Inflation Reduction Act Direct Pay and Transfer Pre-Filing Registration Is Open for Business
The IRS launched its Inflation Reduction Act (IRA) Pre-Filing Registration Tool 1 in late 2023 for elective (direct) payments under Section 6417 and tax credit transfers under Section 6418 of the Internal Revenue Code. Contemporaneous with the launch of the online tool, the IRS released a user guide and an instructional video that should be carefully reviewed before accessing the online pre-filing registration tool.
Holland & Knight Insight: Even though registration is not possible prior to the beginning of the tax year in which the credit will be earned (i.e., the project is placed in service), the IRS recommends that the taxpayer registers as soon as reasonably practicable during the tax year. The current recommendation is to submit the pre-filing registration at least 120 days prior to when the taxpayer claiming the credit plans to file its annual tax return. This should allow time for IRS review and for the taxpayer to respond if the IRS requires additional information before issuing the registration numbers.
Upon successful and satisfactory completion of the pre-filing registration process, the IRS will generate a registration number. This registration number must be included in the taxpayer's annual return on which the election to claim direct pay or transfer is made by using an IRS Form 3800, "General Business Credits." A registration number must be obtained for each separate eligible facility or property for which a credit is claimed – that is, a taxpayer may need to seek multiple registration numbers – and is valid for only one taxable year.
Holland & Knight Insight: If the taxpayer chooses to make additional pre-filing registration submissions for different facilities or properties, the taxpayer must wait until the most recent pre-filing registration submission is processed by the IRS and returned. As such, the annual registration process could potentially give rise to significant compliance burden for the taxpayer placing multiple projects into service annually or receiving 10-year production tax credits.
General Overview: Pre-Filing Registration Process
As a first step in the pre-filing registration process, users must create or sign into an ID.me account. This site will request personal information about the user to confirm identity. The user must be a natural person.
Holland & Knight Insight: ID.me has its own help site to assist taxpayers having difficulty creating an account. The user guide notes that taxpayers should not call an IRS customer account service telephone number for help with ID.me.
In step two of the process, users must create (or authorize) an "Energy Credits Online" account. In the case of taxpayers who are distinct legal entities, the user must confirm it has authorization by the taxpayer to create the account. To complete the authorization, the user must provide personal information (name and personal address) and the name, address and Employer Identification Number (EIN) of the taxpayer. The authorization will require users to make the following attestations: 1) under penalties of perjury, such user declares that the information provided is true, correct and complete to the best of the user's knowledge and belief, and 2) the user is a corporate officer, partner, guardian, executor, receiver, administrator, trustee or individual other than the taxpayer and has legal authority to execute the authorization on behalf of the taxpayer.
Holland & Knight Insight: Users are encouraged to carefully review the information they provide before clicking "Submit." Information provided will be compared to information in IRS records. Errors may cause a user's attempt to authorize a business to fail. After three unsuccessful attempts to authorize a business, the user will not be able to try again for 24 hours.
Users can be authorized for more than one taxpayer. One taxpayer can also have more than one user. IRS Publication 5902 details how permission is granted from the first user, referred to by the IRS as the Clean Energy Officer, to other users. The first user and any additional users will receive email notifications on the status of the pre-filing registration process if they opt in to receive such emails.
Once step two of the process is complete, users will be able to begin the pre-filing registration process entering general taxpayer information and answering specific questions about the facility or property and the related tax credit. Users can save information and return to the process as needed prior to formal submission.
Holland & Knight Insight: Prior to formal submission, taxpayers should confirm what type of credit they expect to earn and whether they intend to claim an elective (direct) payment under Section 6417 or elect to transfer the tax credits under Section 6418 to avoid having to later amend the registration, which could result in delays in obtaining the requisite registration number.
Each registration number is unique and will be assigned to a specific election type, credit, facility/property, tax period of the election and owner of the facility or property. Any changes to the information provided in the registration affecting any of these elements of the registration number will necessitate an amendment to the registration. A registration submitted for review cannot be changed until it is returned with registration numbers or comments that explain why registration numbers were not issued. Once the registration submission is returned, users can revise the registration.
Holland & Knight Insight: Amendments should be made at least 120 days prior to the taxpayer's annual tax return filing to avoid a situation where a registration number is not obtained by the time such tax return is due.
For taxpayers who are members of consolidated groups for tax purposes, the taxpayer (registrant) is the parent, and the parent's EIN and name must be used. The parent must act as an agent for its subsidiaries.
Other General Information
The guide also covers the following topics:
- Timing: A pre-filing registration request is to be submitted to the IRS no earlier than the beginning of the tax year in which the taxpayer earns and wishes to monetize the tax credit. However, the IRS recommends that the taxpayer complete the process and submit the request at least 120 days before intending to file an annual return. No expediting can be requested. The IRS will generally review the requests in order received but may consider the tax period end date when prioritizing pending registrations.
- Additional IRS Information Requests: Once the taxpayer submits a pre-filing registration request, the IRS may during its review request additional information. Taxpayers have 35 days to respond. If that deadline is missed, a registration number may be denied.
- Additional Documents: The guide notes that the online tool is dynamic (i.e., depending on the tax credit looking to be monetized through an election, the questions and information the IRS seeks will differ). The guide previews the questions and information that will be required. In addition to responding to specific questions on the facility or property (e.g., latitude and longitude), the IRS allows the taxpayer to upload additional supporting documentation. Though not mandatory, the IRS notes that such additional documentation may be helpful in its review.
The Holland & Knight Energy Tax Team is available for questions regarding the Pre-Filing Registration Tool.
1 Pre-filing registration is also required for those taxpayers seeking a direct payment of the Section 48D tax credit for the investment in semiconductor or semiconductor equipment manufacturing facilities. The Section 48D credit was enacted as part of The Chips and Science Act. The official name of the portal is "Inflation Reduction Act (IRA) and CHIPS Act of 2022 (CHIPS) Pre-Filing Registration Tool," although this alert is focused on use of the portal for the Inflation Reduction Act provisions.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.