Tax Exempt Bonds Community Updates

Clean energy credits: what you need to know about elective pay

Tax-exempt and governmental entities can benefit from clean energy tax credits using new options enabled by the Inflation Reduction Act of 2022 (IRA). The IRA allows governmental entities to benefit from certain clean energy tax credits through elective pay. For tax years beginning after December 31, 2022, an applicable entity that qualifies for a clean energy tax credit can make an elective payment election. This election will treat certain credits as a payment against their federal income tax liabilities rather than as a nonrefundable credit. The amount of the credit will first offset any tax liability of the entity and any excess will be refundable.

How do I make an elective pay election?

The elective payment election is made on your annual tax return in the manner prescribed by the IRS, along with any form required to claim the relevant tax credit (source credit forms), a completed Form 3800, General Business Credit (or its successor), and any additional information, including supporting calculations, required in instructions to the relevant forms. Making an elective payment election requires completing multiple steps, including completing the required pre-filing registration process.

The term annual tax return includes:

1. for any person normally required to file an annual tax return with the IRS, such annual return (including Form 990-T for organizations with unrelated business income tax or a proxy tax under section 6033(e));
2. for any person that is not normally required to file an annual tax return with the IRS (such as taxpayers located in the territories), the return they would be required to file if they were not located in the territories, or, if no such return is required (such as for State, local, or Indian tribal governmental entities), the Form 990-T Exempt Organization Business Income Tax Return; and
3. for short tax year filers, the short year tax return.

Electronic return filing is strongly encouraged.

Each entity making an elective payment election must have a unique EIN. More information about applying for an EIN is available at IRS.gov/ein.

How do I determine the taxable year?

Check the instructions for the annual tax return you are filing. For example, for tax-exempt entities filing Form 990-T, the return must be filed using the organization's established annual accounting period. If the organization has no established accounting period, file the return on the calendar-year basis.

How do I timely file my return?

An elective payment election may only be made on an original, timely filed return (including extensions). This means the deadline is the due date (including extensions of time) for the tax return for the taxable year for which the election is made. For most tax exempt and government entities including Indian tribal governments this is generally 4.5 months (for example, May 15 for a calendar year taxpayer) (or up to 10.5 months with extensions) after the end of the entity's tax year.

An original return includes a superseding return filed on or before the due date (including extensions). No election is permitted to be made on an amended return or by filing an administrative adjustment request under section 6227 of the Code. There is no relief available under §§ 301.9100-1 through 301.9100-3 of the Procedure and Administration Regulations (26 CFR part 301) for an elective payment election that is not timely filed.

Subject to future guidance, an automatic paperless six-month extension from the original due date is deemed to be allowed for entities for which no Federal income tax return is required under sections 6011 or 6033(a) of the Code.

Additional information about Clean Energy Credits can be found at IRS.gov/cleanenergy.

Clean energy credits: what you need to know about claiming and receiving credits

Tax-exempt and governmental entities can benefit from clean energy tax credits using new options enabled by the Inflation Reduction Act of 2022 (IRA). The IRA allows governmental entities to benefit from certain clean energy tax credits through elective pay. For tax years beginning after December 31, 2022, an applicable entity that qualifies for a clean energy tax credit can make an elective payment election. This election will treat certain credits as a payment against their federal income tax liabilities rather than as a nonrefundable credit. The amount of the credit will first offset any tax liability of the entity and any excess will be refundable. 

Available clean energy credits

For information on which clean energy tax credits are available, Publication 5817-GPDF has a list of elective pay eligible tax credits. 

Pre-filing registration information

A pre-filing registration process must be completed, and a registration number received, prior to making an elective payment election on an annual tax return. Applicable entities will need their own Employer Identification Number (EIN) or Tax Identification Number (TIN) to complete the pre-filing registration process. Applicable entities cannot use or borrow the EIN of a related entity. Watch this video to learn about using the IRS EIN tool to get an EIN.

The online pre-filing registration process is expected to launch in late 2023. After the launch, you may complete pre-filing registration as soon as you have all the information required. More detail will be available as the launch approaches. 

To complete pre-filing registration, you must provide certain information about yourself, the applicable credits you intend to earn, each eligible project or property that will contribute to the applicable credit, and certain additional information. The IRS will review the information provided and will issue a separate registration number for each applicable credit property for which the applicable entity or electing taxpayer provided sufficient verifiable information. Registration is not complete until a registration number is received. Each entity making an elective payment election must have a unique Employer Information Number (EIN). 

After you complete the pre-filing registration process, the IRS will review the information provided and will issue a separate registration number for each applicable credit property for which the applicable entity or electing taxpayer provided sufficient verifiable information.

