Pre-Filing Registration for Elective Pay is Now Available

The US Treasury Department recently opened its Pre-Filing Registration Page for entities that want to claim elective or direct pay of the Investment Tax Credit (ITC).

Elective Or Direct Pay

As part of the Inflation Reduction Act (IRA), tax-exempt entities are eligible to receive a cash payment equal to the investment tax credit (ITC) amount they would have received for an eligible investment.

Entities that can participate in elective pay are those that do not pay any federal income tax, including “… tax-exempt organizations, states and political subdivisions such as local governments, Indian tribal governments, rural electric cooperatives, and agencies and instrumentalities of state, local, tribal and U.S. territorial governments.”

Beginning in 2024, solar projects 1 MW and above will be required to meet domestic content requirements to receive the full Elective Pay refund.

Beginning of Construction

Reduction in Elective Pay Refund for Failure to Meet Domestic Content Requirement

2024 2025 2026 & Later 10%15%100%

To participate in elective pay, entities must complete the Pre-Filing Registration for the IRS where they will identify:

• The credits they intend to earn
• The location of the projects
• Other details about their clean energy investment

After completing the Pre-Filing Registration form, the entity will receive a registration number for each property. Entities will then either file a tax return or a Form 990-T: “Exempt Organization Business Tax Return,” which must include their registration number in order to claim the payment.

Additional information about elective pay can be found on this fact sheet and the IRS has also posted a video with instructions on how to complete the Pre-Filing Registration form.

Pre-Registration Filing & Annual Tax Returns

According to the US Treasury, Pre-Filing Registration should be completed “no earlier than the beginning of the tax year in which the taxpayer will earn the credit it wishes to monetize” and at least 120 days before filing tax returns.  The project must be placed in service before participating in elective pay.

Annual tax returns for entities claiming elective pay must also include:

• Form 3468, showing how the tax credit amount is computed
• Form 3800, showing how the amount is applied to the tax return

(Treasury has not finalized Form 3800 for 2024, but a draft version of the form and instructions are available).

The Pre-Filing Registration form cannot currently be downloaded, so Treasury has provided a worksheet on Page 66 of the User Guide for the Pre-Filing Registration Tool and a video on how to complete the form.

Additional information on completing the Pre-Filing Registration can be found in the  User Guide and FAQ provided by the IRS.