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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
[REG–101607–23]
RIN 1545–BQ63

Section 6417 Elective Payment of
Applicable Credits
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
AGENCY:

This document contains
proposed regulations concerning the
election under the Inflation Reduction
Act of 2022 to treat the amount of
certain tax credits as a payment of
Federal income tax. The proposed
regulations describe rules for the
elective payment of these credit
amounts in a taxable year, including
definitions and special rules applicable
to partnerships and S corporations and
regarding repayment of excessive
payments. In addition, the proposed
regulations describe rules related to an
IRS pre-filing registration process that
would be required. These proposed
regulations affect tax-exempt
organizations, State and local
governments, Indian tribal governments,
Alaska Native Corporations, the
Tennessee Valley Authority, rural
electric cooperatives, and, in the case of
three of these credits, certain taxpayers
eligible to elect the elective payment of
credit amounts in a taxable year. This
document also provides notice of a
public hearing on the proposed
regulations.
DATES: Written or electronic comments
must be received by August 14, 2023.
The public hearing on these proposed
regulations is scheduled to be held on
August 21, 2023, at 10 a.m. ET. Requests
to speak and outlines of topics to be
discussed at the public hearing must be
received by August 14, 2023. If no
outlines are received by August 14,
2023, the public hearing will be
cancelled. Requests to attend the public
hearing must be received by 5 p.m. ET
on August 17, 2023. The public hearing
will be made accessible to people with
disabilities. Requests for special
assistance during the hearing must be
received by August 16, 2023.
ADDRESSES: Stakeholders are strongly
encouraged to submit public comments
electronically. Submit electronic
submissions via the Federal
eRulemaking Portal at https://
www.regulations.gov (indicate IRS and
REG–101607–23) by following the

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SUMMARY:

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online instructions for submitting
comments. Once submitted to the
Federal eRulemaking Portal, comments
cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish
for public availability any comments
submitted, whether electronically or on
paper, to the IRS’s public docket. Send
paper submissions to: CC:PA:LPD:PR
(REG–101607–23), Room 5203, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC
20044.
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations,
Jeremy Milton at (202) 317–5665 and
James Holmes at (202) 317–5114 (not
toll-free numbers); concerning
submissions of comments or the public
hearing, Vivian Hayes at (202) 317–6901
(not a toll-free number) or by email to
publichearings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
Section 6417 was added to the
Internal Revenue Code (Code) on
August 16, 2022, by section 13801(a) of
Public Law 117–169, 136 Stat. 1818,
2003, commonly referred to as the
Inflation Reduction Act of 2022 (IRA).
Section 6417 allows ‘‘applicable
entities’’ (including tax-exempt
organizations, State and local
governments, Indian tribal governments,
Alaska Native Corporations, the
Tennessee Valley Authority, and rural
electric cooperatives) to make an
election to treat an applicable credit
determined with respect to such entity
as making a payment against the tax
imposed by subtitle A of the Code
(subtitle A), for the taxable year with
respect to which such credit was
determined, equal to the amount of such
credit. Section 6417 also allows certain
taxpayers to elect to be treated as
applicable entities for limited purposes,
as described in part III of this
background section. Section 6417 also
provides special rules relating to
partnerships and S corporations and
directs the Secretary of the Treasury or
her delegate (Secretary) to provide rules
for making elections under section 6417
and to require information or
registration necessary for purposes of
preventing duplication, fraud, improper
payments, or excessive payments under
section 6417. Section 13801(g) of the
IRA provides that section 6417 applies
to taxable years beginning after
December 31, 2022. This document
contains proposed regulations that
would amend the Income Tax
Regulations (26 CFR part 1) and the
Procedure and Administration

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Regulations (part 301) to implement the
statutory provisions of section 6417.
In the Rules and Regulations section
of this issue of the Federal Register, the
Treasury Department and the IRS are
issuing temporary regulations under
§ 1.6417–5T that implement the prefiling registration process described in
proposed § 1.6417–5 of the proposed
regulations. The temporary regulations
require applicable entities that want to
elect the elective payment of applicable
credit amounts to register with the IRS
through an IRS electronic portal in
advance of the applicable entity filing
the return on which the election under
section 6417 is made.
I. Overview of Section 6417
Section 6417(a) provides that, in the
case of an applicable entity that makes
an elective payment election under
section 6417 with respect to any
applicable credit determined with
respect to the applicable entity for the
taxable year, the applicable entity is
treated as making a payment against the
tax imposed by subtitle A, that is,
Federal income taxes, for the taxable
year with respect to which such credit
was determined that is equal to the
amount of such credit (elective payment
amount). An election under section
6417 must be made at such time and in
such manner as provided by the
Secretary.
Section 6417(b) defines the term
‘‘applicable credit’’ to mean each of the
following 12 credits:
(1) So much of the credit for
alternative fuel vehicle refueling
property allowed under section 30C of
the Code that, pursuant to section
30C(d)(1), is treated as a credit listed in
section 38(b) of the Code (section 30C
credit);
(2) So much of the renewable
electricity production credit determined
under section 45(a) of the Code as is
attributable to qualified facilities that
are originally placed in service after
December 31, 2022 (section 45 credit);
(3) So much of the credit for carbon
oxide sequestration determined under
section 45Q(a) of the Code as is
attributable to carbon capture
equipment that is originally placed in
service after December 31, 2022 (section
45Q credit);
(4) The zero-emission nuclear power
production credit determined under
section 45U(a) of the Code (section 45U
credit);
(5) So much of the credit for
production of clean hydrogen
determined under section 45V(a) of the
Code as is attributable to qualified clean
hydrogen production facilities that are

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originally placed in service after
December 31, 2012 (section 45V credit);
(6) In the case of a ‘‘tax-exempt
entity’’ described in section
168(h)(2)(A)(i), (ii), or (iv) of the Code,
the credit for qualified commercial
vehicles determined under section 45W
of the Code by reason of section
45W(d)(3) 1 (section 45W credit);
(7) The credit for advanced
manufacturing production under section
45X(a) of the Code (section 45X credit);
(8) The clean electricity production
credit determined under section 45Y(a)
of the Code (section 45Y credit);
(9) The clean fuel production credit
determined under section 45Z(a) of the
Code (section 45Z credit);
(10) The energy credit determined
under section 48 of the Code (section 48
credit);
(11) The qualifying advanced energy
project credit determined under section
48C of the Code (section 48C credit);
and
(12) The clean electricity investment
credit determined under section 48E of
the Code (section 48E credit).
As described in part II of this
Background section, section 6417(d)
defines an ‘‘applicable entity’’ and
provides generally applicable rules for
making elective payment elections.
Sections 6417(e) through (h) provide
special rules applicable under section
6417 that are described in part II of this
Background section. As described in
parts III and IV of this Background
section, section 6417(c), (d)(1)(B), (C),
and (D), and (d)(3) also contain special
rules allowing a taxpayer, including for
this purpose a partnership or S
corporation, that is not an applicable
entity (electing taxpayer) to elect to be
treated as an applicable entity for the
limited purpose of making an elective
payment election under section 6417,
but only with respect to section 45Q
credits, section 45V credits, and section
45X credits. Part V of this Background
section describes Notice 2022–50, 2022–
43 I.R.B. 325, which, in part, requested
feedback from the public on potential
issues with respect to the elective
payment election provisions under
section 6417.

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II. Applicable Entities and General
Elective Payment Election Rules
Section 6417(d)(1)(A) defines the term
‘‘applicable entity’’ to mean:
(1) Any organization exempt from tax
imposed by subtitle A;
(2) Any State or political subdivision
thereof;
(3) The Tennessee Valley Authority;
1 The reference should be to 45W(d)(2). This has
been corrected in the proposed regulations.

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(4) An Indian tribal government (as
defined in section 30D(g)(9) of the
Code);
(5) Any Alaska Native Corporation (as
defined in section 3 of the Alaska Native
Claims Settlement Act (43 U.S.C.
1602(m)); or
(6) Any corporation operating on a
cooperative basis that is engaged in
furnishing electric energy to persons in
rural areas.
Section 6417(d)(2) provides that, in
the case of any applicable entity that
makes the election described in section
6417(a), any applicable credit amount is
determined (1) without regard to section
50(b)(3) and (4)(A)(i) of the Code (that
is, restrictions on property used by taxexempt organizations and governmental
units), and (2) by treating any property
with respect to which such credit is
determined as used in a trade or
business of the applicable entity.
Section 6417(d)(3)(A)(i) provides
rules regarding the due date for making
any elective payment election. In the
case of any government (such as a State,
the District of Columbia, an Indian
Tribal government, any U.S. territory, or
any agency or instrumentality of the
foregoing), or political subdivision,
described in section 6417(d)(1) and for
which no Federal income tax return is
required under sections 6011 or 6033(a)
of the Code, any election under section
6417(a) cannot be made later than the
date as is determined appropriate by the
Secretary. In any other case, any
election under section 6417(a) cannot be
made later than the due date (including
extensions of time) for the tax return for
the taxable year for which the election
is made, but in no event earlier than 180
days after the date of the enactment of
section 6417 (that is, in no event earlier
than 180 days after August 16, 2022,
which is February 13, 2023).
Section 6417(d)(3)(A)(ii) provides that
any election under section 6417(a), once
made, is irrevocable, and applies
(except as otherwise provided in section
6417(d)(3)) with respect to any credit for
the taxable year for which the election
is made.
Section 6417(d)(3)(B) provides that, in
the case of section 45 credits, any
election under section 6417(a): (1)
applies separately with respect to each
qualified facility; (2) must be made for
the taxable year in which such qualified
facility is originally placed in service;
and (3) applies to such taxable year and
to any subsequent taxable year that is
within the 10-year credit period
described in section 45(a)(2)(A)(ii) with
respect to such qualified facility.
Section 6417(d)(3)(C) provides that, in
the case of section 45Q credits, any
election under section 6417(a): (1)

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applies separately with respect to the
carbon capture equipment originally
placed in service by the applicable
entity during a taxable year; and (2)
applies to such taxable year and to any
subsequent taxable year that is within
the 12-year credit period described in
section 45Q(a)(3)(A) or (4)(A) with
respect to such equipment. Section
6417(d)(3)(C)(i)(II)(aa), (d)(3)(C)(ii), and
(d)(3)(C)(iii) provides special rules for a
taxpayer making the election to be
treated as an applicable entity for
purposes of section 6417 with respect to
the 45Q credit (see part III of this
Background section).
Section 6417(d)(3)(D) provides that, in
the case of section 45V credits, any
election under section 6417(a): (1)
applies separately with respect to each
qualified clean hydrogen production
facility; (2) must be made for the taxable
year in which such facility is placed in
service (or within the 1-year period
subsequent to the date of enactment of
section 6417 in the case of facilities
placed in service before December 31,
2022); and (3) applies to the taxable year
and all subsequent taxable years with
respect to such facility. Section
6417(d)(3)(D)(i)(III)(aa), (d)(3)(D)(ii), and
(d)(3)(D)(iii) provide special rules for a
taxpayer making the election to be
treated as an applicable entity for
purposes of section 6417 with respect to
the 45V credit (see part III of this
Background section).
Section 6417(d)(3)(E) provides that, in
the case of section 45Y credits, any
election under section 6417(a): (1)
applies separately with respect to each
qualified facility; (2) must be made for
the taxable year in which such facility
is placed in service; and (3) applies to
such taxable year and to any subsequent
taxable year that is within the 10-year
credit period described in section
45Y(b)(1)(B) with respect to such
facility.
Section 6417(d)(4) provides rules
regarding when the elective payment is
treated as made. Section 6417(d)(4)(A)
provides that in the case of any
government or political subdivision
described in section 6417(d)(1), and for
which no return is required under
section 6011 or section 6033(a), the
payment described in section 6417(a) is
treated as made on the later of the date
that a return would be due under
section 6033(a) if such government or
subdivision were described in section
6033 or the date on which such
government or subdivision submits a
claim for credit or refund (at such time
and in such manner as the Secretary
provides). Section 6417(d)(4)(B)
provides that, in any other case, the
payment described in section 6417(a) is

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treated as made on the later of the due
date (determined without regard to
extensions) of the return of tax for the
taxable year or the date on which such
return is filed with the IRS.
Section 6417(d)(5) provides that, as a
condition of, and prior to, any amount
being treated as a payment that is made
by an applicable entity under section
6417(a), the Secretary may require such
information or registration as the
Secretary deems necessary for purposes
of preventing duplication, fraud,
improper payments, or excessive
payments under section 6417.
Section 6417(d)(6) provides rules
relating to excessive payments. In the
case of any amount treated as a payment
that is made by the applicable entity
under section 6417(a), or the amount of
the payment made pursuant to section
6417(c), that is determined to constitute
an excessive payment, the tax imposed
on such entity by chapter 1 of the Code
(chapter 1), regardless of whether such
entity would otherwise be subject to
chapter 1 tax, for the taxable year in
which such determination is made is
increased by an amount equal to the
sum of (1) the amount of such excessive
payment, plus (2) an amount equal to 20
percent of such excessive payment. The
increase equal to 20 percent of the
excessive payment does not apply if the
applicable entity can demonstrate that
the excessive payment resulted from
reasonable cause.
An excessive payment is defined as,
with respect to a facility or property for
which an election is made under section
6417 for any taxable year, an amount
equal to the excess of (1) the amount
treated as a payment that is made by the
applicable entity under section 6417(a),
or the amount of the payment made
pursuant to section 6417(c), with
respect to such facility or property for
such taxable year, over (2) the amount
of the credit that, without application of
section 6417, would be otherwise
allowable (as determined pursuant to
section 6417(d)(2) and without regard to
section 38(c)) with respect to such
facility or property for such taxable
year.
Section 6417(e) provides a denial of
double benefit rule providing that, in
the case of an applicable entity making
an election under section 6417 with
respect to an applicable credit, such
credit is reduced to zero and, for any
other purpose under the Code, is
deemed to have been allowed to such
entity for such taxable year.

