Elective pay and transferability

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.

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