The Internal Revenue Service (IRS) recently launched a new online registration portal allowing taxpayers to begin the registration process that must be completed in order for a taxpayer to elect to transfer a credit (under Section 6418) or to receive an elective payment (under Section 6417).1 Taxpayers intending to transfer credits or receive an elective payment must register through the new portal and receive a registration number. Together with the registration portal, the IRS provided a user guide and instructional video to assist taxpayers in the pre-filing registration process.

Even though registering on the online portal is not possible prior to the beginning of the tax year in which the credit will be earned, registration must be completed prior to the filing of the tax return for such tax year, and, therefore, the IRS recommends that taxpayers register as soon as reasonably practicable during such tax year. The IRS currently recommends that a taxpayer submit its pre-filing registration at least 120 days prior to the due date (including extensions) for filing the tax return on which the taxpayer will report the applicable credits and make the transfer or direct pay election. This should allow enough time for the IRS review, and for the taxpayer to respond if the IRS requires additional information before issuing the registration numbers.

In addition, as a practical matter, it is important to start the pre-filing registration process early where the purpose of such registration is to transfer a tax credit because buyers of tax credits typically prefer the seller to have a registration number in hand before the cash payment is made and not having a registration number could potentially delay the transaction.

The following are some additional important filing considerations based on the user guide issued by the IRS:

  • The IRS intends to review and process registration submissions through the IRA/CHIPS Pre-Filing Registration tool in the order it receives them. A registrant cannot request expedited handling.
  • If the registrant chooses to make additional pre-filing registration submissions for different facilities/properties, the registrant must wait until the most recent pre-filing registration submission is processed by the IRS and returned.
  • The IRS may consider a registrant’s tax period ending date when managing the pre-filing registration caseload.
  • The IRS will work to issue a registration number even where the registration submission is made close in time before the registrant’s filing deadline. However, in such cases, the registrant should anticipate that the tax return on which the elective payment or transfer election is made may undergo heightened scrutiny to mitigate the risk of fraud and duplication that pre-filing registration is intended to address before a payment is issued. Given the IRS’s warning of “heightened scrutiny” taxpayers may prefer to allow the IRS sufficient time before their filing deadline to review their submission.

Both the elective payment election and the transfer election are made on an annual tax return. The registration number that a taxpayer receives upon completion of the pre-filing registration process must be included on the taxpayer’s annual tax return as part of making a valid credit transfer election or in order to receive an elective payment.

Please click on the link below to view a tax alert discussing the increased opportunity for more taxpayers to access clean energy tax credits and related considerations and limitations, and visit Viewpoints on the Mintz website to access many articles discussing IRS rules and guidance with respect to various clean energy tax credits promulgated under the Inflation Reduction Act.