IRS Offers Tool for IRA, CHIPS Act Pre-Filing

The IRS is offering a new tool for businesses and organizations looking to monetize clean energy credits. 

Qualifying businesses, tax-exempt organizations, and entities like state, local, and tribal governments can use the new IRA/CHIPS Pre-filing Registration Tool.

Through the Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors Act, known as CHIPS, taxpayers can take advantage of manufacturing investment, clean energy investment and production tax credits through elective pay or transfer.

The elective pay and transfer are ways for those entities who earned an IRA clean energy or CHIPS credit to get the benefit even if they can’t use the credit to offset their tax liability. 

Taxpayers must make an investment or undertake tax credit production activities to earn a qualifying credit.

Monetizing Credits

Entities should submit the pre-filing registration request no earlier than the beginning of the tax year they will earn the credit they wish to monetize.

To monetize credits, entities must:

• Use the online tool to register the intention to make an elective payment or transfer election
• Include registration numbers received through this online tool on the entity’s tax return

The IRS says taxpayers should register “as soon as reasonably practicable.” 

The current recommendation is to submit pre-filing registration at least 120 days before filing tax returns to allow time for review.

If the elective payment amount and other tax payments and refundable credits exceeds the taxpayer’s income tax liability, it will be treated as an overpayment of tax. 

That means it can be refunded or credited to estimated tax for the next tax year.

The IRS released a video explaining how to use the pre-filing registration tool.