New IRS pre-filing registration portal for tax credits
In a move toward promoting clean energy and economic growth, the IRS and the U.S. Department of Treasury have unveiled a pre-filing registration portal. The portal, launched on December 22, is designed to provide access to tax credits for eligible clean energy products under the Inflation Reduction Act (IRA) and the CHIPS and Science Act of 2022 (CHIPS Act).
The purpose of the portal is to facilitate the transferable and refundable tax credits promised under these legislative acts for counties and tax-exempt entities, such as tribes, schools, churches and nonprofits.
The IRA and CHIPS Act allow taxpayers to take advantage of certain manufacturing investments, clean energy investments and production tax credits through elective pay or transfer.
The elective payment and transfer options offer viable alternatives for eligible taxpayers and applicable entities to enjoy the advantages of the IRA clean energy and CHIPS credits, even when they can’t use the credits to offset their tax obligations.
Tax credit access for eligible entities
To access these tax credits, taxpayers — including nonprofit, education and government entities — must navigate the pre-filing registration process successfully. The IRS has provided comprehensive instructions that outline the registration process, which is a prerequisite for claiming these credits or refunds. Without a valid registration number, taxpayers will be unable to initiate tax credit transfers or direct payments.
Taxpayers must complete the pre-file registration process at the start of the tax year in which they intend to monetize the credit through an elective payment election or transfer election. Taxpayers will receive a registration number to include on the annual return for making a valid election.
Registration isn’t possible before the beginning of the tax year; however, the IRS recommends taxpayers, regardless of the entity type, register as soon as possible during the tax year (at least 120 days before the organization/entity plans to file its tax return).
The following are tips as taxpayers work through the pre-filing process:
- Applications are processed in the order they are received, and applicants should respond quickly to IRS follow-up requests to maintain their position in the processing queue.
- Each applicant can submit only one registration package per taxable year, even if they have multiple facilities requiring registration numbers. Modifications are only possible after the initial IRS response.
- Applicants must certify their legal authority to act on behalf of the taxpayer during the registration process and detailed information and various documents are required for both the applicant and their projects.
The pre-filing registration process prioritizes fraud prevention, necessitating specific registration numbers for different scenarios. Any changes in relevant factors will require obtaining a new registration number. When corporations or other groups, such as nonprofits and government organizations, join or leave consolidated groups, they will also need a new registration number.
Tax-exempt entities
The pre-registration portal allows tax-exempt entities to access tax credits for eligible clean energy projects under the IRA. These entities can receive direct payments equivalent to the tax credits’ value, provided the projects are placed into service in a tax year starting after December 31, 2022.
The pre-filing registration process applies to tax-exempt entities like tribes, school, churches and nonprofits, as well. Considerations include:
- Ensuring alignment of the tax year with the entity’s annual accounting period or fiscal year to meet IRS requirements.
- Recognizing that registration can only occur after a facility or property is placed in service. Timing is important.
- Acknowledging that the IRS will review and approve registrations on a rolling basis. To avoid potential delays, tax-exempt entities are advised to complete pre-filing registration at least 120 days before their intended tax return filing date.
Clean hydrogen and proposed regulations
The Treasury and the IRS also have issued proposed regulations related to the tax credit for clean hydrogen production. This development offers opportunities to engage in sustainable practices and to reap the benefits of clean energy initiatives.
The IRA offers a production credit for each kilogram of qualified clean hydrogen produced by a taxpayer at a qualified clean hydrogen production facility.
The proposed regulations outline critical definitions and procedures for administering and claiming clean hydrogen production credits. They address emissions rate calculations, hinging credit values on production process emissions and compliance with wage and apprenticeship standards during facility development.
The guidance establishes processes for seeking provisional emissions rates, mandates for verifying hydrogen production and usage, and guidelines for modifying existing facilities to access fresh credit eligibility dates.
How Wipfli can help
Our team of energy and tax professionals can work with you in a timely and thorough manner to navigate the pre-filing registration process. Learn more about our energy credit services.
Sign up to receive additional tax content and information in your inbox, or continue reading on:
