TL/DR –
The Internal Revenue Service (IRS) has released final regulations regarding the transfer of certain tax credits under the Inflation Reduction Act (IRA) of 2022. Taxpayers can now elect to transfer all or part of their eligible tax credits to an unrelated taxpayer for a specific year, where the recipient then becomes the taxpayer for the given credit. These regulations include 11 specific credits such as renewable electricity production and clean hydrogen production, with the rules set to go into effect on July 1, 2024.
New IRS Regulations for Transferring Tax Credits
The Internal Revenue Service (IRS) has recently issued final rules regarding the transfer of certain credits related to the Inflation Reduction Act (IRA) of 2022. This comprehensive guideline clarifies how taxpayers can transfer these credits and includes definitions, special regulations for partnerships and S corporations, and procedures if credits are improperly transferred or need to be recaptured.
Taxpayers can opt to transfer all or some of their eligible tax credits to another unrelated taxpayer for a specific tax year. The recipient, in turn, becomes the taxpayer for that credit. This non-taxable or deductible transaction must be conducted in cash.
The IRA identified 11 particular credits available for transfer, including those for renewable electricity production, clean hydrogen production, and various energy projects. Each credit transfer must be separately made for each facility and year.
The transfer election must be made on the original tax return for the year when the credit is calculated and is irrevocable. Moreover, the transferee is prohibited from re-transferring the credit and must account for it in their first taxable year following the transfer.
These provisions will take effect starting July 1, 2024.
—
Read More US Economic News