IRS Announces Direct Pay Election Extension for Clean Energy Projects

Key Takeaways

On October 11, the Internal Revenue Service (IRS) announced that an automatic six month extension to file the agency’s Form 990-T will be granted to counties and other eligible entities making an elective payment election (also referred to as direct pay) to recover the costs of clean energy initiatives. 

• Filing Form 990-T is one of the last steps in the process of claiming elective pay. More information on the steps required of counties to claim elective pay is available here
• Eligible counties that were required to but did not file a timely extension on Form 8868 will be granted automatic 6-month extensions to file Form 990-T to make an elective payment election from the original return due date 
• The extension applies to taxable years ending between December 31, 2023, and November 30, 2024

What is Direct Pay?

Direct Pay provides counties access to clean energy tax incentives under the Inflation Reduction Act (IRA). Instead of receiving a tax credit, counties that have made certain clean energy investments can apply for a refund equivalent to the value of the credit. 

Learn more about elective pay here

Next steps for qualified counties:

• Ensure the required pre-filing registration for projects is complete through IRS Energy Credits Online. A valid registration number is required when submitting the return to claim elective pay.
• If filing paper returns, follow the IRS’s procedural instructions carefully to ensure the elective payment election is valid.

Additional Direct Pay Resources:

• IRS virtual office hours 
  • October 30 | 1:00 p.m. – 2:30 p.m. EDT | Register here
  • November 13 | 1:00 p.m. – 2:30 p.m. EST | Register here
• IRS tutorial video
• IRS elective pay FAQs
• IRS elective pay one-pager for state and local governments 
• NACo Inflation Reduction Act Analysis 
• NACo IRA Funding Explorer & Elective Pay Hub 

Counties are encouraged to take advantage of this extension as they look to new clean energy solutions.