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. Related IR-2024-120, IRS releases final guidance on transfers of certain credits under the Inflation Reduction Act 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 Inflation Reduction Act (IRA) and CHIPS Act of 2022 (CHIPS) Pre-Filing Registration Tool -- User Guide and Instructions, Publication 5884PDF Clean Energy Authorization Permission Management User Guide, Publication 5902PDF Laws and guidance NPRM Section 6417 Elective Payment of Applicable Credits NPRM Section 6418 Transfer of Certain Credits NPRM Elective Payment of Advanced Manufacturing Investment Credit Temporary Regulations Pre-Filing Registration Requirements for Certain Tax Credit Elections Notice 2024-27 NPRM: Election to Exclude Certain Unincorporated Organizations Owned by Applicable Entities from Application of the Rules on Partners and Partnerships Final Regulations: Elective Payment of Applicable Credits Final Regulations: Transfer of Certain Credits
