IRS and Treasury Department Surpass Major Milestone in Clean Energy Tax Credits Implementation

Internal Revenue Service (IRS)

WASHINGTON, D.C. — The Internal Revenue Service (IRS) and the Treasury Department recently celebrated a significant achievement in the implementation of key provisions in the Inflation Reduction Act. The two bodies registered more than 1,000 projects through their newly launched IRS Energy Credits Online (ECO) tool.

Introduced under the Inflation Reduction Act, two new credit delivery mechanisms—elective pay (also known as “direct pay”) and transferability—have been designed to encourage clean energy initiatives. These mechanisms allow state, local, and Tribal governments, non-profit organizations, U.S. territories, and more to benefit from clean energy tax credits.

IRS Commissioner Danny Werfel highlighted the milestone, stating, “This new tool helps key groups with these clean energy credits, improves communication, and reduces compliance issues. This effort is part of our larger transformation effort underway across the IRS as our efforts continue to accelerate.”

The ECO tool has been developed by the IRS to facilitate taxpayers in receiving a direct payment, transferring a clean energy credit, or claiming a CHIPS credit. To do so, taxpayers must complete the pre-file registration process via ECO and obtain a registration number. This number is required when making a direct payment or transfer election for a clean energy credit on the taxpayer’s annual return.

To ensure taxpayers are well-informed about these new provisions, the IRS and Treasury have rolled out a comprehensive educational campaign. This includes hosting office hour sessions where IRS representatives answer questions related to the pre-registration process.

As of now, around 145 entities have requested registration numbers for over 1,290 projects or facilities located in 40 states and territories using the IRS ECO tool. Of these, more than 1,170 projects or facilities are pursuing transferability, and over 110 projects or facilities are pursuing direct pay. The value of the tax credits for these projects will be determined when the credit recipient files their taxes.

For those seeking further guidance, the IRS has published detailed information on how to complete pre-filing registration, including Publication 5884, Inflation Reduction Act (IRA) and CHIPS Act of 2022 (CHIPS) Pre-Filing Registration Tool — User Guide.

This milestone marks a significant step in promoting clean energy initiatives across the country. By simplifying access to clean energy tax credits, the IRS and the Treasury Department are paving the way for a more sustainable future.

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