Nonprofits can now register Inflation Reduction Act tax credits

Blog written by Michael DePrima, Principal, Federal Tax Strategies Group

Many nonprofit organizations may have already undertaken projects that are eligible for “green energy credits” under the Inflation Reduction Act, but have been awaiting availability of the IRS tools to start the process to claim the credits. That day is now here!

The IRS has launched its pre-filing registration tool, allowing organizations to register tax credits for elective payment under the Inflation Reduction Act (IRA). The much-anticipated online portal will be the first step for tax exempts to claim cash in lieu of credits for various clean energy investments, such as solar panels, geothermal HVAC, electric vehicles, and charging infrastructure.

Section 6417 of the Internal Revenue Code, which created the elective payment opportunity under the IRA, is effective for tax years beginning on or after January 1, 2023. While organizations may be eager to register their projects, registration isn’t required until a qualified project is placed in service; and registration should not be done earlier than the beginning of the tax period in which the credit will be claimed.

The IRS is advising organizations to allow ample time for it to review submissions and recommends registering projects at least 120 days before the due date (including extensions) of the Form 990-T on which the applicable credit will be claimed. Organizations should account for this wait time when completing the registration process and consider extending their Forms 990-T accordingly.

Be on the lookout 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?

The Inflation Reduction Act is a game changer for investing in clean energy, offering new tax incentives and financing opportunities.

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