How to make an elective payment election for a clean energy tax credit:

1. Identify and pursue the qualifying project or activity: You will need to know which credit you intend to earn.
    
2. Determine your tax year, if not already known: Your tax year will determine the due date for your tax return.
    
3. Complete pre-filing registration with the IRS
    
4. Satisfy all eligibility requirements for the tax credit and any applicable bonus credits, if applicable, for a given tax year: For example, to claim an energy credit on a solar energy generating project, you would need to place the project in service before making an elective payment election. You will need the documentation necessary to properly substantiate any underlying tax credit, including if bonus amounts increased the credit.
    
5. File the required annual tax return by the due date (or extended due date) and make a valid elective payment election. This includes properly completed and attached source credit forms, Form 3800 (including registration numbers) and required return attachments.

Additional information about clean energy credits can be found at IRS.gov/cleanenergy. 

Electronic Filing of Form 8038-CP is available; Mandatory Electronic Filing for Certain Filers in 2024

As part of ongoing efforts to improve service for the tax-advantaged bond community, the IRS accepts electronic filing of Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds. Form 8038-CP is used to claim credit payments relating to interest on build America bonds, recovery zone economic development bonds, new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds, and qualified school construction bonds.

Electronic filing ensures that returns are filed using the current versions of Form 8038-CP and the accompanying Schedule A. Electronic filing can also reduce filing errors. See the Instructions for Form 8038-CP and Schedule A (Form 8038-CP), under General Information, on how to get faster payments and avoid common mistakes.

Under Treasury Regulations published February 23, 2023 (26 CFR Section 301.6011-11), electronic filing of Forms 8038-CP filed after December 31, 2023 is mandatory for certain filers.
Electronic filing of Form 8038-CP must be done through an authorized e-file provider. The IRS maintains a list of authorized Form 8038-CP e-file providers on the following page:  Tax Year 2023 Other Tax Exempt Entities Modernized e-File (MeF) Providers – Form 8038-CP.

For more information about electronically filing Form 8038-CP as well as updates and FAQs, visit: 

Recent Updates to Form 8038-CP and Processing Changes,
Form 8038-CP FAQs
Form 8038 Corner

Elective Payments of Credits under the Inflation Reduction Act: Pre-file Registration and Timely Filing Required

Tax-exempt and governmental entities, including those that were generally unable to use tax credits previously, can now benefit from clean energy tax credits using new options enabled by the Inflation Reduction Act of 2022. Elective pay makes certain clean energy tax credits effectively refundable.

For tax years beginning after December 31, 2022, an applicable entity that qualifies for a clean energy tax credit can make an elective payment election. This election will treat certain credits as a payment against their federal income tax liabilities rather than as a nonrefundable credit. This payment will first offset any tax liability of the entity and any excess will be refundable. 

Applicable entities generally include tax-exempt organizations, state and local governments, Indian tribal governments, Alaska Native Corporations, the Tennessee Valley Authority and rural electric cooperatives. Specific criteria for each type of applicable entity are included in the resources below.

The Internal Revenue Service issued proposed regulations describing rules and definitions concerning elective payments for the clean energy tax credits. The IRS has also issued temporary regulations regarding the pre-filing registration requirements for taxpayers planning to make an elective payment election.

The pre-filing registration process must be completed, and a registration number received, prior to making an elective payment election on an annual tax return. Entities for which no such return is required (such as state and local governments and Indian tribal governments) will file Form 990-T to make the elective payment election. An elective payment election may only be made on a timely filed return (including extensions). Applicable entities will need their own Employer Identification Number (EIN) or Tax Identification Number (TIN) to complete the pre-filing registration process. Applicable entities cannot use or borrow the EIN of a related entity. To apply for an EIN online, visit IRS.gov/EIN.

The IRS is continuing to work to implement the elective payment process and will provide more information, including about the pre-filing registration process, in late 2023.

For more information on elective pay, the IRS has posted Frequently Asked Questions that discuss eligibility, applicable credits, steps for completing pre-file registration, steps for making an election, and other rules. Additionally, the IRS has a series of publications with key information specifically for various types of applicable entities that may make an elective payment election, including information on how to make the elective pay election and what to do to receive a payment:

• 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 

Form 8038-CP – Availability of Electronic Filing; Mandatory Electronic Filing for Certain Filers in 2024

As part of ongoing efforts to improve service for the tax-advantaged bond community, the IRS accepts electronic filing of Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds. Form 8038-CP is used to claim credit payments under Internal Revenue Code section 6431 relating to interest on build America bonds, recovery zone economic development bonds, new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds, and qualified school construction bonds.