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Section 6417(f) provides a special rule
relating to any territory 2 of the United
States with a mirror code tax system (as
defined in section 24(k) of the Code).
Under this rule, section 6417 will not be
treated as part of the income tax laws of
the United States for purposes of
determining the income tax law of any
such U.S. territory unless such U.S.
territory elects to have section 6417 be
so treated. Currently, the U.S. Virgin
Islands, Guam, and the Commonwealth
of the Northern Mariana Islands have
mirror code tax systems.
Section 6417(g) provides basis
reduction and recapture rules. It states
that, except as otherwise provided in
section 6417(d)(2)(A),3 rules similar to
the rules of section 50 apply for
purposes of section 6417.
Section 6417(h) authorizes the
Secretary to issue regulations or other
guidance as may be necessary to carry
out the purposes of section 6417,
including guidance to ensure that the
amount of the payment or deemed
payment made under section 6417 is
commensurate with the amount of the
credit that would be otherwise
allowable (determined without regard to
section 38(c)).
III. Special Rules Relating to Certain
Taxpayers Making an Election Under
Section 6417(d)(1)(B), (C), or (D)
(Electing Taxpayers)
A taxpayer other than an applicable
entity under section 6417(d)(1)(A) may
make an election under section
6417(d)(1)(B), (C), or (D) at such time
and in such manner as the Secretary
provides (but no election may be made
with respect to any taxable year
beginning after December 31, 2032). The
election allows the electing taxpayer to
be treated as an applicable entity for the
limited purpose of making an elective
payment election under section 6417
with respect to a section 45V credit, a
section 45Q credit, or a section 45X
credit, respectively. The special rules
for such an election are described in
paragraphs III.A, III.B, and III.C of this
background section.
A. Electing Taxpayers Making an
Election With Respect to Section 45V
Credits
Section 6417(d)(1)(B) allows an
electing taxpayer to make an elective
payment election for any taxable year in
which such taxpayer has placed in
2 Section 6417(f) uses the term ‘‘possession,’’ but
this proposed regulation uses the alternative term
‘‘territory.’’
3 Section 6417(g) actually states ‘‘subsection
(c)(2)(A),’’ but there is no section 6417(c)(2)(A);
thus, the proposed regulations correct the reference
to state‘‘(d)(2)(A).’’

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service a qualified clean hydrogen
production facility (as defined in
section 45V(c)(3)), but only with respect
to a section 45V credit determined in
such year with respect to the electing
taxpayer. Pursuant to section
6417(d)(3)(D)(i)(III), such electing
taxpayer is treated as having made such
election for the taxable year with respect
to which the election is made and each
of the four subsequent taxable years
ending before January 1, 2033. Under
section 6417(d)(3)(D)(iii), an electing
taxpayer may elect to revoke the
application of such election, but any
such election to revoke, if made, applies
to the applicable year specified in such
election (but not any prior taxable year)
and each subsequent taxable year within
the 5-year period and cannot be
revoked.
Section 6417(d)(3)(D)(ii) prohibits an
electing taxpayer from making a transfer
election under section 6418(a) with
respect to a section 45V credit for any
year for which the electing taxpayer’s
election under section 6417(d)(1)(B) is
in effect.
B. Electing Taxpayers Making an
Election With Respect to Section 45Q
Credits
Section 6417(d)(1)(C) allows an
electing taxpayer to make an elective
payment election for any taxable year in
which the electing taxpayer has, after
December 31, 2022, placed in service
carbon capture equipment at a qualified
facility (as defined in section 45Q(d)),
but only with respect to a section 45Q
credit determined in such year with
respect to such taxpayer. Pursuant to
section 6417(d)(3)(C)(i)(II)(aa), such
electing taxpayer is treated as having
made such election for the taxable year
with respect to which the election is
made and each of the four subsequent
taxable years ending before January 1,
2033. Under section 6417(d)(3)(C)(iii),
an electing taxpayer may elect to revoke
the application of such election, but any
such election to revoke, if made, applies
to the applicable year specified in such
election (but not any prior taxable year)
and each subsequent taxable year within
the 5-year period and cannot be
revoked.
Section 6417(d)(3)(C)(ii) prohibits an
electing taxpayer from making a transfer
election under section 6418(a) with
respect to a section 45Q credit for any
year for which the electing taxpayer’s
election under section 6417(d)(1)(C) is
in effect.

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C. Electing Taxpayers Making an
Election With Respect to Section 45X
Credits
Section 6417(d)(1)(D) allows an
electing taxpayer to make an elective
payment election for any taxable year in
which the electing taxpayer has, after
December 31, 2022, produced eligible
components (as defined in section
45X(c)(1)), but only with respect to a
section 45X credit determined in such
year with respect to such taxpayer.
Pursuant to section 6417(d)(1)(D)(ii)(I),
such electing taxpayer is treated as
having made such election for the
taxable year with respect to which the
election is made and each of the four
subsequent taxable years ending before
January 1, 2033. Under section
6417(d)(1)(D)(ii)(II), an electing taxpayer
may elect to revoke the application of
such election, but any such election to
revoke, if made, applies to the
applicable year specified in such
election (but not any prior taxable year)
and each subsequent taxable year
remaining within the 5-year period and
cannot be revoked.
Section 6417(d)(1)(D)(iii) prohibits an
electing taxpayer from making a transfer
election under section 6418(a) with
respect to a section 45X credit for any
year for which the electing taxpayer’s
election under section 6417(d)(1)(D) is
in effect.

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IV. Section 6417 Rules for Partnerships
and S Corporations
Section 6417(c) provides special rules
for partnerships and S corporations that
hold directly (as determined for Federal
income tax purposes) a facility or
property for which an applicable credit
is determined. Section 6417(c)(1)
provides that, in the case of any
applicable credit determined with
respect to any facility or property held
directly by a partnership or S
corporation, any elective payment
election must be made by such
partnership or S corporation in the
manner provided by the Secretary. If
such a partnership or S corporation
makes an elective payment election
with respect to any applicable credit, (1)
a payment is made to such partnership
or S corporation equal to the applicable
credit amount, (2) section 6417(e) is
applied with respect to the applicable
credit before determining any partner’s
distributive share, or S corporation
shareholder’s pro rata share, of such
applicable credit, (3) any applicable
credit amount with respect to which the
election in section 6417(a) is made is
treated as tax exempt income for
purposes of sections 705 and 1366 of the
Code, and (4) a partner’s distributive

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share of such tax exempt income is
based on such partner’s distributive
share of the otherwise applicable credit
for each taxable year (an S corporation
shareholder’s share of tax exempt
income is based on the shareholder’s
pro rata share).
Section 6417(c)(2) provides that, in
the case of any facility or property held
directly by a partnership or S
corporation, no election by any partner
or shareholder is allowed under section
6417(a) with respect to any applicable
credit determined with respect to such
facility or property.
V. Notice 2022–50
On October 24, 2022, the Treasury
Department and the IRS published
Notice 2022–50, 2022–43 I.R.B. 325, to,
among other things, request feedback
from the public on potential issues with
respect to the elective payment election
provisions under section 6417 that may
require guidance. Over 200 comment
letters were received in response to
Notice 2022–50. Based in part on the
feedback received, the Treasury
Department and the IRS are issuing
these proposed regulations regarding the
elective payment election provisions
under section 6417. The major areas
with respect to which public
stakeholders provided letters are
discussed in the following Explanation
of Provisions.
Explanation of Provisions
I. General Rules and Definitions
A. Applicable Entity
Section 6417(d)(1) defines ‘‘applicable
entity’’ as (1) any organization exempt
from the tax imposed by subtitle A, (2)
any State or political subdivision
thereof, (3) the Tennessee Valley
Authority, (4) an Indian tribal
government (as defined in section
30D(g)(9)), (5) any Alaska Native
Corporation (as defined in section 3 of
the Alaska Native Claims Settlement Act
(43 U.S.C. 1602(m)), or (6) any
corporation operating on a cooperative
basis that is engaged in furnishing
electric energy to persons in rural areas.
Proposed § 1.6417–1(c) would clarify
these statutory definitions pursuant to
the Secretary’s authority under section
6417(h) to issue regulations necessary to
carry out the purposes of section 6417,
as discussed below.
1. Any Organization Exempt From the
Tax Imposed by Subtitle A
Stakeholders asked for clarification on
the scope of the phrase ‘‘any
organization exempt from the tax
imposed by subtitle A’’ for purposes of
determining whether a taxpayer is an

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applicable entity. Entities may be
exempt from tax or have their income
exempt from tax under various
authorities. For example, an
organization could be exempt from
taxation by section 501(a) of the Code or
by other provisions of the Code. An
organization could also have its income
excluded from taxation by section 115.
The Treasury Department and the IRS
propose to define the term ‘‘any
organization exempt from the tax
imposed by subtitle A’’ to include all
organizations exempt from the tax
imposed by subtitle A by section 501(a)
of the Code, commonly referred to as
‘‘tax-exempt organizations.’’
Several stakeholders requested
clarification that tax-exempt entities in
the U.S. territories are eligible to make
an election under section 6417. Under
these proposed regulations, such
entities would be considered
organizations exempt from the tax
imposed by subtitle A as long as they
are exempt from taxation by section
501(a) and as long as they meet the
requirements to claim an applicable
credit (such as being an appropriate
owner of an investment credit property
under sections 50(b)(1)(B) and
168(g)(4)(G)).4
Stakeholders also asked whether an
entity classified as a nonprofit under
State law but that does not have Federal
tax-exempt status would be described in
section 6417(d)(1)(A). Such an entity
would not be described in section
6417(d)(1)(A) because it is not exempt
from the tax imposed by subtitle A
(unless it met the requirements of
another type of applicable entity
discussed below, such as a state
instrumentality).
Stakeholders also specifically sought
clarification as to whether governments
of U.S. territories would be treated as
applicable entities, based on their
unique status and the importance of
their energy security. These
stakeholders noted that the renewable
energy credits generally may be claimed
for activities in the U.S. territories
provided the underlying requirements
are met, including the specific
ownership requirements for investment
tax credits.5 In response, the proposed
regulations would interpret the term
‘‘organization exempt from the tax
4 Section 50(b)(1) provides that no investment tax
credit can be determined with respect to property
used predominantly outside of the United States,
but section 50(b)(1)(B) provides an exception for
property described in section 168(g)(4). In the case
of entities, section 168(g)(4)(G) describes property
which is owned by a domestic corporation and
which is used predominantly in a U.S. territory by
such a corporation, or by a corporation created or
organized in, or under the law of, a U.S. territory.
5 See footnote 2.

