Tax990 Knowledge Base

How do elective payments and transfers of certain credits work under the Inflation Reduction Act?

Under the Inflation Reduction Act, applicable entities can choose to make elective payments, treating certain clean energy credits as payments against federal tax liabilities, with any excess refunded. Entities like tax-exempt organizations and governments qualify, and other taxpayers may also opt in for limited credits. 

Additionally, eligible taxpayers can transfer credits to unrelated parties for cash payments. The cash isn’t taxed for the transferor, and the unrelated party can claim the credit on their tax return. A mandatory IRS pre-filing registration process is required before making these elections.