Next steps for tribes seeking clean energy investment tax credits
In light of the Inflation Reduction Act’s focus on renewable energy, tribes and tribal enterprises now have additional guidance available from the IRS. The guidance clarifies which entities qualify for clean energy investment tax credits and the method of payment tribes can expect to receive. The energy investment tax credit (ITC) and other Native American tax credits are part of a broader initiative to promote energy security and support clean energy projects in tribal communities.
Based on all guidance provided to date, tribal casinos qualify under tribal governments as entities eligible for clean energy investment tax credits. Tribal governments or tribal tax-exempt entities are eligible for elective pay. This provision of the Inflation Reduction Act aims to stimulate economic development and promote adoption of renewable energy initiatives available for tax credits.
However, neither party is an applicable entity eligible to transfer these tax credits. This is partly due to the Native American tax exemption status that many tribal entities enjoy.
So, what do tribal governments or tribal tax-exempt entities do next if they want to get involved with these credits? Since tribal governments have their own federal tax status and do not file tax returns, they will need to complete a prefiling registration process with the IRS. They will need to file Form 990-T, along with any other forms required to claim the credit, with the IRS electronically. This process respects tribal self-governance while ensuring compliance with the Clean Electricity Investment Credit and Clean Electricity Production Tax Credit requirements, which are part of the IRA renewable energy initiatives.
In addition, tribal governments or tribal tax-exempt entities will need to:
- Identify and pursue the qualifying project or activity: You will need to know what applicable credit you intend to earn and use elective pay for, whether it’s the investment tax credit (ITC) or other clean energy tax credits available under the Inflation Reduction Act. This may include projects on qualifying tribal lands or energy storage technology installations.
- Determine your tax year (if not already known): Your tax year will determine the due date for your tax return. This is crucial for claiming credits like the Clean Electricity Investment Credit or the Clean Electricity Production Tax Credit.
- Complete prefiling registration with the IRS: This will include providing information about yourself, which applicable credits you intend to earn, each eligible project/property that will contribute to the applicable credit and other information required. Upon completing this process, the IRS will provide you with a registration number for each applicable credit property. You will need to provide that registration number on your tax return as part of making the elective pay election.
- Complete prefiling registration in sufficient time to have a valid registration number at the time you file your tax return.
- More information about this prefiling registration process will be available by late 2023.
- 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. This may include meeting prevailing wage and apprenticeship requirements, as well as domestic content requirements for clean energy investments.
- You will need the documentation necessary to properly substantiate any underlying tax credit, including any bonus amounts that increased the credit, such as ITC adders for projects in energy communities or low-income communities.
- File Form 990-T by the due date (or extended due date) and make a valid elective payment election.
How Wipfli can help
When navigating energy tax credits, Wipfli tax professionals with deep experience working with tribes are ready to help you understand these new opportunities and maximize your benefits. Our expertise extends to tribally chartered entities and their unique tax considerations.
Contact us to learn more about our services for tribes and how we can assist with your clean energy investments aimed at reducing greenhouse gas emissions.
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