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imposed by subtitle A’’ as used in
section 6417(d)(1)(A) to include the
governments of the U.S. territories.
Since section 115(2) excludes the
income accruing to the government of
any territory of the United States, or any
political subdivision thereof, from gross
income, it effectively exempts these
governments from the tax imposed by
subtitle A. In addition, these
governments may properly be viewed as
organizations.6 Accordingly, proposed
§ 1.6417–1(c)(1)(ii) would provide that
the government of any U.S. territory, or
a political subdivision thereof, is an
applicable entity for purposes of section
6417 or provisions of law referencing
section 6417(d)(1)(A).
The Treasury Department and the IRS
request comments on this definition of
any organization exempt from the tax
imposed by subtitle A, including as to
whether the term should encompass the
United States, federal agencies, or other
organizations beyond those listed in
these proposed rules.

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2. Any State or Political Subdivision
Thereof
Section 6417(d)(1)(A)(ii) states that
‘‘any State or political subdivision
thereof’’ is an applicable entity for
purposes of section 6417.
The Treasury Department and the IRS
note that section 7701(a)(10) provides
that the term ‘‘State’’ must be construed
to include the District of Columbia
where such construction is necessary to
carry out provisions of Title 26, and
thus propose that the definition of State
would include the District of Columbia.
The Treasury Department and the IRS
request comments on whether
additional clarification is needed.
3. Indian Tribal Governments
Section 6417(d)(1)(A)(iv) states that
an applicable entity includes an Indian
tribal government (as defined in section
30D(g)(9)). To provide Indian tribal
governments parity with state
governments, proposed § 1.6417–1(c)(3)
would include subdivisions of Indian
tribal governments in this definition.
Section 30D(g)(9) provides that ‘‘the
term ‘‘Indian tribal government’’ means
the recognized governing body of any
Indian or Alaska Native tribe, band,
nation, pueblo, village, community,
component band, or component
reservation, individually identified
(including parenthetically) in the list
6 The Code and the regulations under 26 CFR part
1 occasionally refer to governmental entities as
organizations. For example, section 509(a)(1) refers
to ‘‘an organization described in section
170(b)(1)(A),’’ which includes a governmental unit
described in sections 170(b)(1)(A)(v) and 170(c)(1).
See corresponding rules in § 1.170A–9(a) and (e).

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published most recently as of the date
of enactment of this subsection pursuant
to section 104 of the Federally
Recognized Indian Tribe List Act of
1994 (25 U.S.C. 5131). Thus, proposed
§ 1.6417–1(k) would incorporate this
definition into the 6417 regulations. See
Rev. Proc. 2008–55, 2008–39 I.R.B. 768
(generally providing that an Indian
tribal entity that appears on the most
recent list published by the Department
of the Interior in the Federal Register
pursuant to the requirements of the List
Act is designated an Indian tribal
government for purposes of section
7701(a)(40)).
The Treasury Department and the IRS
request comments regarding the
definitions in proposed § 1.6417–1(c)(3)
and (k), including as to whether any
further clarification would be
warranted. The Treasury Department
and the IRS further request comments
on whether the proposed definitions
encompass the entity structures that
Indian tribal governments employ in
activities that would give rise to elective
payments, including entities with
partial Indian tribal government
ownership.
4. Alaska Native Corporations
Section 6417(d)(1)(A)(v) provides that
an applicable entity for purposes of
section 6417(a) includes ‘‘any Alaska
Native Corporation (as defined in
section 3 of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602(m)).’’ A
‘‘Native Corporation’’ is defined in 43
U.S.C. 1602(m) to mean ‘‘any Regional
Corporation, any Village Corporation,
any Urban Corporation, and any Group
Corporation,’’ which are organized
under the laws of the State of Alaska.
Although 43 U.S.C. 1606(d) provides
that a Regional Corporation is
incorporated to conduct business for
profit, each of a Village Corporation,
Urban Corporation, and Group
Corporation may be organized as a
business for profit or nonprofit
corporation to hold rights and assets for
Native villages, urban communities of
Natives, or members of a Native group.
A few stakeholders requested that a
Settlement Trust (within the meaning of
43 U.S.C. 1602(t)) that is established by
an Alaska Native Corporation (ANC) for
the benefit of its shareholders also be
treated as an applicable entity. The
stakeholders stated that an ANC is a
separate legal entity that is required to
be a C corporation for Federal income
tax purposes, and as such, it is an entity
different from the Settlement Trust
established by the ANC. However, the
beneficiaries of the ANC Settlement
Trust are typically the same Native
individuals as the shareholders of the

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ANC. the stakeholders thus asked that
an ANC Settlement Trust be added as an
applicable entity in cases in which the
Settlement Trust is directly affiliated
with an applicable ANC.
Unlike the case of the statutory
definitions of ‘‘Indian Tribal
government,’’ the statutory definition of
ANC is not ambiguous. Accordingly, the
proposed regulations would not treat
Settlement Trusts as ANCs. However,
Settlement Trusts could themselves be
applicable entities not based on their
relationship with an ANC if they
qualified for exempt status under
section 501(a) and applied for and
received a determination letter from the
IRS recognizing any such tax-exempt
status.
Separately, an ANC may be the
common parent of a consolidated group
of corporations (ANC-parented group)
that, in many ways, is treated similarly
to a single taxpayer for Federal income
tax purposes by the consolidated return
regulations (§§ 1.1502–1, et seq.). For
example, the members of a consolidated
group report their consolidated taxable
income on a single Federal income tax
return that the common parent files
with the IRS as the agent for the group
under § 1.1502–77. In this regard, some
stakeholders have inquired whether
non-ANC members of an ANC-parented
group may separately make an elective
payment election with respect to a
section 45V credit, a section 45Q credit,
or section 45X credit determined with
respect to such member. The concern
appears to be that, by reason of their
affiliation with an ANC common parent,
the non-ANC members might be
prevented from making an election
under section 6417(d)(1)(B), (C), or (D).
The proposed regulations would
clarify that a non-ANC member of an
ANC-parented group may qualify as an
electing taxpayer eligible to make
elections under section 6417(d)(1)(B),
(C), or (D), based on its own corporate
status. See § 1.1502–80(a). As with any
other electing taxpayer, a non-ANC
member of an ANC-parented group
would be required to complete pre-filing
registration (as would be required under
proposed § 1.6417–5) and must make its
elective payment election under section
6417(d)(1)(B), (C), or (D) with respect to
an applicable section 45V credit, section
45Q credit, or section 45X credit
determined with respect to the member.
See § 1.1502–77 (providing rules
regarding the status of the common
parent as agent for its members).
The Treasury Department and the IRS
request comments regarding the
definition in proposed § 1.6417–1(c)(4)
and whether additional guidance is

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necessary regarding consolidated groups
with ANC common parents.
5. Tennessee Valley Authority
As per section 6417(d)(1)(A)(iii), the
Tennessee Valley Authority would be
an applicable entity under proposed
§ 1.6417–1(c)(5).

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6. Rural Electrical Co-Ops
Section 6417(d)(1)(A)(vi) provides
that ‘‘any corporation operating on a
cooperative basis which is engaged in
furnishing electric energy to persons in
rural areas’’ is an applicable entity.
These proposed regulations do not
elaborate on this definition, but request
comments on whether further
clarification of the definition in
proposed § 1.6417–1(c)(6) is necessary.
Stakeholders asked that any payment
under section 6417(a) not be considered
income for purposes of the 85-percent
income test under section 501(c)(12) for
electric cooperatives. Because the
section 6417(a) election results in a
credit being treated as a payment against
the tax imposed by subtitle A for the
taxable year with respect to which such
credit was determined, any such
payment that results in a refund being
issued by the IRS to an electric
cooperative under section 6417(a) will
not affect the application of the 85percent income test determined with
respect to the electric cooperative.
The Treasury Department and the IRS
request comments on whether
additional guidance is necessary to
address any uncertainty that may exist
regarding the application of section
6417 in the context of a consolidated
group with members that are
cooperatives subject to the rules of
subchapter T of chapter 1.
7. Agencies and Instrumentalities
Based on feedback from stakeholders,
the Treasury Department and the IRS
believe that, in many instances, States,
Indian tribal governments, U.S.
territories, or political subdivisions
thereof are likely to make investments
or engage in activities that qualify for
applicable credits through their agencies
and instrumentalities. Multiple
stakeholders requested that State and
local government agencies and
instrumentalities be included as
applicable entities under a variety of
theories, including cross-references to
sections 50(b)(4)(A)(i) and
168(h)(2)(A)(i) in section 6417, the fact
that the income of an instrumentality is
generally excluded from tax by section
115 of the Code, and the authority
provided by section 6417(h) to issue
regulations necessary to carry out the
purposes of section 6417. In particular,

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stakeholders stated that the term
‘‘Indian tribal government’’ should be
defined to include, in part, economic
subdivisions of a tribe (such as a utility,
housing authority, energy division or
authority, or other enterprise) regardless
of how the entity is formed (whether by
Federal, Tribal or State law).
It would be administratively
burdensome, both for stakeholders and
for the IRS, to determine what is part of
a State, Indian tribal government, U.S.
territory, or political subdivision, on the
one hand, and what is an agency or
instrumentality thereof on the other
hand.7 For example, stakeholders
expressed uncertainty about whether
certain entities, such as school districts,
public utility districts, and special
purpose entities established by
governments (such as joint action
agencies, economic development
corporations, and joint powers
authorities) would qualify as political
subdivisions or would be viewed as
agencies or instrumentalities.
Stakeholders also noted that the status
of such entities as political subdivisions
may turn on differences in state law,
such as whether a school district has
taxing authority.
In addition, different States may
structure ownership of relevant property
differently (for example, a school
district or the county of the school
district may own the electric school
buses), and it would be inequitable for
entities to be eligible or ineligible for
elective payment on the basis of such
differences in ownership structures.
Furthermore, if agencies and
instrumentalities were not specifically
listed as applicable entities, States and
political subdivisions may decide to
create new entities or reorganize the
administration of their activities to
perform applicable credit eligible
activities directly, which would be
administratively burdensome without a
commensurate public benefit. For these
reasons, and to promote uniform
treatment throughout the United Sates,
proposed § 1.6417–1(c)(7) would
provide that applicable entities include
any agency or instrumentality of any
State, the District of Columbia, Indian
tribal government, U.S. territory, or
political subdivision thereof.
The Treasury Department and the IRS
request comments on this approach to
defining applicable entities and on
whether further guidance is necessary.
7 The definitions of political subdivision under
§ 1.103–1(b) and of instrumentality under Rev. Rul.
57–128, 1957–1 C.B. 311, are frequently cited for
Federal tax purposes.

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40533

8. Electing Taxpayers
Certain taxpayers may make an
election to be treated as an applicable
entity with respect to applicable credit
property giving rise to the section 45Q
credit, section 45V credit, or section
45X credit, as described in part III of
this Explanation of Provisions. Proposed
§ 1.6417–1(g) defines an ‘‘electing
taxpayer’’ as any taxpayer that is not an
applicable entity, but makes an election
in accordance with proposed §§ 1.6417–
2(b), 1.6417–3, and, if applicable,
1.6417–4, to be treated as an applicable
entity for a taxable year with respect to
applicable credits determined with
respect to an applicable credit property
described in proposed § 1.6417–1(e)(3),
(5), or (7). Section 7701(a)(14) defines a
‘‘taxpayer’’ as any person subject to any
internal revenue tax, including income
taxes, employment taxes, and excise
taxes.
Members of a consolidated group that
is not an ANC-parented group also may
make an election to be treated as an
applicable entity with respect to the
section 45Q credit, section 45V credit,
or section 45X credit. A member of the
consolidated group would be required
to complete pre-filing registration (as
would be required under proposed
§ 1.6417–5) and must make its elective
payment election with respect to an
applicable section 45V credit, section
45Q credit, or section 45X credit
determined with respect to the member.
See § 1.1502–77 (providing rules
regarding the status of the common
parent as agent for its members). The
Treasury Department and the IRS
request comments regarding the
application of section 6417 to
consolidated groups with electing
taxpayers (for example, whether special
rules are necessary for consolidated
groups under proposed § 1.6417–2(e)(2)
(the denial of double benefit rule).
B. Entities Formed by an Applicable
Entity or by an Electing Taxpayer
1. Disregarded Entities
Several stakeholders asked whether
an entity disregarded as separate from
its owner (disregarded entity) is
described in section 6417(d)(1)(A) if its
owner is described in section
6417(d)(1)(A). Since a disregarded entity
is disregarded for Federal income tax
purposes and its attributes are attributed
to the owner regarded for Federal
income tax purposes, the disregarded
entity’s activities would be attributed to
the owner and the owner could claim
the credit as long as the owner is
described in section 6417(d)(1)(A). This
would also include property that an
electing taxpayer that is a partnership or

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S corporation holds through a
disregarded entity or multiple
disregarded entities, including tiers of
multiple disregarded entities owned
though chains of ownership. Thus,
proposed §§ 1.6417–2(a)(1)(ii) and
–2(a)(2)(iv) would provide that, if an
applicable entity or electing taxpayer is
the owner (directly or indirectly) of a
disregarded entity that directly holds an
applicable credit property, the
applicable entity may make an elective
payment election for applicable credits
determined with respect to the
applicable credit property held directly
by the disregarded entity.
2. Taxable C Corporations
Stakeholders also asked whether an
entity described in section 6417(d)(1)(A)
could create an entity that is a taxable
C corporation to perform the applicable
credit activity and still qualify for the
section 6417 election. Because a taxable
C corporation is an entity separate from
its owner, proposed § 1.6417–1(c)(1)
would not include a C corporation that
is not itself an applicable entity
described in proposed § 1.6417–1(c)(1),
even if its owner is an applicable entity
described in proposed § 1.6417–1(c)(1).
However, an electing taxpayer may
include a taxable C corporation
(including a member of a consolidated
group).

