IRS Form 8933 (Schedule D) – In the evolving landscape of environmental tax incentives, the IRS Form 8933 plays a crucial role for businesses involved in carbon capture and sequestration. Specifically, Schedule D of Form 8933, known as the Recapture Certification, is essential for reporting recapture events related to the section 45Q carbon oxide sequestration credit. This article delves into what Schedule D is, its purpose, who must file it, and how to complete it, drawing from official IRS guidelines to ensure accuracy and compliance. Whether you’re an operator of a geological disposal site or an enhanced oil recovery (EOR) project, understanding this form can help you navigate potential tax implications effectively.
What Is IRS Form 8933 and Schedule D?
IRS Form 8933 is designed to claim the carbon oxide sequestration credit under section 45Q of the Internal Revenue Code. This credit incentivizes the capture, disposal, or utilization of qualified carbon oxide to reduce greenhouse gas emissions. The form includes several schedules tailored to different aspects of the credit process.
Schedule D (Form 8933) focuses on recapture certification. It is used when a recapture event occurs, meaning previously claimed credits must be reversed due to issues like leakage of sequestered carbon oxide. A recapture event happens when qualified carbon oxide, for which a credit was claimed, ceases to be properly captured, disposed of, or used as a tertiary injectant during the designated recapture period.
This schedule ensures accountability in carbon sequestration projects, aligning with broader environmental and tax policy goals. It’s part of a suite of schedules for Form 8933, including:
- Schedule A: For owners of geological disposal sites or EOR projects.
- Schedule B: For operators of geological disposal sites.
- Schedule C: For operators of EOR projects.
- Schedule E: For owners electing to pass the credit to another party.
- Schedule F: For owners of utilization facilities.
Purpose of Schedule D: Recapture Certification
The primary purpose of Schedule D is to report and certify recapture events to the IRS. If a project experiences a leakage or failure in sequestration during the recapture period (typically a look-back period of up to five years), the taxpayer must calculate and report the recaptured amount. This involves:
- Determining the quantity of leaked qualified carbon oxide in metric tons.
- Calculating the recapture amount based on the original statutory credit rate.
- Providing details on how the recapture event was discovered, including involvement of regulatory agencies.
Recapture is computed using a last-in, first-out (LIFO) methodology, applying to the most recent tax years first. This mechanism prevents over-claiming of credits and ensures that sequestration efforts meet stringent standards for secure geological storage or utilization.
Who Must File Schedule D??
Schedule D must be filed by the operator or owner of the geological disposal site or EOR project if a recapture event occurs and credits were previously claimed for that project. This includes:
- Entities involved in direct air capture or industrial carbon capture.
- Owners or operators of sites where carbon oxide is injected for sequestration or enhanced recovery.
If you’re the supplier of carbon oxide, you may need to report the amount of sequestration credit to recapture, adding up relevant rows on the form. Filing is required with your federal income tax return or Form 1065 for the tax year in which the recapture event happened.
Note that not all taxpayers claiming the section 45Q credit will need Schedule D—it’s specifically for recapture scenarios. Consult IRS instructions if your project involves contracts with third parties, as both parties may need to report on Form 8933.
When and How to File Schedule D?
File Schedule D as an attachment to Form 8933 with your annual tax return. The recapture period generally spans five years, but it could be shorter if secure storage monitoring ends earlier. Key steps include:
- Identify the recapture event through monitoring or regulatory reporting.
- Calculate the leaked amount (excess over stored amount) and recapture based on prior credits claimed.
- Complete the form sections, starting with Part I: Information About the Geological Disposal Site, which requires details on owners and site specifics.
- Report the recapture amount, leaked quantity, original credit rate, and a descriptive statement.
- Attach any required certifications, such as from a petroleum engineer, by the filing deadline.
Electronic filing is encouraged for accuracy and speed. Always use the most current version of the form, revised as of December 2025.
Key Sections of Schedule D
Schedule D is structured for clear reporting:
- Part I: Information About the Geological Disposal Site – Details on owners, site location, and identification.
- Recapture Calculations – Rows for adding amounts of carbon oxide sequestration credit to recapture, including totals for the supplier.
- Statement Section – Narrative on the event discovery, quantification method, and regulatory involvement.
For detailed line-by-line guidance, refer to the official IRS instructions.
Download IRS Form 8933 Schedule D PDF
To get started, download the latest version of Schedule D (Form 8933) directly from the IRS website: Download IRS Form 8933 Schedule D PDF.
For the full Form 8933 and instructions, visit the IRS Forms and Publications page.
Tips for Compliance and Optimization
- Monitor Projects Closely: Regular audits and compliance with section 45Q regulations can prevent recapture events.
- Seek Professional Advice: Tax professionals specializing in energy credits can assist with calculations and filings.
- Stay Updated: IRS rules may evolve; check for updates on carbon capture incentives.
By properly using Schedule D, you can maintain eligibility for the carbon oxide sequestration credit while ensuring environmental integrity. This not only supports tax savings but also contributes to sustainable practices in carbon management.