Electronic filing ensures that returns are filed using the current versions of Form 8038-CP (January 2022) and the accompanying Schedule A (December 2022) and can reduce filing errors. Use of a prior version of the form and filing errors delay processing. See the Form Instructions for Form 8038-CP and Schedule A (Form 8038-CP) (December 2022), under General Information, for information on how to get faster payments and avoid common mistakes.

Under Treasury Regulations published February 23, 2023(26 CFR Section 301.6011-11), electronic filing of Forms 8038-CP filed after December 31, 2023 is mandatory for certain filers.

Electronic filing of Form 8038-CP must be done through an authorized e-file provider. The IRS maintains a list of authorized Form 8038-CP e-file providers at IRS.gov/Efile. Additional information regarding Form 8038-CP is available from the IRS on the Form 8038-CP Corner.

Tribal Economic Development Bond Volume Cap is still available

National bond volume authority (volume cap) for Tribal Economic Development Bonds is available for allocation to federally recognized Indian tribal governments. This volume cap is available for tax-exempt bonds issued to finance qualified projects.

In 2009, Congress provided for $2 billion of volume cap for Tribal Economic Development Bonds through the American Recovery and Reinvestment Act of 2009. Currently, approximately $63 million of unused volume cap is available.

Notice 2012-48PDF solicits applications for volume cap and provides related guidance on application requirements and forms to request volume cap allocations. Notice 2015-83PDF modifies Notice 2012-48 and provides special rules for bonds issued under a “draw-down” loan structure.

Tribes may request an allocation of volume cap by following the application procedures provided in Notice 2012-48. The IRS will allocate available volume cap on a first-come, first-served basis by order of submission date.

Find additional information on IRS.gov at Published Volume Cap Limit for Tribal Economic Development Bonds.

Telephonic public approval hearings permitted permanently

The IRS has released Revenue Procedure 2022-20PDF, which provides guidance regarding the public approval requirement under section 147(f) of the Internal Revenue Code for tax-exempt qualified private activity bonds. Specifically, the revenue procedure provides that hearings held by teleconference as described in section 4 of the revenue procedure will be treated as held in a location that, based on the facts and circumstances, is convenient for residents of the approving governmental unit for the purpose of section 1.147(f)-1(d)(2) of the Income Tax Regulations. This guidance eliminates the time period limitations on holding telephonic public hearings that were contained in previous guidance.

Reminder: Use revised form 8038-CP to claim direct pay credits

Issuers of direct pay tax credit bonds should use the January 2022 version of Form 8038-CP for all credit payment claims. Using a prior version of Form 8038-CP will cause processing delays. However, filers should not refile if they have used a prior version of the form.

Below are links to the revised form and instructions:

• Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds
• Form 8038-CP InstructionsPDF
• Schedule A, Specific Tax Credit Bonds Interest Limit ComputationPDF
• Watch revisions to Form 8038-CP video for a detailed discussion of the January 2022 revisions.

Form 8038-CP is used to claim refundable tax credit payments payable to issuers of qualified build America bonds, recovery zone economic development bonds, and specified tax credit bonds.

The IRS has revised Form 8038 to include bonds authorized by the Infrastructure Investment and Jobs Act

The IRS has released an updated Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues.  Form 8038 has been revised to include exempt facility bonds for qualified broadband projects (line 11k) and qualified carbon dioxide capture facilities (line 11o), which were authorized to be financed with private activity bonds by the Infrastructure Investment and Jobs Act, Pub. L. 117-58, 135 Stat. 429 (2021).

Tax Exempt Bonds Forms & Publications are available on IRS.gov.

Reminder: Use revised form 8038-CP to claim direct pay credits

Issuers of direct pay tax credit bonds should use the January 2022 version of Form 8038-CP for all future credit payment claims. Using a prior version of Form 8038-CP may cause processing delays.
Below are links to the revised form and instructions:

• Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds
• Form 8038-CP InstructionsPDF
• Schedule A, Specific Tax Credit Bonds Interest Limit ComputationPDF
• Watch revisions to Form 8038-CP video for a detailed discussion of the January 2022 revisions.

Form 8038-CP is used to claim refundable tax credit payments payable to issuers of qualified build America bonds, recovery zone economic development bonds, and specified tax credit bonds.

The IRS extends the acceptance of electronic or digital signatures on certain Form 8038 series filings

The IRS has extended its policy to temporarily allow the use of electronic or digital signatures on various forms if signed and postmarked by October 31, 2023. This includes the following Form 8038 filings:

• Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues
• Form 8038-G, Information Return for Government Purpose Tax-Exempt Bond Issues
• Form 8038-GC, Consolidated Information Return for Small Tax-Exempt Government Bond Issues

No other Form 8038 series forms are eligible for this temporary relief.