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3. Undivided Ownership Interests
Stakeholders also asked whether
entities such as unincorporated joint
ventures could provide applicable
entities access to earning applicable
credits available for an elective payment
election, including by partnering with
other applicable entities or with forprofit entities. Proposed § 1.6417–
2(a)(1)(iii) would provide that, if an
applicable entity is a co-owner of an
applicable credit property through an
ownership arrangement treated as a
tenancy-in-common or pursuant to a
joint operating arrangement that has
properly elected out of subchapter K of
chapter 1 of the Code (subchapter K)
under section 761, then each owner is
considered to own an undivided interest
in or share of the underlying applicable
credit property and thus, any applicable
credits are determined separately with
respect to each owner. As a result, an
applicable entity may make an elective
payment election under section 6417(a)
in the manner provided in paragraph (b)
with respect to its share of the
applicable credits determined with
respect to its undivided ownership
interest in or share of the underlying
applicable credit property.

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4. Partnerships
Many stakeholders questioned
whether a partnership that contains
partners described in section
6417(d)(1)(A) could make an elective
payment election under section 6417
with respect to those partners, pointing
to the ‘‘determined with respect to such
entity’’ language in section 6417(a).
Stakeholders stated that clarity around
the treatment of these partnerships is of
particular importance as many
applicable entities choose to partner
with non-applicable entities in
investment and development of credit
generating projects, that applicable
entities may not have the expertise or
resources to own such projects outright,
and that the ability to partner is key to
their meaningful participation in the
energy transition.
The Treasury Department and the IRS
believe that the better interpretation of
the ‘‘determined with respect to such
entity’’ language in section 6417(a), as
well as the rules in sections 6417(c), is
to apply entity-specific rules under
section 6417. Section 6417(c) refers to a
credit determined with respect to any
facility or property ‘‘held directly by a
partnership or S corporation,’’ meaning
that the partnership or S corporation,
not its owners, is the relevant entity for
these purposes. Additionally, section
6417(c) provides that the partnership or
S corporation, not the partners or
shareholders, makes the section 6417
election. Furthermore, because section
6417 elections are made for a particular
applicable credit property, allowing a
section 6417 election for a portion of an
applicable credit property would be
contrary to section 6417(a) and, if
permitted, would be difficult to
administer, particularly in tiered
partnership structures.
Thus, proposed § 1.6417–2(a)(1)(iv)
would provide that partnerships and S
corporations are not applicable entities
described in section 6417(d)(1)(A) and
proposed § 1.6417–1(c). This proposed
rule would apply no matter how many
of the partners or shareholders are
described in section 6417(d)(1)(A) and
proposed § 1.6417–1(c), including if all
partners or shareholders are described
in section 6417(d)(1)(A) and proposed
§ 1.6417–1(c). However, because section
6418(f)(2) defines ‘‘eligible taxpayer’’ as
any taxpayer that is not described in
section 6417(d)(1)(A) (and thus not in
proposed § 1.6417–1(c)), such a
partnership would be an eligible
taxpayer described in section 6418(f)(2).
In addition, as described in part I.B.3.
of this Explanation of Provision, an
applicable entity may engage with other
entities, including with for-profit

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partners, in an ownership arrangement
that has properly elected out of
subchapter K and make an elective
payment election under section 6417(a)
with respect to its share of the
applicable credits determined with
respect to its share of the underlying
applicable credit property. This type of
arrangement provides some flexibility
for tax-exempt and government entities
to participate in section 6417 with other
entities. The Treasury Department and
the IRS request comments on whether
any additional rules are needed.
Comments are also requested regarding
whether any entity described in section
6417(d)(1)(A)(i)–(vi) or proposed
§ 1.6417–1(c) could include an entity
organized as a partnership for Federal
tax purposes.
As described in part IV of this
Explanation of Provisions, an electing
taxpayer may include a partnership or S
corporation.
C. Applicable Credit
Section 6417(b) lists the applicable
credits for which a section 6417(a)
election is available. Proposed § 1.6417–
1(d) lists those credits, with minor
changes to account for erroneous crossreferences in the statute.
Stakeholders asked for clarification on
the scope of the credit for qualified
commercial vehicles. Section 6417(b)(6)
states that the term ‘‘applicable credit’’
includes the credit for qualified
commercial vehicles determined under
section 45W by reason of subsection
(d)(2) 8 thereof, ‘‘in the case of a taxexempt entity described in clause (i),
(ii), or (iv) of section 168(h)(2)(A).’’ In
order to qualify for elective pay for the
section 45W credit, an entity would
need to be both be an applicable entity,
as defined in proposed § 1.6417–1(c),
and a tax-exempt entity described in
clause (i), (ii), or (iv) of section
168(h)(2)(A) (in other words, an
organization exempt from the tax
imposed by subtitle A by reason of
section 501(a) of the Code; a State, the
District of Columbia, a political
subdivision thereof, or any agency or
instrumentality of any of the foregoing;
a U.S. territory, a political subdivision
thereof, or any agency or
instrumentality of any of the foregoing;
or an Indian tribal government, a
subdivision thereof, or any agency or
instrumentality of any of the foregoing),
and would also need to otherwise
qualify for the section 45W credit.
One stakeholder asked whether the
elective payment election applies to
8 While section 6417(b)(6) refers to section
45W(d)(3), the reference should be to section
45W(d)(2). This has been corrected in the proposed
regulations.

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both the applicable credit and any
eligible bonus credit amounts. The
amount of applicable credit is
determined, in part, under the Code by
including any eligible bonus credit
amounts. The entire amount of any
applicable credit is eligible under the
Code for the elective payment election,
assuming all the relevant requirements
are met.
Several stakeholders asked whether
the applicable entity could treat the
applicable credits arising during a
quarter as a payment against quarterly
estimated tax (assuming such an amount
was due). These proposed regulations
do not contain a special rule because
taxpayers can determine, based on their
projected tax liability, the correct
amount of estimated tax to pay in order
to avoid a section 6654 or section 6655
estimated tax penalty at the end of the
year.
Because registration must be made
with respect to each facility or property
giving rise to an applicable credit,
proposed § 1.6417–1(e) defines
‘‘applicable credit property’’ for
purposes of each of the applicable
credits, and the section 6417 regulations
use the term ‘‘applicable credit
property’’ throughout for clarity.
D. Definitions Pertaining to the Election
Proposed § 1.6417–1(i) would provide
that the ‘‘elective payment election’’ is
the election provided in proposed
§ 1.6417–2(b). Proposed § 1.6417–1(h)
would provide that the ‘‘elective
payment amount’’ means, with respect
to an applicable entity or an electing
taxpayer that is not a partnership or an
S corporation, the applicable credit(s)
for which an applicable entity or
electing taxpayer makes an elective
payment election to be treated as
making a payment against the tax
imposed by subtitle A for the taxable
year, which would be equal to the sum
of (1) the amount (if any) of the current
year applicable credit(s) allowed as a
general business credit (GBC) under
section 38 for the taxable year, and (2)
the amount (if any) of unused current
year applicable credits which would
otherwise be carried back or carried
forward from the unused credit year
under section 39 and that are treated as
a payment against tax. With respect to
an electing taxpayer that is a
partnership or an S corporation, the
term ‘‘elective payment amount’’ would
mean the sum of the applicable credit(s)
for which the partnership or S
corporation makes an elective payment
election and results in a payment to
such partnership or S corporation equal
to the amount of such credit(s) (unless
the partnership or S corporation owes a

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Federal tax liability, in which case the
payment may be reduced by such tax
liability).
E. Guidance
Interpretations and procedures
pertaining to section 6417 and the
section 6417 regulations may be issued
through guidance, as appropriate.
Proposed § 1.6417–1(j) would define
‘‘guidance’’ for purposes of these
regulations as guidance published in the
Federal Register or Internal Revenue
Bulletin, as well as administrative
guidance such as forms, instructions,
publications, or other guidance on the
IRS.gov website.
F. Annual Tax Return
To avoid any confusion about where
the elective payment election should be
made, proposed § 1.6417–1(b) would
define ‘‘annual tax return,’’ for purposes
of the section 6417 regulations, as
follows: (1) for any taxpayer normally
required to file an annual tax return
with the IRS, such annual return
(including the Form 1065, ‘‘U.S. Return
of Partnership Income,’’ for partnerships
and the Form 990–T for organizations
with unrelated business income tax or a
proxy tax under section 6033(e)); (2) for
any taxpayer that is not normally
required to file an annual tax return
with the IRS (such as taxpayers located
in the U.S. territories), the return they
would be required to file if they were
located in the United States, or, if no
such return is required (such as for
State, District of Columbia, local, or
Indian tribal governmental entities), the
Form 990–T; and (3) for short tax year
filers, the short year tax return. For
example, an individual in a U.S.
territory would file a Form 1040, ‘‘U.S.
Individual Income Tax Return,’’ a
corporation in a U.S. territory would file
a Form 1120, ‘‘U.S. Corporation Income
Tax Return,’’ and the U.S. territory itself
would file Form 990–T, ‘‘Exempt
Organization Business Income Tax
Return (and proxy tax under section
6033(e).’’ Similarly, a tax-exempt entity
would file the Form 990–T even if not
otherwise required to file the Form 990–
T.
II. Rules for Making Elective Payment
Elections
A. In General
Proposed § 1.6417–2 would provide
general rules for an applicable entity or
electing taxpayer to make an elective
payment election under section 6417 in
accordance with the rules of proposed
§ 1.6417–2(b) with respect to any
applicable credit determined with
respect to such entity.

