Understanding Clean Energy Credits and Pre-Filing Registration

The Inflation Reduction Act of 2022 (IRA) has introduced new opportunities for tax-exempt and governmental entities to benefit from clean energy tax credits. This includes Indian tribal governments and Alaskan Native Corporations, who are now able to leverage these credits through elective pay.

Elective Payment Elections and Clean Energy Tax Credits

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

Pre-Filing Registration Process

Before an entity can make an elective payment election on an annual tax return, a pre-filing registration process must be completed. This involves receiving a registration number. Entities will need their own Employer Identification Number (EIN) or Tax Identification Number (TIN) to complete this process, and cannot use or borrow the EIN of a related entity.

The online pre-filing registration process is set to launch in late 2023. Once it’s live, 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.

Completing Pre-Filing Registration

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

For more information about clean energy tax credits, visit the IRS pages on tribes and clean energy.