Electronic or digital signatures are not mandatory and handwritten signatures will continue to be accepted. These forms cannot be e-filed and generally are printed and mailed. Electronic and digital signatures appear in many forms when printed and may be created by many different technologies. The IRS does not require the use of any specific technology to generate electronic or digital signatures.

Reminder: Use revised Form 8038-CP to claim direct pay credits

Issuers of direct pay tax credit bonds should use the January 2022 version of Form 8038-CP for all future credit payment claims. Using a prior version of Form 8038-CP may cause processing delays.

Below are links to the revised form and instructions:

• Form 8038-CP, Return for Credit Payments to Issuers of Qualified BondsPDF
• Form 8038-CP InstructionsPDF
• Schedule A, Specific Tax Credit Bonds Interest Limit ComputationPDF
• Watch Revisions to Form 8038-CP video for a detailed discussion of the January 2022 revisions.

Form 8038-CP is used to claim refundable tax credit payments payable to issuers of qualified build America bonds, recovery zone economic development bonds and specified tax credit bonds.

Revised Form 8038-CP

The IRS revised Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds, and related instructionsPDF. The January 2022 revision includes a new Schedule A, Specific Tax Credit Bonds Interest Limit ComputationPDF.

Form 8038-CP is used to claim refundable tax credit payments payable to issuers of qualified build America bonds, recovery zone economic development bonds, and specified tax credit bonds.

Issuers should use the January 2022 version of Form 8038-CP for all future submissions. Using a prior version after 2021 may cause a delay in processing a request for credit payment.

Watch the new video from Tax Exempt Bonds, Revisions to Form 8038-CP for a detailed discussion of the Form 8038-CP changes.

Reporting private activity bonds authorized by the Infrastructure Investment and Jobs Act

The IRS plans to update Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues, to provide for identifying the new types of projects (qualified broadband projects and qualified carbon dioxide capture facilities) authorized to be financed with private activity bonds by the Infrastructure Investment and Jobs Act, Pub. L. 117-58, 135 Stat. 429 (2021). The revised Form 8038 is expected to be available before May 15, 2022.

Revision to Form 8038-CP and Instructions

The IRS released draft Form 8038-CP, Return for Credit Payments to Issuers of Qualified BondsPDF, including new Schedule A, Specific Tax Credit Bonds Interest Limit ComputationPDF, and the related draft InstructionsPDF. We’re updating the form and instructions to accommodate electronic filing of Form 8038-CP in 2022.

Form 8038-CP is used to claim refundable tax credit payments payable to issuers of qualified Build America Bonds, Recovery Zone Economic Development Bonds, and specified tax credit bonds.

Issuers should use the January 2022 version of Form 8038-CP for submissions received by the IRS in January 2022. Using a prior version of Form 8038-CP after 2021 may cause a delay in processing a request for credit payment.

Tax Exempt Bonds will hold two Zoom meetings to explain the changes to filing Form 8038-CP and answer questions. Select the appropriate link below to join the meeting:

• Tuesday November 16, 2021 2 p.m. Eastern Zoom meeting ID 161 789 8661
  For paid preparers such as banks and bond counsel.
• Wednesday November 17, 2021 1 p.m. Eastern Zoom meeting ID 160 852 4420 For issuers that file their own Forms 8038-CP.
  
  To join by audio only, dial by your location and input the meeting ID when prompted:
  • 669-254-5252 US (West Coast)
  • 646-828-7666 US (East Coast)

These Zoom meetings are open to everyone and will cover the same material with a slightly different emphasis. You are welcome to attend either meeting.

We’ll post more information about Form 8038-CP revisions and electronic filing at the Recent Updates to Form 8038-CP and Processing Changes.

Revision to Form 8038-CP and Instructions

The IRS released draft Form 8038-CP, Return for Credit Payments to Issuers of Qualified BondsPDF, including new Schedule A, Specific Tax Credit Bonds Interest Limit ComputationPDF, and the related draft InstructionsPDF. We're updating the form and instructions to accommodate electronic filing of Form 8038-CP in 2022.

Form 8038-CP is used to claim refundable tax credit payments payable to issuers of qualified Build America Bonds, Recovery Zone Economic Development Bonds, and specified tax credit bonds.

Issuers should use the January 2022 version of Form 8038-CP for submissions received by the IRS in January 2022. Using a prior version of Form 8038-CP after 2021 may cause a delay in processing a request for credit payment.