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Proposed § 1.6417–2(a)(1) would
provide the rules for applicable entities
making elective payment elections. An
applicable entity that makes an elective
payment election in the manner
described in Part II.B. of this
Explanation of Provisions would be
treated as making a payment against the
Federal income taxes imposed by
subtitle A, for the taxable year with
respect to which an applicable credit
was determined, in the amount of such
credit as determined under the rules
discussed in Part II.C. of this
Explanation of Provisions. Proposed
§ 1.6417–2(d)(1) would provide that the
payment described in proposed
§ 1.6417–2(a)(1) is treated as made (1) in
the case of an entity for which no return
is required under sections 6011 or
6033(a), on the later of the date that a
return would be due under section
6033(a) (determined without regard to
extensions) if such entity were
described in that section, or the date on
which such entity submits a claim for
credit or refund, and (2) in any other
case, on the later of the due date
(determined without regard to
extensions) of the return of tax for the
taxable year, or the date on which such
return is filed.
Special rules are provided in
proposed § 1.6417–2(a)(1)(ii) through (v)
that would apply for applicable entities
if the election is made for applicable
credit property held by a disregarded
entity; if the applicable entity is a coowner in an applicable credit property
through an ownership arrangement
properly treated as a tenancy-incommon, or pursuant to a joint
operating arrangement that has properly
elected out of subchapter K under
section 761; and for members of a
consolidated group of which an Alaska
Native Corporation is the common
parent.
As discussed in Part I.B.4 of this
Explanation of Provisions, partnerships
and S corporations would not be
applicable entities described in
proposed § 1.6417–1(c)(1), and thus
would not be eligible to make an
elective payment election unless the
partnership or S corporation is an
electing taxpayer.
Proposed § 1.6417–2(a)(2) would
provide the rules for electing taxpayers
making an elective payment election.
An electing taxpayer other than a
partnership or an S corporation that has
made an elective payment election in
accordance with proposed §§ 1.6417–3
and § 1.6417–2(b) would be treated as
making a payment against the Federal
income taxes imposed by subtitle A for
the taxable year with respect to which
the applicable credit is determined in

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the amount determined under proposed
§ 1.6417–2(c). Proposed § 1.6417–2(d)(1)
would provide that the payment
described in proposed § 1.6417–2(a)(2)
is treated as made at the same time as
made by an applicable entity. However,
in the case of an electing taxpayer that
is a partnership or S corporation that
has made an elective payment election
in accordance with proposed §§ 1.6417–
3, 1.6417–4, and 1.6417–2(b), the IRS
will make a payment to such
partnership or S corporation equal to
the amount of such credit determined
under proposed §§ 1.6417–2(b) and
1.6417–4(d)(3) (unless the partnership
or S corporation owes any Federal
income tax liability, in which case the
payment may be reduced by such tax
liability).
Proposed § 1.6417–2(a)(2) also
provides special rules for electing
taxpayers that would apply if the
election is made for applicable credit
property held by a disregarded entity; if
the applicable entity is a co-owner in an
applicable credit property through an
ownership arrangement properly treated
as a tenancy-in-common, or pursuant to
a joint operating arrangement that has
properly elected out of subchapter K
under section 761; and for members of
a consolidated group.
Proposed § 1.6417–2(a)(3)(i)–(iv)
would address the special rules with
regard to the election for credits under
section 45, 45V, 45Q, or 45Y, as
provided in section 6417(d)(3).
However, the special rules in section
6417(d)(3) that relate to electing
taxpayers are set forth in proposed
§ 1.6417–3, for clarity.
Consistent with the special rule for
electing taxpayers that may elect to be
treated as an applicable entity for
purposes of section 6417 for up to five
years with respect to a facility placed in
service that produces eligible
components (as defined in section
45X(c)(1)), proposed § 1.6417–2(a)(3)(v)
would clarify that a section 45X election
is made, for purposes of section 6417,
with respect to a facility (whether the
facility existed on or before, or after,
December 31, 2022) at which a taxpayer
produces, after December 31, 2022,
eligible components as defined in
section 45X(c)(1) during the taxable
year.
B. Manner of Making the Election
Section 6417(a) provides that the
elective payment election is made ‘‘at
such time and in such manner as the
Secretary may provide,’’ and proposed
§ 1.6417–2(b) would provide those
rules. First, proposed § 1.6417–2(b)(1)
provides that an applicable entity or
electing taxpayer would make an

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elective payment election on the
applicable entity’s or electing taxpayer’s
annual tax return, as defined in
§ 1.6417–1(b), in the manner prescribed
by the IRS in guidance, along with any
required completed source credit
form(s) with respect to the applicable
credit property, a completed Form 3800,
General Business Credit, (or its
successor), and any additional
information, including supporting
calculations, required in instructions to
the relevant forms.
Proposed § 1.6417–2(b)(1)(iv) would
provide that an elective payment
election may only be made on an
original return (including any revisions
on a superseding return) filed not later
than the due date (including extensions
of time) for the original return for the
taxable year for which the applicable
credit is determined. No elective
payment election may be made or
revised on an amended return or by
filing an administrative adjustment
request under section 6227 of the Code.
There also would be no relief available
under §§ 301.9100–1 through 301.9100–
3 of the Procedure and Administration
Regulations (26 CFR part 301) for an
elective payment election that is not
timely filed.
Second, proposed § 1.6417–2(b)(2)
would specify that pre-filing registration
(as would be required under proposed
§ 1.6417–5) is a condition of any amount
being treated as a payment that is made
by an applicable entity under section
6417(a). An elective payment election
will not be effective with respect to
applicable credits determined with
respect to an applicable credit property
unless the applicable entity or electing
taxpayer received a valid registration
number for the applicable credit
property and provided the registration
number for each applicable credit
property on its Form 3800 (or its
successor) attached to the tax return in
accordance with guidance.
Third, proposed § 1.6417–2(b)(3)
would provide the due date for the
election under section 6417(a). In the
case of any entity for which no Federal
income tax return is required under
sections 6011 or 6033(a) of the Code
(such as a governmental entity), the
elective payment election must be made
no later than the due date (including an
extension of time) for the original return
that would be due under section 6033(a)
if such applicable entity were described
in that section. Under section 6072(e),
that date is the 15th day of the fifth
month after the taxable year determined
by section 441 of the Code. Subject to
issuance of guidance that specifies the
manner in which an entity for which no
Federal income tax return is required

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under sections 6011 or 6033(a) of the
Code could request an extension of time
to file, an automatic paperless sixmonth extension from the original due
date is deemed to be allowed.
In the case of any taxpayer that is not
normally required to file an annual tax
return with the IRS (such as those
located in the U.S. territories), the
elective payment election must be made
no later than the due date (including
extensions of time) that would apply if
the taxpayer was located in the United
States (such as the 15th day of the
fourth month after the end of the year
for individuals filling Form 1040 or for
corporations filling Form 1120). For
example, an individual in a U.S.
territory would be required to make the
elective payment election on or before
the 15th day of April following the close
of the calendar year, or, if they filed an
extension, on or before the 15th day of
October following the close of the
calendar year.
In any other case, the elective
payment election must be made no later
than the due date (including extensions
of time) for the original return for the
taxable year for which the election is
made, but in no event earlier than
February 13, 2023.
Fourth, proposed § 1.6417–2(b)(4)
would provide that any election under
section 6417(a), once made, is
irrevocable and applies with respect to
any applicable credit for the taxable
year for which the election is made.
Under section 6417, the election
period applies for a period of years with
respect to certain applicable credits.
Specifically, for the section 45 credit or
section 45Y credit, the election applies
to the 10-year period beginning on the
date the facility was originally placed in
service. For the section 45Q credit, the
election applies to the 12-year period
beginning on the date the equipment
was originally placed in service. For the
section 45V credit, the election applies
to all subsequent taxable years with
respect to the facility.
Electing taxpayers make the election
for one five-year period per applicable
credit property, but are allowed one
revocation per applicable credit
property, as provided in section
6417(d)(1)(D) and (d)(3)(C) and (D), and
would be provided in proposed
§ 1.6417–3 (as described in part III of
this Explanation of Provisions).
Fifth, proposed § 1.6417–2(b)(5)
would provide that an elective payment
election applies to the entire amount of
applicable credit(s) determined with
respect to each applicable credit
property that was properly registered for
the taxable year, resulting in an elective
payment amount that is the entire

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amount of applicable credit(s)
determined with respect to the
applicable entity or electing taxpayer for
a taxable year.

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C. Determination of Applicable Credit
Proposed § 1.6417–2(c) would provide
three rules relating to the determination
of any applicable credit.
1. Special Rules for Tax-Exempt
Organizations and Government Entities
In accordance with section 6417(d)(2),
proposed § 1.6417–2(c)(1) would
provide that, in the case of any
applicable entity that makes the election
described in section 6417(a), any
applicable credit is determined (1)
without regard to the restrictions
regarding use of property by tax-exempt
organizations and government entities
found in sections 50(b)(3) and (4)(A)(i),
and (2) by treating any property with
respect to which such credit is
determined as used in a trade or
business of the applicable entity.
Proposed § 1.6417–2(c)(2) elaborates
on the effect of the ‘‘trade or business’’
rule in section 6417(d)(2) and proposed
§ 1.6417–2(c)(1)(ii). First, the rule would
allow tax-exempt and government
entities to take advantage of applicable
credits even outside of the unrelated
business taxable income context
(provided other requirements are met)
by allowing the entity to treat an item
of property as if it is of a character
subject to an allowance of depreciation
(such as under sections 30C and 45W);
to produce items ‘‘in the ordinary
course of a trade or business of the
taxpayer’’ (such as in sections 45V and
45X); and to state that an item of
property is one for which depreciation
(or amortization in lieu of depreciation)
is allowable (such as in sections 48,
48C, and 48E).
Second, the rule allows the entity to
apply the capitalization and accelerated
depreciation rules (such as sections 167,
168, 263 and 263A) that apply to
determining the basis and the
depreciation allowance for property
used in a trade or business.
Third, the rule makes applicable
general limitations on the use of credits
by those persons engaged in the conduct
of a trade or business, such as section
49 in the context of investment tax
credits, and section 469 for all
applicable credits. For section 49 to
apply for purposes of section 6417, the
property must be placed in service by an
applicable entity or electing taxpayer
described in section 465(a)(1) (that is, an
individual or a C corporation with
respect to which the stock ownership
requirements of section 542(a)(2) are
met). For section 469 to apply for

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purposes of section 6417, the applicable
entity or electing taxpayer would need
to be described in section 469(a)(2) (that
is, an individual, estate or trust, a
closely held C corporation, or a personal
service corporation). Thus, for any
applicable entity or electing taxpayer for
which section 49 or 469 generally
applies, those sections apply with
respect to the determination of
applicable credits under section 6417.
The Treasury Department and the IRS
request comments on whether any
additional clarification is needed
regarding the application of sections 49
and 469 to applicable entities or electing
taxpayers determining the amount of an
applicable credit.
Lastly, the rule does not create any
presumption that the trade or business
is related (or unrelated) to a tax-exempt
entity’s exempt purpose.
2. Special Rule for Investment-Related
Credit Property Acquired With Income,
Including Income From Certain Grants
and Forgivable Loans, That Is Exempt
From Taxation Under Subtitle A
Multiple stakeholders asked that
regulations clarify whether an
applicable entity that funded the
purchase of an investment credit
property with income, including income
from certain grants and forgivable loans,
that is exempt from taxation under
subtitle A (Tax-Exempt Amounts 9) can
include those amounts in the basis of
the property for purposes of calculating
the amount of the investment tax credit.
Stakeholders also noted that in some
cases the full cost of the investment
credit property can be paid through TaxExempt Amounts.
Generally, the basis of property is the
cost of such property. See section 1012
of the Code. However, for a taxable
entity, cost basis in property may need
to be reduced if Tax-Exempt Amounts
are used for the purpose of purchasing,
constructing, or otherwise acquiring
such property. See for example, sections
118(a) and 362(c)(2) of the Code.
However, grants and forgivable loans
received by taxable entities are generally
taxable, and thus generally do not result
in a reduction in basis. See generally
section 61 of the Code.
For tax-exempt and government
entities, for which grants, forgivable
loans, and other amounts are generally
exempt from taxation under subtitle A,
the treatment of such Tax-Exempt
Amounts with respect to basis in
property is less clear. Because these
9 For this purpose, ‘‘Tax-Exempt Amounts’’ do
not include the proceeds of loans, which are not
included in income as long as they need to be
repaid.

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entities may acquire investment credit
properties eligible for the section
6417(a) election, in whole or in part,
with Tax-Exempt Amounts, if such
amounts were not included in the basis
of the investment credit property (that
is, they resulted in a reduction in the
basis of the investment credit property),
the applicable entity may have little or
no basis with respect to which to
calculate the credit, which would
frustrate Congressional intent to provide
the section 6417(a) election for
investment credit properties owned by
such entities. However, as stakeholders
noted, allowing an elective payment for
an applicable tax credit when the
investment credit property was fully
purchased with Tax-Exempt Amounts
subject to donor restrictions for that
purpose would result in an aggregate
benefit to the applicable entity in excess
of the cost of the property. As a result,
a few stakeholders suggested that local,
State, and Federal government grants
received as Tax-Exempt Amounts by
applicable entities specifically for
acquisition of investment credit
property should not be included in the
basis of such property for purposes of
calculating the applicable credit for the
elective payment under section 6417.
Proposed § 1.6417–2(c)(3) would
provide a special rule for investment
credit property acquired with TaxExempt Amounts and would expand the
rule to other credits that are determined
on the basis of property. The rule states
that, for purposes of 6417, any TaxExempt Amounts used to purchase,
construct, reconstruct, erect, or
otherwise acquire an applicable credit
property described in sections 30C,
45W, 48, 48C, or 48E (investmentrelated credit property) are included in
basis for purposes of computing the
applicable credit amount determined
with respect to the investment-related
credit property, regardless of whether
basis is required to be reduced (in whole
or in part) by such amounts under other
provisions of the Code.
However, to prevent an excessive
benefit, proposed § 1.6417–2(c)(3)
would provide that, if an applicable
entity receives Tax Exempt Amounts for
the specific purpose of purchasing,
constructing, reconstructing, erecting, or
otherwise acquiring an investment
credit property (Restricted Tax Exempt
Amount), and the Restricted TaxExempt Amount plus the applicable
credit otherwise determined with
respect to that investment-related credit
property exceeds the cost of the
investment-related credit property, then
the amount of the applicable credit is
reduced so that the total amount of
applicable credit plus the amount of any

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Restricted Tax Exempt Amount equals
the cost of investment credit property.
Proposed § 1.6417–2(c)(5) contains
three examples illustrating these rules.

