often results in some element of guesswork, which may be recognized by auditors, leaving companies susceptible to audits. 

Some companies will complete the paperwork and worry about being audited when the scenario comes to reality. Why not do this?   

For example, one company ignored the time commitment to complete the paperwork. The strategy is also costly in terms of billable hours to complete the information and losing out on the tax credit. For smaller companies, who may be more likely to do this, the loss of anticipated funds (should they be audited and found out to be non-compliant) can be a huge hit.  

The hit could go beyond money and impact organizational reputation. Because the media and public have concerns about the environment, going green is good for public relations and can affect the bottom line of businesses. Conversely, when the public views a business as a poor environmental steward, it can face backlash. 

One of the major requirements for 45Q eligibility is having a certified payroll as a document of record. myTrack automates the data that drives the certified payroll. Businesses can review payroll information regularly, as opposed to at the end of a project or other lengthy timeframe. 

Imagine doing everything necessary to get the 45Q tax credit—including investing money in carbon capture technology—and counting on receiving funding from the government. Then, the authorities audit your company. Auditors discover an issue related to certifying payroll or other requirements, and you are deemed non-compliant.  

This would be devastating for any company in this situation. 

 3. Validates and Adjusts as Needed 

Companies may believe they do everything necessary to qualify and meet the criteria. However, companies are moving forward blindly if they can't gather the required information.   

myTrack helps ensure this nightmare scenario never occurs. The software enables companies to validate the data needed to prove compliance. 

Quickly reviewing the data empowers companies to recognize issues and adjust as needed. And speed is imperative. Companies must meet compliance within 30 days of the work beginning with each contractor. 

Consider this example. myTrack helped a company discover an issue within one week of going live. The software identified that the company was out of compliance, giving the company time to focus on the problem (it was an upstream issue) and meet the 30-day deadline. 

Companies can also ensure their eligibility remains intact and avoid being penalized due to unintended actions. The data can also help businesses make decisions beyond those specifically related to 45Q. 

With myTrack, the company’s actual hours are audited and automated, which is necessary to determine the certified payroll. It automates the certified payroll process for a contractor. The hours feed into the apprenticeship ratios. It ensures IRA credit qualification by enabling contractors to compare wage rates with prevailing wage, preventing discrepancies and ensuring compliance. 

myTrack offers workforce insights, tracking crafts, hours, and costs. It ensures IRA apprenticeships are met through real-time adjustments, and it’s built into the software’s reporting structure. 

Other issues related to compliance, such as the prevailing wage and pay rates, are also housed in myTrack. This can help companies quickly identify compliance versus non-compliance.  

Learn More About myTrack

The myTrack Platform provides automated contract compliance and gives companies a holistic view of their entire labor, equipment, and materials spend. The platform produces real-time data and can help companies ensure compliance—plus they have all the information they need to apply for the 45Q tax credit. 

Learn more about myTrack, the IRA, and how it captures data so your company can make key decisions with confidence.