Tax Exempt Bonds will hold two Zoom meetings in November to explain the changes to filing Form 8038-CP and answer questions. Select the appropriate link below to join the meeting:

• Tuesday November 16, 2021 2 p.m. Eastern Zoom meeting ID 161 789 8661 
  For paid preparers such as banks and bond counsel.
• Wednesday November 17, 202 1 p.m. Eastern Zoom meeting ID 160 852 4420
  For issuers that file their own Forms 8038-CP.
  
  To join by audio only, dial by your location and input the meeting ID when prompted:
  • 669-254-5252 US (West Coast)
  • 646-828-7666 US (East Coast)

These Zoom meetings are open to everyone and will cover the same material with a slightly different emphasis. You are welcome to attend either meeting. We'll post more information about Form 8038-CP revisions and electronic filing at the Recent Updates to Form 8038-CP and Processing Changes.

IRS Position Announcement – Tax Law Specialists (Tax Exempt Bonds)

The IRS Office of Tax Exempt Bonds (TEB) is seeking to hire two highly experienced Tax-Advantaged Bonds Tax Law Specialists. The positions are available in any of 27 different locations, as described in the position announcement.  The application closing date is October 22, 2021.

As a member of our team, you will be responsible for serving as an expert on technical matters relating to tax-advantaged bonds and municipal finance with respect to all aspects of the TEB program including voluntary compliance, enforcement, data analysis, education and outreach. The job duties for the position include preparing technical responses to inquiries submitted by members of Congress, taxpayers, authorized representatives, government agencies, and other external customers. The position involves conferring with customers and representatives to explain financial, legal and other significant issues involved and the applicability of pertinent tax guidance, as well as actions or adjustments required to promote compliance.

Candidates must have specialized experience in the application of Federal tax laws, regulations and other guidance applicable to tax-advantaged municipal bond transactions, and strong analytical, organizational, writing and interpersonal skills. Please visit us at usajobs.gov.

IRS Position Announcement – Senior Tax Law Specialist (Tax-Advantaged Bonds)

The IRS Tax Exempt and Government Entities (TE/GE) division is seeking to hire a highly experienced Tax-Advantaged Bonds Tax Law Specialist in its Exempt Organizations/Government Entities function for its Washington, D.C. office. The application closing date is October 29, 2021.

As a member of our team, you will be responsible for advising and providing specialized support to the Division Director on complex technical and analytical matters pertaining to tax-advantaged municipal finance transactions, including enforcement and voluntary compliance support and outreach activities. The job duties for the position include preparing technical responses to the most complex inquiries submitted by TE/GE leadership, IRS employees, members of Congress, Tax Exempt Bonds, taxpayers, authorized representatives, government agencies, and other external and internal customers. The position involves networking and relationship building to develop and maintain effective liaisons with internal and external customers within the tax advantaged bond community.

Candidates must have specialized experience in the application of Federal tax laws, regulations and other guidance applicable to tax-advantaged municipal bond transactions, and strong analytical, organizational, writing and interpersonal skills. Please visit us at usajobs.gov.

Revenue Procedure 2021-39 provides temporary guidance regarding the public approval requirement under section 147(f) of the Internal Revenue Code for tax-exempt qualified private activity bonds.  Specifically, in light of the continuing Coronavirus Disease pandemic, this revenue procedure extends until March 31, 2022, the time period during which certain telephonic hearings are permitted, as described in Rev. Proc. 2020-21 and modified by Rev. Proc. 2020-49.

New Webpage from the Office of Tax Exempt Bonds

A new webpage from the Office of Tax Exempt Bonds, Compliance Resources for Issuers, contains important information for issuers of tax-advantaged bonds all in one place. You’ll find IRS publications covering different types of bonds, compliance guides for issuers and borrowers, and links to other resources addressing topics of importance to the tax-advantaged bond community.

Electronic or digital signatures temporarily permitted on various forms, including certain Form 8038 series filings

The IRS will temporarily allow the use of electronic or digital signaturesPDF on various forms, including only the following three Form 8038 filings listed below:

• Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues
• Form 8038-G, Information Return for Government Purpose Tax-Exempt Bond Issues
• Form 8038-GC, Consolidated Information Return for Small Tax-Exempt Government Bond Issues

No other Form 8038 series forms are eligible for this temporary relief.

Electronic or digital signatures will be accepted on these forms that are signed and postmarked from January 1, 2021, through June 30, 2021.

Electronic or digital signatures are not mandatory and handwritten signatures will continue to be accepted. These forms cannot be e-filed and generally are printed and mailed. Electronic and digital signatures appear in many forms when printed and may be created by many different technologies. The IRS does not require the use of any specific technology to generate electronic or digital signatures.