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3. Credits Must Be Determined With
Respect to the Applicable Entity or
Electing Taxpayer
Multiple stakeholders asked that
regulations clarify whether applicable
entities may ‘‘chain’’ an election under
section 6417(a) for credits obtained from
other sources. For example,
stakeholders questioned whether an
applicable entity may make an elective
payment election under section 6417(a)
with respect to purchased credits under
section 6418(a) or credits allowable to
the applicable entity because of an
election under section 45Q(f)(3)(B) or
former section 48(d) (pursuant to
section 50(d)(5)). Stakeholders also
asked whether an applicable entity may
make an elective payment election in
the case of a third-party ownership
arrangement, such as an energy project
owned by a for-profit developer but
developed by a government entity.
The Treasury Department and the IRS
propose that such chaining will not be
permissible and seek further comment
on the issue. Proposed § 1.6417–2(c)(4)
would state that any credits for which
an election is made under section
6417(a) must have been determined
with respect to the applicable entity or
electing taxpayer, meaning that the
applicable entity or electing taxpayer
owns the underlying eligible credit
property or, if ownership is not
required, otherwise conducts the
activities giving rise to the underlying
eligible credit.10 This proposed rule,
which is consistent with the proposed
regulations under section 6418, would
mean that no election may be made
under section 6417(a) for credits
purchased pursuant to section 6418,
transferred pursuant to section
45Q(f)(3), acquired by a lessee from a
lessor by means of an election to pass
through the credit to a lessee under
former section 48(d) (pursuant to
section 50(d)(5)), owned by a third
party, or otherwise not determined
directly with respect to the applicable
entity or electing taxpayer.
Stakeholders noted several
administrative and practical reasons
why making an elective payment
election with respect to credits
transferred under section 6418 would
present challenges. For example,
stakeholders noted that businesses
10 The section 45X credit requires that the
taxpayer produce eligible components. Thus, an
applicable entity or electing taxpayer must produce
eligible components to claim the credit.

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electing to be treated as applicable
entities with respect to applicable credit
property giving rise to section 45V, 45Q,
or 45X credits must do so in the taxable
year in which such taxpayer has placed
in service such property, and the
election generally lasts through the
following four taxable years, whereas
the duration of the section 6418 transfer
election is limited to the tax year. In
addition, any credit determined with
respect to an electing taxpayer that is a
partnership or S corporation must be
determined with respect to only
applicable credit property held directly
by the partnership or S corporation.
Allowing a partnership or S corporation
to make an elective payment election
with respect to transferred credits
would conflict with this rule.
Furthermore, the elective payment
election under section 6417 with respect
to a section 45 credit or section 45Q
credit only applies to applicable credit
property that is originally placed in
service after December 31, 2022, and the
elective payment election under section
6417 with respect to a section 45V
credit only applies to clean hydrogen
attributable to applicable credit property
that is originally placed in service after
December 31, 2012, whereas there are
no such restrictions under section 6418.
In addition, stakeholders contended that
section 6417(d)(3)(ii)’s requirement that
a section 6417(a) election be
‘‘irrevocable’’ would seem to prohibit an
applicable entity from making a section
6417(a) election with respect to any
transferred credit for which the 6417(a)
election spans more than one year (such
as credits determined under sections 45,
45Q, 45V, 45Y, and, for electing
taxpayers only, under section 45X),
because elections to transfer all or a
portion of eligible credits under section
6418(a) are annual and the transferee
does not own the property or engage in
the activities that originally gave rise to
the eligible credits. Finally, stakeholders
noted that a transferee may purchase
only a portion of a credit determined
with respect to an eligible credit
property pursuant to section 6418(a),
which they argued is inconsistent with
the requirement under section 6417(a)
that the elective payment election be
with respect to the entire applicable
credit determined with respect to
applicable credit property for a taxable
year.
These administrative and practical
reasons have informed the proposed
conclusion of the Treasury Department
and the IRS that sections 6417 and 6418
are best interpreted to not allow an
applicable entity under section 6417 to
make an elective payment election for a

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transferred credit under section 6418.
Furthermore, the pre-filing registration
process contemplated by section
6417(d)(5) and by section 6418(g)(1) is
not currently designed to allow an
applicable entity purchasing eligible
credits under section 6418 to make an
elective payment election under section
6417.
Other stakeholders have suggested
that the Code may allow a transferee
taxpayer under section 6418 to make an
elective payment election under section
6417 for a transferred credit because
section 6418(a) provides that ‘‘the
transferee taxpayer specified in such
election (and not the eligible taxpayer)
shall be treated as the taxpayer for
purposes of this title with respect to
such credit.’’ These stakeholders argue
the transferee taxpayer steps into the
shoes of the eligible taxpayer
transferring the credit, such that a
transferee taxpayer may be viewed as
the taxpayer earning the credit for
purposes of section 6417 and therefore
is able to make an elective payment
election with respect to such credit.
They further noted that section 6417
does not expressly prohibit an
applicable entity from making an
elective payment election with respect
to a transferred credit and that allowing
applicable entities to make an elective
payment election with respect to a
transferred credit may further the policy
goals of the IRA by expanding the
financing methods available to
renewable energy projects.
The Treasury Department and the IRS
agree with stakeholders who noted that
there is no restriction on who can be a
transferee under section 6418, other
than that the transferee cannot be
related (within the meaning of section
267(b) or 707(b)(1) of the Code) to the
eligible taxpayer transferring the credit.
Thus, an applicable entity could be
transferred credits under 6418, at least
to offset any Federal income tax
liability. However, the statute does not
address whether an applicable entity
can make an elective payment election
under section 6417 with respect to
transferred credits. Based on the reasons
previously discussed in this part II.C.3.
of this Explanation of Provisions, the
Treasury Department and the IRS
believe that a transferred credit is not
properly interpreted as an applicable
credit that is ‘‘determined with respect
to’’ an applicable entity or electing
taxpayer under section 6417(a) because
the credit is not determined with
respect to underlying applicable credit
property owned by the applicable entity
or electing taxpayer, or, if ownership is
not required, activities otherwise
conducted by the applicable entity or

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electing taxpayer. Section 6418(a) and
the proposed regulations under section
6418 provide that a transferred credit is
determined with respect to the eligible
taxpayer transferring the credit.
Although the transferee taxpayer uses
the credit, the proposed regulations
under section 6418 provide that the
transferee taxpayer is not considered to
have owned an interest in the
underlying eligible credit property or
have otherwise conducted any of the
activities that give rise to the credit.
The Treasury Department and the IRS
seek comments on limited situations
where exceptions to this proposed rule
may be appropriate because it is
consistent with the text, design, and
intent of the IRA, while also ensuring
that such exceptions are not subject to
fraud or abuse. Stakeholders could
consider appropriate limitations such as
(1) the type of applicable entity that may
be allowed to make an elective payment
election with respect to credits
transferred under section 6418, such as
a government entity; (2) the
involvement of the transferee taxpayer
in the project’s development; (3) the
level of due diligence conducted by the
transferee taxpayer regarding whether
the project qualifies for the applicable
credit and any bonus credits and
whether the amount of transferred
credits was properly determined with
respect to the eligible taxpayer
transferring the credit; (4) the fact that
the transferee taxpayer is paying close to
the face value of the credit (and what
minimum percentage of face value
should be required); and (5) there are no
other special financial arrangements
between the parties. Stakeholders
should address legal considerations, as
well as practical and administrative
challenges, to any such exception to the
proposed rule.
D. Denial of Double Benefit
Section 6417(a) allows an applicable
entity or electing taxpayer other than a
partnership or S corporation to be
treated as making a payment against the
tax imposed by subtitle A for the taxable
year with respect to which such credit
was determined equal to the amount of
such credit. Section 6417(c)(1)(A)
provides that, for an electing taxpayer
that is a partnership or S corporation,
the Secretary will make a payment to
such partnership or S corporation with
respect to a credit determined with
respect to applicable credit property
held directly by the partnership or S
corporation equal to the amount of such
credit. Sections 6417(e) and
6417(c)(1)(B) each provide that such
credit is reduced to zero and, for any
other purposes of the Code, is deemed

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to have been allowed to such entity for
such taxable year. Section 6417(h)
provides that the Secretary must issue
guidance necessary to carry out the
purposes of section 6417, including
guidance to ensure that the amount of
the payment (in the case of an electing
taxpayer that is a partnership or S
corporation) or deemed payment (in the
case of all other electing taxpayers and
applicable entities) made under section
6417 is commensurate with the amount
of the credit that would be otherwise
allowable (determined without regard to
section 38(c)).
Proposed § 1.6417–2(e)(2) and (3)
would address the methodology for
determining the amount of the elective
payment election, reducing the elective
payment election amount to zero, and
treating the applicable credit as a credit
allowed for the taxable year for all other
purposes of the Code with respect to
applicable entities and electing
taxpayers other than partnerships or S
corporations. The methodology with
respect to a payment made to a
partnership or S corporation is provided
in proposed § 1.6417–4(c), as described
in part IV of this Explanation of
Provisions.
An applicable entity or electing
taxpayer (other than an electing
taxpayer that is a partnership or S
corporation) making an elective
payment election applies section
6417(e) by taking the following steps.
First, the taxpayer would compute the
amount of the Federal income tax
liability (if any) for the taxable year,
without regard to the GBC, that is
payable on the due date of the return
(without regard to extensions), and the
amount of the Federal income tax
liability that may be offset by GBCs
pursuant to the limitation based on
amount of tax under section 38. Second,
the taxpayer would compute the
allowed amount of GBC carryforwards
carried to the taxable year plus the
amount of current year GBCs (including
current applicable credits) allowed for
the taxable year under section 38 (that
is, in accordance with all the rules in
section 38, including the ordering rules
provided in section 38(d)). Since the
election would be required to be made
on an original return, any business
credit carrybacks would not be
considered when determining the
elective payment amount for the taxable
year. Third, the taxpayer would apply
the GBCs allowed for the taxable year as
computed in step 2, including those
attributable to applicable credits as
GBCs, against the tax liability computed
in step 1. Fourth, the taxpayer would
identify the amount of any excess or
unused current year business credit, as

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defined under section 39, attributable to
current year applicable credit(s) for
which the applicable entity is making
an elective payment election. The
amount of such unused applicable
credits would be treated as a payment
against the tax imposed by subtitle A for
the taxable year with respect to which
such credits are determined (rather than
having them available for carryback or
carryover) (net elective payment
amount). Fifth, the taxpayer would
reduce the applicable credits for which
an elective payment election is made by
the amount (if any) allowed as a GBC
under section 38 for the taxable year, as
provided in step 3, and by the net
elective payment amount (if any) that is
treated as a payment against tax, as
provided in step 4, which results in the
applicable credits being reduced to zero.
The proposed regulations would
provide, consistent with section 6417(e),
that the full amount of the applicable
credits for which an elective payment
election is made is deemed to have been
allowed for all other purposes of the
Code, including, but not limited to, the
basis reduction and recapture rules
imposed by section 50 and calculation
of any underpayment of estimated tax
under sections 6654 and 6655 of the
Code. The proposed regulations would
give several examples illustrating these
rules.
The Treasury Department and the IRS
request comments on whether future
guidance should expand or clarify the
methodology that an applicable entity
follows to compute the amount of its
elective payment. Comments are also
requested on additional Code sections
under which it may be necessary to
consider the applicable credit to have
been deemed to have been allowed for
the taxable year in which an elective
payment election is made.
III. Elective Payment Election by
Electing Taxpayers
Section 6417(d)(1)(B), (C), and (D)
provides that a taxpayer that is not an
applicable entity described in section
6417(d)(1)(A) and that, with respect to
any taxable year, places in service
applicable credit property that qualifies
for the section 45V credit or the section
45Q credit, or, with respect to any
taxable year in which such taxpayer has,
after December 31, 2022, produced
eligible components (as defined in
section 45X(c)(1)), respectively, may
elect to be treated as an applicable
entity for purposes of section 6417 for
such taxable year, but only with respect
to the applicable credit property and
only with respect to the credit under
section 45V(a), 45Q(a), or 45X(a),
respectively. Proposed § 1.6417–1(g)

