The Internal Revenue Service currently released new regulations and usually responded to queries defining the requirements for qualified taxpayers who decide to provide expected credits to outside parties and guidelines for relevant organizations that make certain renewable energy credits and elect to make an optional payment election. The majority of the small print won’t be made public till June 21, 2023.
An optional payment election might be made by eligible entities for tax years starting after December 31, 2022, allowing them to treat some credits as payments towards their federal income tax liability instead of as nonrefundable credits. The extra amount will be refunded once this payment has first been applied to any tax liabilities of the organization.
The Tennessee Valley Authority, rural electrical associations, state and municipal governments, Indian governments of tribes, Alaska Native corporations, and tax-exempt organizations are examples of eligible organizations. A small number of credits are available to all additional taxpayers who choose to be recognized as an appropriate entity.
Additionally, for tax years starting after December 31, 2022, a select group of qualified taxpayers (often taxpayers who are not relevant businesses) may elect to exchange all or some of a qualifying credit for payments in cash from unconnected taxpayers.