The Inflation Reduction Act of 2022 (the “IRA”) made several changes to the tax laws allowing owners to transfer certain manufacturing investment, clean energy investment and production tax credits to unrelated third parties or to elect for direct payment in lieu of the tax credit, if certain requirements are met. Among the various requirements set forth in the IRA, taxpayers that want to take advantage of transferring the tax credits or receiving a direct payment from the IRS will need to file with the IRS (i) a transfer election statement, (ii) a relevant source credit form, and (iii) a Form 3800 (General Business Credit) with such taxpayer’s tax return. However, before taxpayers can make a transfer or direct payment election, they must complete a pre-filing registration process with the IRS to obtain a registration number. The registration number is required to be disclosed on the taxpayer’s annual tax return as part of making a valid election.
On December 22, 2023, the IRS announced (IR-2023-249) the opening of the IRA and CHIPS Act of 2022 Pre-filing Registration Tool, which is intended to prevent fraud, duplication, improper payments, or excessive payment. In addition, the IRS also released Publication 5884, Inflation Reduction Act (IRA) and CHIPS Act of 2022 (CHIPS) Pre-Filing Registration Tool User Guide and Instructions, to assist taxpayers with the pre-filing registration process.
Taxpayers seeking to transfer tax credits or receive a direct payment from the IRS must complete the pre-filing registration process at least 120 days prior to when such taxpayer plans to file its tax return on which it will make its election. The IRS recommends that taxpayers register as soon as practicable during the tax year. Therefore, taxpayers who expect to make an election with respect to a 2023 tax credit should immediately start considering completing their registration.
Business taxpayers should note that registration is not available through an IRS business tax account and therefore, the registration will be tied to the IRS personal account of the authorized individual who completes the pre-filing registration process. Furthermore, the IRS is working on expanding the functionality of the pre-filing tool to allow for additional authorized users and allow for the registration through an IRS business tax account.
If you have any questions about the pre-filing registration process, please contact any member of the Tax Practice Group.