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would define such a taxpayer as an
‘‘electing taxpayer.’’
The special rules for electing
taxpayers are found in section
6417(d)(1) and (d)(3). Proposed
§ 1.6417–3 would combine these rules
for clarity.
Proposed § 1.6417–3(b), (c), and (d)
would provide the specific rules
regarding the election under section
6417(d)(1)(B), (C), or (D). Proposed
§ 1.6417–3(e) would provide the rules
relating to the election for electing
taxpayers. Proposed § 1.6417–4 would
provide additional rules for electing
taxpayers that are partnerships or S
corporations.
Proposed § 1.6417–3(b) would
provide that an electing taxpayer that
has placed in service a qualified clean
hydrogen production facility as defined
in section 45V(c)(3) during the taxable
year may make an elective payment
election for such taxable year (or by
August 16, 2023, in the case of facilities
placed in service before December 31,
2022), but only with respect to the
qualified clean hydrogen production
facility, only with respect to the section
45V credit, and only if the pre-filing
registration process that would be
required by proposed § 1.6417–5 was
properly completed. An electing
taxpayer that elects to treat qualified
property that is part of a specified clean
hydrogen production facility as energy
property under section 48(a)(15) would
not be able to make an elective payment
election with respect to such facility.
Proposed § 1.6417–3(c) would provide
that an electing taxpayer that has, after
December 31, 2022, placed in service a
single process train described in
§ 1.45Q–2(c)(3) at a qualified facility (as
defined in section 45Q(d)) during the
taxable year may make an elective
payment election for such taxable year,
but only with respect to the single
process train, only with respect to the
section 45Q credit, and only if the prefiling registration process that would be
required by proposed § 1.6417–5 was
properly completed.
Proposed § 1.6417–2(a)(3)(v) and
–3(d) would provide that an electing
taxpayer that produces, after December
31, 2022, eligible components (as
defined in section 45X(c)(1)) at a facility
during the taxable year may make an
elective payment election for such
taxable year, but only with respect to
the facility at which the eligible
components are produced by the
electing taxpayer in that year, only with
respect to the section 45X credit, and
only if the pre-filing registration process
that would be required by proposed
§ 1.6417–5 was properly completed.

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Proposed § 1.6417–3(e) would provide
rules on how the electing taxpayer
makes the elective payment election.
First, if an electing taxpayer makes an
elective payment election under
proposed § 1.6417–2(b) with respect to
any taxable year in which the electing
taxpayer places in service a qualified
clean hydrogen production facility for
which a section 45V credit is
determined, places in service a single
process train at a qualified facility for
which a section 45Q credit is
determined, or produces, after
December 31, 2022, eligible components
(as defined in section 45X(c)(1)) at a
facility, respectively, the electing
taxpayer will be treated as an applicable
entity for purposes of making an
elective payment election for such
taxable year and during the election
period described in proposed § 1.6417–
3(e)(3), but only with respect to the
applicable credit property described in
proposed § 1.6417–1(e)(3), (5), or (7),
respectively, that is the subject of the
election. The taxpayer would be
required to otherwise meet all
requirements to earn the credit in the
electing year and in each succeeding
year during the election period
described in proposed § 1.6417–3(e)(3).
Second, the election would be made
separately for each applicable credit
property, which is, respectively, a
qualified clean hydrogen production
facility placed in service for which a
section 45V credit is determined, a
single process train placed in service at
a qualified facility for which a section
45Q credit is determined, or a facility in
which eligible components are
produced for which a section 45X credit
is determined. Only one election may be
made with respect to any specific
applicable credit property.
Third, the elective payment election
generally would apply for an election
period consisting of the taxable year in
which the election is made and each of
the four subsequent taxable years that
end before January 1, 2033. The election
period would not be able to be less than
a taxable year but may be made for a
taxable period of less than 12 months
within the meaning of section 443 of the
Code.
However, an electing taxpayer may,
during a subsequent year of the election
period, revoke the elective payment
election with respect to an applicable
credit property described in proposed
§ 1.6417–1(e)(3), (5), or (7) in
accordance with forms and instructions.
Any such revocation, if made, applies to
the taxable year in which the revocation
is made (which cannot be less than a
taxable year but may be made for a
taxable period of less than 12 months

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within the meaning of section 443 of the
Code) and each subsequent taxable year
within the election period. Any such
revocation may not be subsequently
revoked.
An electing taxpayer would not be
able to make a transfer election under
section 6418(a) with respect to any
applicable credit under proposed
§ 1.6417–1(d)(3), (5), or (7) determined
with respect to applicable credit
property described in proposed
§ 1.6417–1(e)(3), (5), or (7) during the
election period for that applicable credit
property. However, if the election
period is no longer in effect with respect
to an applicable credit property, any
credit determined with respect to such
applicable credit property would be able
to be transferred pursuant to a transfer
election under section 6418(a), as long
as the taxpayer meets the requirements
of section 6418 and the 6418
regulations.
IV. Elective Payment Election for
Partnerships and S Corporations
A. Overview
Section 6417(c)(1) provides that, in
the case of any applicable credit
determined with respect to any
applicable credit property held directly
by a partnership or S corporation, any
election under section 6417(a) is made
by such partnership or S corporation.
These proposed regulations would
clarify that partnerships or S
corporations are not applicable entities
described in section 6417(d)(1)(A); thus,
any partnership or S corporation making
an elective payment election must be an
electing taxpayer, and as such, the only
applicable credits with respect to which
the partnership or S corporation can
make an elective payment election are a
section 45V credit, a section 45Q credit,
and a section 45X credit.
If a partnership or S corporation
makes an election under section 6417(a)
and proposed § 1.6417–2(b), the special
rules of section 6417(c)(1)(A) through
(D) apply. In that regard, proposed
§ 1.6417–4(c) would provide that (1) the
IRS will make a payment to such
partnership or S corporation equal to
the amount of such credit; (2) before
determining any partner’s distributive
share, or shareholder’s pro rata share, of
such credit, such credit is reduced to
zero and is, for any other purposes
under this title, deemed to have been
allowed solely to such entity (and not
allocated by such entity, or otherwise
allowed, to any partner or shareholder)
for such taxable year (for example, if a
partnership pays a Federal tax liability
to the IRS in a year for which an elective
payment election is made and cash is

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received, it treats the payment to the IRS
as if it paid the liability with the same
amount of underlying credit for which
the elective payment election is made);
(3) any amount with respect to which
the election under section 6417(a) is
made is treated as tax exempt income
for purposes of sections 705 and 1366;
and (4) a partner’s distributive share of
such tax exempt income is equal to such
partner’s distributive share of the
otherwise applicable credit for each
taxable year as determined under
§ 1.704–1(b)(4)(ii). The tax exempt
income would be taken into account by
the partnership or S corporation at the
same time as the underlying credit
would have been taken into account by
the partnership or S corporation absent
an elective payment election. The
proposed regulations provide an
example illustrating this rule. Because it
is the applicable credits, and not the tax
exempt income, that arise from the
conduct of the trade or business, the
proposed regulations would treat the tax
exempt income resulting from an
elective payment election by a
partnership or an S corporation as
arising from an investment activity and
not from the conduct of a trade or
business within the meaning of section
469(c)(1)(A). As such, the tax exempt
income would not be treated as passive
income to any partners or shareholders
who do not materially participate
within the meaning of section
469(c)(1)(B).
As requested by stakeholders, the
Treasury Department and the IRS clarify
here that there are no restrictions
imposed under section 6417 or the
section 6417 regulations on how a
partnership or S corporation that
receives a payment from the IRS
pursuant to an elective payment
election may use the cash payments in
its operations (including on when it
makes distributions to its partners or
shareholders).
Section 6417(h) requires that the
Secretary issue regulations or other
guidance to ensure that the amount of
the payment to a partnership or S
corporation is commensurate with the
amount of the credit that would
otherwise be allowable (without regard
to section 38(c)). Therefore, proposed
§ 1.6417–4(d)(1) would provide that, in
determining the applicable credit
amount that will result in a payment to
a partnership or S corporation, the
partnership or S corporation must
compute the amount of the applicable
credit allowable (without regard to
section 38(c)) as if an elective payment
election were not made. Because a
partnership or S corporation is not
subject to section 469 (that is, section

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469 applies at the partner or shareholder
level), the amount of an applicable
credit determined with respect to an
applicable credit property held directly
by a partnership or S corporation is not
subject to limitation by section 469. In
addition, because the credits to which a
partnership or S corporation may make
the elective payment election (that is,
section 45V, 45Q, and 45X) are not
investment tax credits under section 46,
sections 49 and 50 do not apply to limit
the amount of the credits.
B. BBA Partnerships
Many partnerships are subject to the
centralized partnership audit regime
found in subchapter C of chapter 63 of
the Code as amended by the Bipartisan
Budget Act of 2015 (BBA).11 In
connection with the implementation of
section 6417, the Treasury Department
and the IRS identified several areas of
the BBA regulations that require
updates to administer section 6417 in
the case of a partnership subject to the
BBA (BBA Partnership). Section 6221 of
the Code provides that any adjustment
to a partnership-related item with
respect to a BBA Partnership, and any
tax attributable thereto, is assessed and
collected at the partnership-level except
to the extent provided under the BBA.
The BBA outlines centralized audit
procedures which generally must be
followed before the IRS can adjust a
partnership-related item (as defined in
§ 301.6241–1). In order to implement
section 6417, the Treasury Department
and the IRS propose updates to the
regulations under §§ 301.6241–1 and
301.6241–7.
1. Partnership-Related Items
Under § 301.6241–1(a)(6)(ii), a
partnership-related item is any item or
amount that is, with respect to the BBA
Partnership, relevant in determining the
tax liability of any person under chapter
1. Because the partnership-related item
definition is based on relevance to the
chapter 1 liability of any person, the
liability could belong to the BBA
Partnership or its partners. While
partnerships do not typically pay
chapter 1 tax pursuant to section 701 of
the Code, a BBA Partnership is eligible
to be an electing taxpayer under section
6417 and is thus subject to the excessive
payment rule under section 6417(d)(6),
which could result in a chapter 1 tax
liability to the BBA Partnership. In
11 See section 1101 of the BBA, Public Law 114–
74, 129 Stat. 584, 625–638 (2015), as amended by
section 411 of the Protecting Americans from Tax
Hikes Act of 2015, Public Law 114–113, 129 Stat.
2242, 3121 (2015), and sections 201 through 207 of
the Tax Technical Corrections Act of 2018, Public
Law 115–141, 132 Stat. 348, 1171–1183 (2018).

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addition, if a partnership makes an
election under section 6417, the
partnership must reduce its applicable
credit under section 6417(e), which
would impact the amount of credit and
tax exempt income that the partners
would be allocated, thereby affecting the
partners’ chapter 1 liability. Because the
application of section 6417 may be
relevant in determining the chapter 1
liabilities of a BBA Partnership and its
partners, any item or amount relevant to
section 6417 that is ‘‘with respect to the
partnership’’ would be a partnershiprelated item as defined under
§ 301.6241–1(a)(6)(ii).
Section 301.6241–1(a)(6)(iii) provides
than an item or amount is ‘‘with respect
to the partnership’’ if the item or
amount is shown or reflected, or
required to be shown or reflected, on a
return of the partnership under section
6031 of the Code or is required to be
maintained in the partnership’s books
and records. Because the definition of a
partnership-related item is based on the
item’s relevance to the chapter 1 tax
liability of any person, this definition
ensures that the definition of a
partnership-related item is not so broad
as to include items that are wholly
unrelated to a BBA Partnership, such as
a partner’s unrelated income. While the
limitation in this definition works well
to ensure partner-level items are not
inadvertently swept into the definition
of a partnership related item, this
definition may inadvertently exclude a
chapter 1 liability of a BBA Partnership
if, for instance, the liability is not
required to be shown or reflected on the
BBA Partnership’s return. The BBA
Partnership’s own chapter 1 tax
liability, in contrast with a partner’s
liability, is undoubtedly ‘‘with respect
to the partnership’’ and a partnershiprelated item.
Accordingly, these proposed
regulations propose to add a sentence to
§ 301.6241–1(a)(6)(iii) (regarding items
or amounts with respect to a BBA
Partnership) to provide that any chapter
1 tax that is the liability of the BBA
Partnership is an item with respect to
the BBA Partnership regardless of
whether that chapter 1 tax is required to
be reflected or shown on the partnership
return or required to be maintained in
the BBA Partnership’s books and
records.
2. Special Enforcement Rule for the
Elective Payment Election
As noted in part IV.B.1. of this
Explanation of Provisions, the BBA’s
centralized partnership audit regime
requires the IRS to follow certain
procedures before adjusting partnershiprelated items of a BBA Partnership.

