1. Final regulations from the Dept. of Treasury and IRS provide rules for transferring eligible credits in a taxable year, including specific rules for partnerships and S corporations.
2. The Inflation Reduction Act and CHIPs act allow taxpayers to take advantage of manufacturing and clean energy investment tax credits through elective pay or transfer provisions.
3. Eligible taxpayers starting in 2023 can transfer credits to unrelated taxpayers for cash payments, with special rules for excessive credit transfers and recapture events, as well as a mandatory pre-filing registration process through an electronic portal.
Final regulations issued by the Dept. of Treasury and IRS provide rules for transfer of eligible tax credits, including special provisions for partnerships and S corporations. The Inflation Reduction Act and CHIPs Act allow taxpayers to transfer manufacturing and clean energy investment credits for cash payments to unrelated taxpayers. Cash payments are not taxed for the transferor or deductible for the transferee.
Special rules are outlined for excessive credit transfers and recapture events, along with a mandatory pre-filing registration process through an electronic portal to transfer eligible credits. Ben Norris of SEIA commended the finalized rules for providing flexibility to clean energy companies to monetize tax credits without complex structures.
The IRS also updated FAQs based on the final regulations and guidelines for using the pre-filing registration tool. The regulations aim to streamline the process for transferring tax credits and provide liquidity to clean energy businesses facing economic challenges. SEIA calls on the Biden administration to revise proposed Basel III rules to maximize the impact of the transferability provisions in the IRA. For more information, refer to Publication 5884 on IRS.gov.