30% Elective Pay Option for Non-taxed Entities Who Install Solar

Summary of IRS Website: https://www.irs.gov/credits-deductions/register-for-elective-payment-or-transfer-of-credits. We highly recommend consulting a tax professional when completing IRS forms.

The IRS offers new elective payment and transfer options for qualifying businesses, tax-exempt organizations, and government entities to access tax credits, even if they don’t have taxable income. These options apply to certain clean energy and manufacturing credits under the Inflation Reduction Act of 2022 and CHIPS Act.

An authorized representative must use the online tool to register their intention for elective payment or transfer election to monetize applicable credits. The registration numbers obtained through the tool must be included on the entity’s tax return. The tool is part of the IRS business tax account application, and detailed guidance can be found in Publication 5884.

The online tool requires information like the entity’s Employer ID number (EIN), name, address, and documentation supporting the reported credits. Only authorized representatives can use the tool, and each entity must have its own EIN.

Users should register after placing an investment property or production facility in service, but no earlier than the beginning of the tax period when credits are earned. Registration should occur at least 120 days before the due date of the return, with government entities receiving a paperless automatic 6-month extension at the time of registration.

Before registering, users should consult the instructions for the applicable form and Form 3800 to determine the number of registration numbers needed based on how the entity must compute and report its credits. It’s recommended to request only the necessary registration numbers to complete the tax return.

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