Tax-exempt and governmental entities that were generally unable to use tax credits can now benefit from clean energy tax credits using new options enabled by the Inflation Reduction Act of 2022. In some situations, other taxpayers can also benefit from the clean energy tax credits in new ways. We're working on implementing these options and will provide more information about how to claim these clean energy tax credits in late 2023. Elective pay makes certain clean energy tax credits effectively refundable. With elective pay, an eligible entity (such as a local government) that qualifies for a clean-energy investment tax credit can notify the IRS of their intent to claim the credit and file an annual tax return to claim elective pay for the full value of the credit. The IRS would then pay the local government the value of the credit. NOTE: Elective pay is sometimes also known as "direct pay," which shouldn't be confused with the IRS payment method. Transferability allows entities that qualify for a tax credit but are not eligible to use elective pay to transfer all or a portion of the credit to a third-party buyer in exchange for cash. The buyer and seller would negotiate and agree to the terms and pricing. The information below will help you answer questions about: Eligibility of your organization Process for claiming and receiving payment Applicable credits and bonuses Implementation updates and other news Related Elective Pay and Transferability Frequently Asked Questions IR-2023-117, Treasury, IRS issue guidance for the advanced manufacturing investment credit IR-2023-116, IRS releases guidance on elective payments and transfers of certain credits under the Inflation Reduction Act Inflation Reduction Act of 2022 Publications Elective Pay Overview, Publication 5817PDF Rural Electric Cooperatives, Publication 5817-APDF U.S. Territorial Governments, Publication 5817-BPDF Alaska Native Corporations, Publication 5817-CPDF Tax-Exempt Organizations, Publication 5817-DPDF State and Local Government, Publication 5817-EPDF Indian Tribal Governments, Publication 5817-FPDF Clean Energy Tax Incentives: Elective Pay Eligible Tax Credits, Publication 5817-GPDF Laws and guidance Federal Register: Section 6417 Elective Payment of Applicable Credits Federal Register: Section 6418 Transfer of Certain Credits Federal Register: Elective Payment of Advanced Manufacturing Investment Credit Federal Register: Pre-Filing Registration Requirements for Certain Tax Credit Elections
