IRS Launches Pre-Filing Tool for IRA, CHIPS Act
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The IRS has launched a new tool to assist businesses and organizations in monetizing clean energy credits. This tool is linked to the Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors Act (CHIPS) and permits taxpayers to capitalize on manufacturing investment, clean energy investment and production tax credits. Entities wishing to monetize credits must register their intent using the online tool, ensuring registration is completed at least 120 days in advance of filing tax returns.
IRS’s New Tool for Monetizing Clean Energy Credits
The IRS has introduced a unique tool for businesses, tax-exempt organizations, and government bodies to monetize clean energy credits. Qualified entities can access this new IRA/CHIPS Pre-filing Registration Tool.
This tool is a product of the Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors Act (CHIPS). It permits taxpayers to benefit from manufacturing and clean energy investment tax credits via elective pay or transfer, even if they can’t offset their tax liability with the earned credits. However, to earn these qualifying credits, taxpayers need to invest or partake in tax credit production activities.
Procedures for Monetizing Credits
Entities intending to monetize their credits should submit the pre-filing registration request at the beginning of the tax year they will earn the credit. This process requires entities to use the online tool to register their intention and include the received registration numbers on their tax return. The IRS advises to register “as promptly as possible” and recommends submitting pre-filing registration at least 120 days before filing tax returns to allow sufficient time for review.
If the elective payment amount alongside other tax payments and refundable credits exceeds the taxpayer’s income tax liability, it’s treated as an overpayment of tax. This overpayment can be refunded or credited to the estimated tax for the subsequent tax year. A detailed video guide on how to use the pre-filing registration tool has been released by the IRS.
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