Elective pay and transferability

Note: Revenue Procedure 2024-39 granted certain applicable entities that are making an elective payment election a six-month automatic extension of time to file an original or superseding Form 990-T, Exempt Organization Business Income Tax Return, with relevant schedules and forms.  

This relief means that applicable entities that were required to but did not file a timely extension on Form 8868, Application for Extension of Time to File an Exempt Organization Return, will be granted a six-month automatic extension of time to file a Form 990-T for purposes of making an elective payment election from the original return due date.

Tax-exempt and governmental entities can benefit from certain clean energy investment and production credits using new options enabled by legislation enacted in 2022. In some situations, other taxpayers can also benefit from the tax credits in new ways.

Elective pay makes certain clean energy tax credits and the CHIPs manufacturing credit effectively refundable (see Elective pay and transferability frequently asked questions). The entity can receive the full value of the credit because the IRS treats the elective payment amount as a tax payment. We then count it as overpayment on the return and refund it to the entity.

Note: Elective pay is sometimes also known as "direct pay," which shouldn't be confused with the IRS payment method.

Transferability allows entities that can't use elective pay but do qualify for an eligible tax credit 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.

Purchases of new and used clean vehicles by individuals involve a different kind of credit transfer that is negotiated with the dealer at the time of sale.

The information below will help you find answers to questions about:

  • Eligibility of your business, organization or entity
  • Process for claiming and receiving payment
  • Applicable credits and bonuses
  • Entities with no regular filing requirement
  • Implementation updates and other news

Pre-filing registration

To be eligible to make the election on a tax return, your entity must register with us before filing. Registration numbers must be included on the entity's tax return for an elective payment or transfer election to be effective.

Elective pay election and statutory exceptions to credit phaseouts

Applicable entities making an elective pay election with respect to a production tax credit or investment tax credit may be subject to a reduced credit amount (“phaseouts”) if the qualified facility or energy project does not satisfy the domestic content requirement or does not have maximum net output of less than 1 megawatt.

Applicable entities may be excepted from the phaseouts if:

  1. the inclusion of steel, iron or manufactured products that are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent, or
  2. relevant steel, iron or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.

Notice 2024-84 extends the transition process for claiming a statutory exception to the elective payment phaseouts. Therefore, if an Applicable Entity provides an attestation and follows the record keeping requirements for an Applicable Credit Property which construction begins before the later of Jan. 1, 2027, or the issuance of further guidance, the Treasury Department and the IRS will treat the attestation as establishing that a Domestic Content Exception is met.

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Page Last Reviewed or Updated: 09-Apr-2025