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Clean energy credits: what you need to know about claiming and receiving credits

Understanding Clean Energy Credits: A Guide on Claiming and Receiving Credits

Tax-exempt organizations and governmental entities have a unique opportunity to benefit from clean energy tax credits. Thanks to the Inflation Reduction Act of 2022 (IRA), these entities now have new options to leverage these credits. The IRA has made it possible for certain exempt organizations to benefit from specific clean energy tax credits through elective pay.

Starting from tax years that begin after December 31, 2022, qualifying entities can make an elective payment election for a clean energy tax credit. This election allows these credits to be used as a payment against federal income tax liabilities, rather than being treated as a nonrefundable credit. The credit amount will first be used to offset any tax liability of the entity, and any excess will be refundable.

Available Clean Energy Credits

There are several clean energy tax credits available. For a comprehensive list of elective pay eligible tax credits, refer to Publication 5817-D.

Pre-filing Registration Information

Before making an elective payment election on an annual tax return, a pre-filing registration process must be completed. Entities will need their own Employer Identification Number (EIN) or Tax Identification Number (TIN) to complete this process. It’s important to note that entities cannot use or borrow the EIN of a related entity. For more information on applying for an EIN, visit IRS.gov/ein.

The online pre-filing registration process is set to launch in late 2023. Once launched, entities can complete pre-filing registration as soon as they have all the required information. More details will be provided closer to the launch date.

To complete pre-filing registration, entities must provide specific information about themselves, the credits they intend to earn, each eligible project or property that will contribute to the credit, and certain additional information. The IRS will review the provided information and issue a separate registration number for each credit property. Registration is not considered complete until a registration number is received.

How to Make an Elective Payment Election for a Clean Energy Tax Credit

1. Identify and pursue the qualifying project or activity: Entities need to know which credit they intend to earn.
2. Determine your tax year, if not already known: The tax year will determine the due date for the tax return.
3. Complete pre-filing registration with the IRS.
4. Satisfy all eligibility requirements for the tax credit and any applicable bonus credits for a given tax year: To claim an energy credit on a solar energy generating project, for example, the project must be in service before making an elective payment election. Entities will need the necessary documentation to substantiate any underlying tax credit, including bonus amounts that increased the credit.
5. File the required annual tax return by the due date (or extended due date) and make a valid elective payment election. This includes properly completed and attached source credit forms, Form 3800 (including registration numbers), and required return attachments.

For additional information about clean energy credits, visit IRS.gov/cleanenergy.

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Clean energy credits: what you need to know about claiming and receiving credits Tax-exempt and governmental entities can benefit from clean energy tax credits using new options enabled by the Inflation Reduction Act of 2022 (IRA). The IRA allows certain exempt organizations to benefit from certain clean energy tax credits through elective pay. For tax years beginning after December 31, 2022, an applicable entity that qualifies for a clean energy tax credit can make an elective payment election. This election will treat certain credits as a payment against their federal income tax liabilities rather than as a nonrefundable credit. The amount of the credit will first offset any tax liability of the entity and any excess will be refundable. Available clean energy credits For information on which clean energy tax credits are available, Publication 5817-D has a list of elective pay eligible tax credits. Pre-filing registration information A pre-filing registration process must be completed, and a registration number received, prior to making an elective payment election on an annual tax return. Applicable entities will need their own Employer Identification Number (EIN) or Tax Identification Number (TIN) to complete the pre-filing registration process. Applicable entities cannot use or borrow the EIN of a related entity. Find additional information on applying for an EIN at IRS.gov/ein. The online pre-filing registration process is expected to launch in late 2023. After the launch, you may complete pre-filing registration as soon as you have all the information required. More detail will be available as the launch approaches. To complete pre-filing registration, you must provide certain information about yourself, the applicable credits you intend to earn, each eligible project or property that will contribute to the applicable credit, and certain additional information. The IRS will review the information provided and will issue a separate registration number for each applicable credit property for which the applicable entity or electing taxpayer provided sufficient verifiable information. Registration is not complete until a registration number is received. How to make an elective payment election for a clean energy tax credit: Identify and pursue the qualifying project or activity: You will need to know which credit you intend to earn. Determine your tax year, if not already known: Your tax year will determine the due date for your tax return. Complete pre-filing registration with the IRS. Satisfy all eligibility requirements for the tax credit and any applicable bonus credits, if applicable, for a given tax year: For example, to claim an energy credit on a solar energy generating project, you would need to place the project in service before making an elective payment election. You will need the documentation necessary to properly substantiate any underlying tax credit, including if bonus amounts increased the credit. File the required annual tax return by the due date (or extended due date) and make a valid elective payment election. This includes properly completed and attached source credit forms, Form 3800 (including registration numbers) and required return attachments. Additional information about clean energy credits can be found at IRS.gov/cleanenergy.

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