When to Claim Green Energy Tax Credits

Timeliness is very important!

Many tax-exempt clients are eager to claim their refundable green energy credits from the Inflation Reduction Act (IRA). The Inflation Reduction Act is a game changer for investing in clean energy, offering new tax incentives and financing opportunities. These credits can only be claimed, however, on a timely filed original Form 990-T (including extensions.) You cannot file an amended or late return to obtain the credits.

Exempt organizations need to either file timely a Form 990-T or timely file an extension using Form 8868 – Application for Automatic Extension of Time to File an Exempt Organization Return. The original filing due date is generally the 15th day of the 5th month after the tax year end.

According to the IRS’s Elective Pay Frequently Asked Questions (FAQs) 21:

• No election is permitted to be made on an amended return or by filing an administrative adjustment request under section 6227 of the Code. There is no relief available under sections 301.9100-1 through 301.9100-3 of the Procedure an Administration Regulations (26 CFR part 301) for an elective payment election that is not timely filed.
• Elective Pay and Transferability Frequently Asked Questions: Elective Pay | Internal Revenue Service (irs.gov)

These green energy tax credits are available now starting for tax year 2023. According to the IRS’s FAQ 27:

• Q27. Can I apply elective pay to taxable years beginning before December 31, 2022? (added June 14, 2023)
• A27. No. Elective pay is only effective for taxable years beginning after December 31, 2022. As a result, if your taxable year begins in the middle of the calendar year, even though one of your taxable years ends during 2023, section 6417 only applies to the taxable year that begins in 2023.

The good news for government entities is that, since the extension Form 8868 has not yet been updated to allow for government entities to request an extension of time to file, according to the recently released IRS Pre-Filing Registration Tool User Guide, in this first year of implementation it is unnecessary for government entities to request an extension.

But for all exempt organizations, be sure to timely file a Form 990-T or timely file an extension if there is any potential for your organization to qualify for green energy tax credits. These energy tax credits are very valuable, and filers will want to take extra care with due dates.

CLA’s Federal Tax Strategies and National Exempt Tax (NExT) teams can help your organization navigate the available credits and filing requirements. Watch for more insights from CLA’s nonprofit and federal tax strategies teams about this important development and how the IRA can benefit your organization. Unsure if your project might be eligible? Contact Us for an initial consultation.