Article
IRS preregistration portal opens for elective payment and transfer tax credits
Jan. 22, 2024 · Authored by Colin Quill
Taxpayers can now register federal tax credits eligible for elective payment or transfer under Internal Revenue Code (IRC) Section 6417 and IRC Section 6418 respectively. The IRS released the long-anticipated online prefiling portal on Dec. 22, 2023.
The IRS also issued Publication 5884, Inflation Reduction Act and CHIPS Act of 2022 Pre-Filing Registration Tool User Guide and Instructions, which outlines the registration process and provides ample insight into the process and its mechanics.
Background
The Inflation Reduction Act of 2022 (IRA) allows eligible taxpayers to monetize certain energy related federal tax credits by either transferring those credits to an unrelated third-party or electing to treat the credits as refundable and receiving a direct payment of the credit amount.
Eligible taxpayers must preregister and obtain a registration number for IRA credits before filing the tax return on which an election for direct payment or transfer is made. Both the elective payment and transfer elections are generally made on an annual tax return using Form 3800, general business credits, where the registration number is identified upon filing.
Registration numbers are required for each eligible property for which the credit is claimed and is only valid for one taxable year. For taxpayers placing multiple projects into service annually, or receiving 10-year production tax credits, the annual registration process could potentially become a significant compliance burden.
Planning considerations
The IRS clarified that registration numbers aren’t instantly generated upon submission. In fact, the IRS recommends submitting prefiling registration at least 120 days prior to filing a return.
Taxpayers submitting prefiling registration, as well as potential transferees, should be aware of this substantial review period and begin compiling the necessary information as early as possible.
Another complicating feature of the portal and the preregistration process is that each registration number is unique to the election type. Taxpayers must indicate at the time of registration whether they intend to transfer or pursue elective payment.
Inflation Reduction Act of 2022: An overview of tax implications
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.