Entities looking to leverage the Direct Pay option under the Inflation Reduction Act (IRA) for clean energy projects can follow these steps to ensure they correctly apply for and receive their entitled benefits.

​

Step 1: Identify the Project and Applicable Credit

​

• Project Eligibility: Confirm that your clean energy project is eligible for one of the IRA tax credits applicable for Direct Pay. This could include various clean energy initiatives like solar, wind, or energy-efficient upgrades.

​

• Documentation: Gather all necessary documentation for the tax credits and any additional bonuses you intend to claim.

​

• Consultation: Since the Treasury and IRS do not provide personalized tax advice on eligibility, it's advisable to consult with a tax advisor for clarity. For general information about clean energy tax credits, visit IRS.gov/Cleanenergy.

​

Step 2: Complete Your Project and Determine the Tax Year

​

• Project Completion: Complete your clean energy project and ensure it's operational ("placed in service").

​

• Tax Year Identification: Typically, the tax year is the calendar year in which your project is placed in service. For instance, if your project is operational in 2023, your tax year is likely 2023.

​

Step 3: Determine Your Tax Return Due Date

​

• Due Date Calculation: For most tax-exempt and governmental entities, the tax return for a given year is due 4.5 months after the end of that year. For example, if your tax year ends in December 2023, your return would be due by May 15, 2024.

​

• Extension Option: Entities without a regular filing requirement may be eligible for an automatic 6-month extension.

​

Step 4: Complete Pre-filing Registration with the IRS

​

• IRS Registration: Before filing your tax return, register with the IRS to receive a unique registration number for your clean energy property. This number is specific to one property for one tax year and must be renewed for subsequent years.

​

• Information Submission: During pre-registration, provide details about your organization, the credits sought, and your clean energy project via an online portal. Detailed guidance on pre-filing registration is expected to be available by late 2023.

​

Step 5: File Your Tax Return

​

• Filing with Registration Number: File your tax return by the due date (including any extensions), incorporating your registration number and electing the payment option. Most entities will use Form 990-T.

​

• Additional Documentation: Along with your tax return, submit any required documentation and forms related to the underlying tax credit. Helpful filing tips for tax-exempt organizations can be found here.

​

Step 6: Receive Your Direct Payment

​

• Payment Processing: After your return is processed successfully, you will receive your direct payment. Note that under the law, you are entitled to this payment only after the due date of the return.

​

• Payment Method: Payments are typically made either electronically or via mail, depending on your setup with the IRS.

​

By following these steps, eligible entities can efficiently navigate the process of applying for Direct Pay, ensuring they receive the financial benefits available for their clean energy projects. Remember, staying informed about deadlines and maintaining accurate records are key to a smooth application process.