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IRS Opens Pre-Filing Registration Tool for Elective Payment or Transfer of Inflation Reduction Act and CHIPS Act Energy Tax Credits

Client Updates

On December 22, 2023, the IRS announced (IR-2023-249) the opening of the new online pre-filing registration tool for taxpayers who intend to monetize Inflation Reduction Act and CHIPS Act energy tax credits.  Taxpayers electing to sell the credits or elect direct payment must register through the IRS’s registration tool and receive a registration number from the IRS before monetizing their energy credits.  The registration number must be included on the taxpayer’s annual return as part of making a valid election. 

The IRS also released Publication 5884, Inflation Reduction Act (IRA) and CHIPS Act of 2022 (CHIPS) Pre-Filing Registration Tool User Guide (the “User Guide”), a 68-page set of instructions, to assist taxpayers in the pre-filing registration process.  The User Guide includes step-by-step instructions on how to complete the registration process, a list of entity types and the credits available to them for registration, and a credit-specific list of supporting documentation required for each type of credit available for registration.

Compliance with the registration process and issuance of a registration number does not mean a taxpayer qualifies for a credit of any specific amount.  This process is purely an administrative one and does not validate the taxpayer’s credit claim or determine the amount of the credit; however, failure to follow the registration process and receive a registration number will prevent the taxpayer from selling or electing direct pay with respect to its credits.

Allow for Processing Time

The IRS recommends taxpayers register as soon as reasonably practical, but no earlier than the beginning of the tax year in which the taxpayer will earn the credit and no later than 120 days prior to the date the taxpayer intends to file the tax return on which the election will be made, indicating that the review period for submissions may be lengthy.  The IRS anticipates this should allow enough time for the IRS to review and for the taxpayer to respond to any IRS requests for additional information before issuing the registration numbers.  It is important to note that a taxpayer cannot request expedited handling.  However, the IRS has also stated that it will work to issue a registration number quickly when the registration is submitted close to the taxpayer’s filing deadline, but the taxpayer should expect increased scrutiny to mitigate the risk of fraud and duplicate filing before a payment is issued.  Taxpayers who expect to elect to transfer or receive direct payment with respect to 2023 credits will want to start thinking about preparing for their registration soon.  

First-Come, First-Served

The User Guide states that applications for registration numbers will be processed in the order in which the applications are received, i.e., there is a line.  If the IRS asks for additional information in order to make a determination and does not receive a response in a timely fashion, the taxpayer’s application will be kicked to the back of the line.  Therefore, it will be important for taxpayers to continually monitor the portal after they have filed an application so that such requests for information are not overlooked.

Who Makes the Submission?

The portal requires that the person who applies for a registration number must certify that they are “a corporate officer, partner, guardian, executor, receiver, administrator, trustee or individual other than the taxpayer and that they “have the legal authority to execute [the] authorization on behalf of the taxpayer.”  Registration is not currently available through an IRS business tax account, but the IRS is working to make this available.  For businesses other than sole proprietorships, an individual must first authorize an Energy Credits Online Account for the business, and this business account will be tied to the personal account of the authorized individual.  The individual will use their account to manage the process and access information about changes to status of the submission, and to access the results after IRS review is completed (i.e., to view requests for additional information or to acquire the assigned registration numbers).  It is not clear how to change the linked account if, for instance, the authorized account holder leaves the company or is otherwise unavailable to log into their personal account.

One Registration Package Per Year

Registrants can have only one registration package for a taxable year, but it can be amended and updated through the portal.  This means that a taxpayer with multiple facilities in different locations and using different technologies is allowed only registration package.  As soon as a registration package is submitted, the registration will be closed to any additions, updates, or amendments until review is complete.  This means that a taxpayer wanting to register a second group of assets or make other corrections or additions to its registration package would need to wait until the review of the initial submission is completed (i.e., up to 120 days).

Select the Correct Applicant EIN

Each entity that will file a return to make an elective payment election or transfer election must register using its own EIN.  The parent of a consolidated group of corporations will register on behalf of itself and act as agent for the subsidiaries included in the group.  The parent will need to provide the subsidiary name and EIN for each facility or property being registered that is owned by the subsidiary.  In the case of a disregarded entity owned by a grantor trust or individual, the disregarded entity’s name and EIN is used but, for disregarded entities owned by other taxpayers, the EIN and the name of the regarded owner is to be used. 

Bulk Filings 

Taxpayers with a large number of facilities or properties to register can download a template spreadsheet to input and upload all their facilities in a single bulk upload, since a separate registration number is required for each facility.  However, documentation for each facility will need to be uploaded separately after the system validates the uploaded spreadsheet and populates the information for each facility.  There is no bulk upload option for supporting documentation.  Each taxpayer can only use this template once a year, on their first submission, and the file size of that first and only bulk submission cannot exceed 15 MB.

Supporting Documents

Certain information is required of all applicants.  All applicants must submit their name, address, entity type, bank account information, relevant tax period, types of tax returns filed by the taxpayer, and information about subsidiaries.  In addition, most credit registration applications will also be required to provide information about the type of election to be made (direct pay or transfer), dates of beginning of construction and placing in service, and facility location.  Other documentation varies by credit and is set forth in the User Guide.  For the Section 48 Energy Credit, for example, supporting documentation could include proof of ownership of the facility or property, a construction permit showing commencement of construction, or a permit to operate from the local utility or jurisdictional authority.  The portal also requires that the location of each facility must be precisely identified with latitude and longitude coordinates accurate to the sixth decimal digit.

Applicable Credits

The pre-filing registration portal is currently open to taxpayer’s making elections under IRC sections 30C, Alternative Fuel Refueling Property Credit; 45, Renewable Electricity Production Credit; 45Q, Carbon Oxide Sequestration Credit; 45U, Zero Emission Nuclear Power Production Credit; 45V, Clean Hydrogen Production Credit; 45W, Commercial Clean Vehicle Credit; 45X, Advanced Manufacturing Production Credit; 48, Energy Credit; 48C, Qualifying Advanced Energy Project Credit; and 48D, CHIPS Credit.  Registration for credits under sections 45Y, Clean Electricity Production Credit; 45Z, Clean Fuel Production Credit; and 48E, Clean Electricity Investment Credit, will not be available for pre-filing registration until after December 31, 2024.

The IRS stated that it welcomes comments regarding users’ experiences with the registration tool.

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