rm 990-TAs noted in our August 29, 2023 client advisory, the Proposed Regulations, which have not yet been finalized as of the date of publication of this client advisory, would require all Applicable Entities, including units of State and local government which typically do not file a federal tax return, to file IRS Form 990-T to claim these credits. The IRS has published an updated Form 990-T for taxable year 2023, and its instructions include information about how to fill it out to claim a refund (including refundable ITCs) under the heading “Claim for refund.”The amount of the refundable ITC, which is reported on line 6g of Part III, comes from Form 3800, which in turn uses data reported on the source credit forms. When the instructions for those forms are updated, it should be clearer how the refundable ITC amount required for Form 990-T is calculated and reported. Inflation Reduction Act of 2022, H.R. 5376, 117th Cong. (2022). Section 6417 Elective Payment of Applicable Credits, 88 Fed. Reg. 40528 (June 21, 2023). The Proposed Regulations can be found at https://www.federalregister.gov/documents/2023/06/21/2023-12798/section-6417-elective-payment-of-applicable-credits. See Form 990-T below.

This past summer, the Treasury and Internal Revenue Service (IRS) published proposed Treasury Regulations (88 FR 40528 and 88 FR 40496) under two key provisions of the Inflation Reduction Act of 2022 (IRA) designed to enable taxpayers and tax-exempt entities to monetize certain energy-related federal tax credits. Section 6417 allows certain tax-exempt and governmental entities that historically could not benefit from such tax credits to receive direct payments from the government in lieu of such tax credits. Section 6418 permits taxpayers to transfer all or a portion of certain energy-related tax credits to unrelated parties for cash. By broadening the universe of organizations that are able to make use of energy-related tax credits through the direct pay provisions and creating a more direct pathway for taxpayers interested in financing energy projects to share credits through transferability, these provisions stand to significantly expand the market for investment in energy projects.This article begins with some background regarding the Direct Pay Rules and the Transferability Rules and provides a s

On June 21, 2023, the Treasury Department (Treasury) and Internal Revenue Service (IRS) published proposed regulations (88 FR 40528 and 88 FR 40496) under two key provisions of the Inflation Reduction Act of 2022 (IRA) designed to enable taxpayers and tax-exempt entities to monetize certain energy-related federal tax credits. Section 6417 of the Internal Revenue Code (Code) allows certain tax-exempt and governmental entities to apply to receive direct payments from the government with respect to certain energy-related tax credits. Section 6418 of the Code permits taxpayers to transfer all or a portion of certain energy-related tax credits to unrelated parties for cash. By broadening the universe of organizations that are able to make use of energy-related tax credits through direct pay, and creating a more direct pathway for taxpayers interested in financing energy projects to share credits through transferability, these provisions stand to significantly expand the market for investment in energy projects. Even before the regulations were proposed, these two provisions had begun to generate significant interest in