On December 22, 2023, the IRS activated an online portal (the “Registration Portal”) where users can register clean energy projects and investments, which can then be used to claim energy tax credits which are directly payable to state and local governments, as well as to 501(c)(3) organizations (“Applicable Entities”) under the Inflation Reduction Act of 2022 (the “Act”).^[1] This article, which follows and updates our May 8, 2023 and August 29, 2023 client advisories describing the Act’s provision of such payable tax credits for clean energy investments (also referred to as “refundable investment tax credits” or “refundable ITCs”) and the regulations proposed thereunder,^[2] will briefly recap the Act’s refundable ITC provisions, summarize the information provided in IRS Publication 5884 on how to use the Registration Portal, and provide information on the updated Form 990-T.

The Act makes refundable ITCs, along with other energy credits, available to Applicable Entities as cash payments. An Applicable Entity can claim a refundable ITC for up to 30% of its clean energy investment if it meets certain specified wage and apprenticeship requirements. Additional bonuses are available for using domestic content and locating the investment in a low-income community (potentially raising the credit rate to 50% on an all-in basis). The Act, however, also applies a 15% “haircut” to the amount of the refundable ITC if and to the extent proceeds of tax-exempt bonds are used by the Applicable Entity to finance all or a portion of the capital costs of the clean energy project.

Registration Requirement

To claim a refundable ITC with respect to a clean energy investment facility/property (a “Property”), an Applicable Entity must first register the Property on the Registration Portal. Once the registration has been reviewed by the IRS and any outstanding issues resolved, the Registration Portal will provide a registration number that the Applicable Entity can use to claim the refundable ITC.

A property’s registration must occur after the Property has been placed in service, but before the Applicable Entity files a tax return to claim the refundable ITC.^[3] The IRS recommends registering all eligible Properties at least 120 days before the relevant return is due to ensure the IRS has proper time to review the registration (and if the IRS reports any problems, the Applicable Entity will have 35 days to respond after being notified). The registration also identifies which energy-related tax credit the Applicable Entity will claim with respect to the Property.

Different refundable ITCs may require different registrations, and Publication 5884 says to refer to the instructions for Form 3800 and the applicable source credit form for each credit you plan to claim before creating your registration package. Source credit forms are listed in Table 2 on page 17 of Publication 5884. Unfortunately, at the time of this article’s publication, those instructions are not complete. The instructions for Form 3800, dated 2022, state that, “Additional information about [deemed payments] will be posted at https://www.IRS.gov/Form3800 in the coming weeks.” Similarly, looking at one of the source credit forms, Form 3468, the sections for energy credits do not correspond to the form’s instructions, which are also dated 2022. Presumably, once the instructions are updated, the registration requirements for each refundable ITC will be clearer.

Each Applicable Entity can file only one registration package annually, which must contain all of the registrations for its credit-eligible Properties. Once a registration package is submitted, it cannot be amended until after the IRS has completed its review. After that review, however, the Applicable Entity can amend the registration package, including adding new registrations of new Properties. Keep in mind, however, that the amended registration package will enter the same IRS review process, so submissions should be coordinated to ensure the final review is complete before the due date of the return filing to claim the credit.

Portal Directions

IRS Publication 5884 provides detailed screen-by-screen instructions on how to use the Registration Portal, but we will review some highlights here. An individual user must log into the Registration Portal with an ID.me account and enter information about the Applicable Entity (or Entities) it will represent on the Registration Portal. The user must provide a personal name and address which appeared on her or his most recent personal income tax return.

For each Applicable Entity, the user must enter the Applicable Entity’s EIN (an IRS Employer Identification Number is required to claim refundable ITCs) and its name and address from its most recent tax return. The user can also choose whether to receive notification emails from the IRS with respect to the Applicable Entity’s registrations on the Registration Portal.

To register a Property, the user must enter, among other general Applicable Entity and Property information required for the specific tax credit, a bank account associated with the Applicable Entity’s name and EIN; the type of tax credit to be claimed and tax year for which it will be claimed; and tax credit-specific Property information which could include when the Property was placed into service, the Property’s location, the Applicable Entity’s percentage ownership of the Property, and the source of funds to develop the Property.

A user can begin an Applicable Entity’s registration package, save it, and return to the Registration Portal to update it later until the registration package is submitted. At that time, the registration package will be locked and inaccessible to the Applicable Entity until the IRS completes its review.

Form 990-T

As 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.

[1] Inflation Reduction Act of 2022, H.R. 5376, 117th Cong. (2022).

[2] 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.

[3] See Form 990-T below.