The Internal Revenue Service recently launched a new registration portal, specifically designed for taxpayers seeking a direct payment or a sale of certain energy tax credits, such as investment tax credits and production tax credits, under the new rules of the Inflation Reduction Act of 2022. The Dec. 22, 2023, opening of the registration portal is the IRS’ fulfillment of requirements under temporary regulations released this past summer detailing rules for IRC Section 6417 Direct Pay and IRSC Section 6418 Transfers. Previous alerts discussed the Direct Pay guidance and the Transfer guidance.
Eligibility for either Direct Pay or Transfers is contingent upon the taxpayer completing the specified filing process, obtaining a registration number from the government and reporting the registration number on the taxpayer’s annual tax return. Completion of the prefiling registration requirements and receipt of a registration number does not, by itself, mean the taxpayer is eligible for a valid direct payment or that a transferred credit will be respected. Ultimately, the substantive technical rules granting the specific energy credit determine eligibility of a credit claim, while registration determines eligibility for the follow-on transaction under Section 6417 or 6418.
To ensure a smooth process, the IRS advises taxpayers to engage in the prefiling registration process at least 120 days before they intend to file their tax returns that include the Direct Pay or Transfer election.
McGuireWoods lawyers are experienced in energy, project finance and tax equity structures. and will continue to monitor guidance implementing the IRA and issue updated alerts as the tools and regulations evolve. Do not hesitate to reach out if you would like to discuss any of the above information.
Related updates:
- IRS Refreshes and Codifies Energy Property Tax Credit Guidance in Proposed Section 48 Regulations
- Treasury and IRS Issue Guidance for Section 45X Advanced Manufacturing Production Credit
- Treasury and IRS Issue Guidance for Section 45V Hydrogen Production Tax Credit
- IRS and Treasury Seek Comments on Direct Pay and Domestic Content Overlap