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Under section 6241(11), in the case of
partnership-related items that the
Secretary determines involve a special
enforcement matter, the Secretary is
authorized to prescribe regulations
pursuant to which the BBA audit
procedures do not apply, and such
partnership-related items are subject to
special rules (including rules related to
assessment and collection) as the
Secretary determines necessary for the
effective and efficient enforcement of
the Code. Section 6241(11)(A). Section
6241(11)(B) provides a list of certain
‘‘special enforcement matters,’’
including the failure to comply with
information reporting obligations of
tiered partnerships, jeopardy
assessments of tax in exigent
circumstances, and matters involving
foreign partners and partnerships.
Sections 6241(11)(B)(i), (ii), and (v).
Section 6241(11)(B)(vi) also provides a
grant of authority to the Secretary for
‘‘other matters that the Secretary
determines by regulation present special
enforcement considerations.’’
Proposed § 1.6417–2(b) would
provide that the elective payment
election must be made on an original
return and that the election may not be
made on an amended return or
administrative adjustment request.
Under the existing BBA regulations, a
BBA Partnership’s elective payment
election under section 6417 is a
partnership-related item because the
existence of the election is relevant in
determining chapter 1 tax and because
the election is required to be made on
the BBA Partnership’s return. Because
the elective payment election is a
partnership-related item, the only way
for the IRS to make an adjustment upon
the determination of an ineffective
election would be to follow the audit
procedures of the centralized
partnership audit regime. To prevent
duplication, fraud, improper payments,
or excessive payments in an effective
manner, the IRS must be able to
determine whether a BBA Partnership’s
elective payment election is ineffective
in an expeditious manner. The
procedural requirements of the BBA
would require the IRS to treat BBA
Partnerships that have made an
ineffective election payment election
differently from other electing taxpayers
that are not subject to the centralized
partnership audit regime but that are
otherwise similarly situated. The
Treasury Department and the IRS are
proposing that, due to the unique nature
of the section 6417 election, which,
pursuant to proposed § 1.6417–2(d),
would result in a payment treated as
having been made on the later of the

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due date of the return or the date the
return was filed, the special
enforcement matters described in
section 6241(11) would apply, and the
BBA centralized partnership audit
regime should not apply to adjustments
with respect to partnership-related
items that affect the amount or existence
of a payment to the BBA Partnership, or
credit or refund of a payment to the
BBA Partnership under section 6417.
Accordingly, these proposed regulations
would add new paragraph (j) to
§ 301.6241–7 to provide that an election
by a BBA Partnership under section
6417 can be adjusted outside of the BBA
audit rules. These proposed regulations
also would redesignate existing
paragraph (j) (regarding applicability
dates) to a new paragraph (k) and
update that paragraph (k) to reflect an
applicability date for these proposed
regulations.
V. Pre-Filing Registration Requirements
and Additional Information
Section 6417(d)(5) provides that as a
condition of, and prior to, any amount
being treated as a payment that is made
by the taxpayer under section 6417(a) or
any payment being made pursuant to
section 6417(c), the Secretary may
require such information or registration
as the Secretary deems necessary or
appropriate for purposes of preventing
duplication, fraud, improper payments,
or excessive payments.
In general, stakeholders requested
additional information about this
provision and requested that the
regulations balance the need to prevent
fraud and abuse with the burden on
taxpayers. Stakeholders recommended
that the information required to be
provided to the IRS should be provided
in a manner that facilitates automated
procedures to help catch potential
fraud, discourages abusive or otherwise
illegitimate claims, and allows efficient
and prompt review (both before
payment and through audits).
Stakeholders recommended that all
required documents and information
should be able to be submitted easily via
an online portal. Stakeholders
recommended that information or
registration should be as consistent as
possible across sections 48D(d)(1),
6417(d)(5), and 6418(g)(1).
Proposed § 1.6417–5 would provide
the mandatory pre-filing registration
process that, except as provided in
guidance, an applicable entity or
electing taxpayer would be required to
complete as a condition of, and prior to
(1) any amount being treated as a
payment against the tax imposed by
subtitle A that is made by an applicable
entity or electing taxpayer (other than a

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partnership of S corporation) under
proposed §§ 1.6417–2(a)(1)(i) or
–2(a)(2)(i), or (2) any amount being paid
to a partnership or S corporation
pursuant to proposed § 1.6417–
2(a)(2)(ii).
Proposed § 1.6417–5(a) provides an
overview of this process and would
require an applicable entity or electing
taxpayer to satisfy the pre-filing
registration requirements as a condition
of, and prior to, making an elective
payment election. An applicable entity
or electing taxpayer would be required
to use the pre-filing registration process
to register itself as intending to make the
elective payment election, to list all
applicable credits it intends to claim,
and to list each applicable credit
property that contributed to the
determination of such credits as part of
the pre-filing submission (or amended
submission). An applicable entity or
electing taxpayer that does not obtain a
registration number and report the
registration number on its annual tax
return with respect to an applicable
credit property would be ineligible to
make an elective payment election to
treat any credit determined with respect
to that applicable credit property as a
payment of tax. However, completion of
the pre-filing registration requirements
and receipt of a registration number
would not, by itself, mean that the
applicable entity or electing taxpayer
would receive a payment with respect to
the applicable credits determined with
respect to the applicable credit property.
Proposed § 1.6417–5(b) would
provide the following pre-filing
registration requirements.
First, an applicable entity or electing
taxpayer must complete the pre-filing
registration process electronically
through an IRS electronic portal in
accordance with the instructions
provided therein, unless otherwise
provided in guidance. If the election is
by a member of a consolidated group,
the member must complete the prefiling registration process as a condition
of, and prior to, making an elective
payment election. See § 1.1502–77
(providing rules regarding the status of
the common parent as agent for its
members).
Second, an applicable entity or
electing taxpayer must satisfy the
registration requirements and receive a
registration number prior to making an
elective payment election on the
applicable entity’s tax return for the
taxable year at issue.
Third, an applicable entity or electing
taxpayer is required to obtain a
registration number for each applicable
credit property with respect to which an
applicable credit will be determined

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and for which the applicable entity or
electing taxpayer intends to make an
elective payment election.
Finally, an applicable entity or
electing taxpayer must provide the
specific information required to be
provided as part of the pre-filing
registration process. The provision of
such information, which includes
information about the taxpayer, about
the applicable credits, and about the
applicable credit property, would allow
the IRS to prevent duplication, fraud,
improper payments, or excessive
payments under section 6417. For
example, verifying information about
the taxpayer would allow the IRS to
mitigate the risk of fraud or improper
payments to entities that are not
applicable entities or electing taxpayers.
Information about the taxpayer’s taxable
year would allow the IRS to ensure that
an elective payment election is timely
made on the entity’s annual tax return.
Information about applicable credit
properties, including their address and
coordinates (longitude and latitude),
supporting documentation, beginning of
construction date, and placed in service
date would allow the IRS to mitigate the
risk of duplication, fraud, and improper
payments for properties that are not
applicable credit properties. Information
about whether an investment tax credit
property was acquired using any
Restricted Tax Exempt Amounts would
allow the IRS to prevent improper
payments.
Proposed § 1.6417–5(c) would provide
information about the required
registration number. Proposed § 1.6417–
5(c)(1) would provide that, after an
applicable entity or electing taxpayer
completes the pre-filing registration
process as provided in proposed
§ 1.6417–5(b) for the applicable credit
properties with respect to which the
entity intends to make an elective
payment election in the taxable year, the
IRS will review the information
provided and will issue a separate
registration number for each applicable
credit property for which the applicable
entity or electing taxpayer provided
sufficient verifiable information, as
provided in guidance.
Proposed § 1.6417–5(c)(2) would
provide that a registration number is
valid only for the taxable year for which
it is obtained. Proposed § 1.6417–5(c)(3)
would provide that, if an elective
payment election will be made with
respect to an applicable credit property
for which a registration number under
proposed § 1.6417–5 has been
previously obtained, the applicable
entity or electing taxpayer would be
required to renew the registration each
year in accordance with applicable

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guidance, including attesting that all the
facts previously provided are still
correct or updating any facts. Proposed
§ 1.6417–5(c)(4) would provide that, if
specified changes occur with respect to
one or more applicable credit properties
for which a registration number has
been previously obtained but not yet
used, an applicable entity or electing
taxpayer would be required to amend
the registration (or may need to submit
a new registration) to reflect these new
facts. For example, one stakeholder
asked that, if a taxpayer becomes a party
to an internal reorganization under
section 368(a) (such as a merger or
distribution in a nonrecognition
transaction) during the election period,
the elective payment election should
carry over to the successor entity. The
proposed regulations would provide
that if a facility previously registered for
an elective payment election undergoes
a change of ownership (incident to a
corporate reorganization or an asset
sale) such that the new owner has a
different employer identification
number (EIN) than the owner who
obtained the original registration, the
original owner would be required to
amend the original registration to
disassociate its EIN from the credit
property and the new owner must
submit an original registration (or if the
new owner previously registered other
credit properties, must amend its
original registration) to associate the
new owner’s EIN with the previously
registered credit property.
Lastly, proposed § 1.6417–5(c)(5)
would provide that the applicable entity
or electing taxpayer would be required
to include the registration number of the
applicable credit property on their
annual tax return for the taxable year.
The IRS will treat an elective payment
election as ineffective with respect to
the portion of a credit determined with
respect to an applicable credit property
for which the applicable entity or
electing taxpayer does not include a
valid registration number on the annual
tax return.
The corresponding temporary
regulations under § 1.6417–5T
published in the Rules and Regulations
section of this edition of the Federal
Register apply rules to taxable years
ending on or after June 21, 2023, that are
identical to those that would apply
under proposed § 1.6417–5. The
temporary regulations under § 1.6417–
5T expire on June 12, 2026.
VI. Special Rules
Proposed § 1.6417–6 would provide
special rules relating to excessive
payment as well as basis reduction and
recapture.

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A. Excessive Payment
Pursuant to 6417(d)(6), proposed
§ 1.6417–6 would provide that the IRS
may determine that an amount treated
as a payment made by an applicable
entity under proposed § 1.6417–
2(a)(1)(i) or an electing taxpayer under
proposed § 1.6417–2(a)(2)(i), or the
amount of the payment made pursuant
to proposed § 1.6417–2(a)(2)(ii),
constitutes an excessive payment.
Proposed § 1.6417–6(a) would provide
that in the case of an excessive payment
determined by the IRS, the amount of
chapter 1 tax imposed on the applicable
entity or electing taxpayer for the
taxable year in which the excessive
payment determination is made will be
increased by an amount equal to the
sum of (1) the amount of such excessive
payment, plus (2) an amount equal to 20
percent of such excessive payment
(additional 20-percent chapter 1 tax).
This would be the case even if the
applicable entity or electing taxpayer is
otherwise not subject to chapter 1 tax.
The additional 20-percent chapter 1 tax
amount would not apply if the
applicable entity or electing taxpayer
demonstrates to the satisfaction of the
IRS that the excessive payment resulted
from reasonable cause. If the additional
20-percent chapter 1 tax is applicable, it
would apply in addition to any
penalties, additions to tax, or other
amounts applicable under the Code. The
Treasury Department and the IRS
anticipate that existing standards of
reasonable cause will inform the
determination by the IRS of whether
reasonable cause has been demonstrated
for this purpose.
The term ‘‘excessive payment’’ is
proposed to be defined as an amount
equal to the excess of (1) the amount
treated as a payment under proposed
§ 1.6417–2(a)(1)(i) or –2(a)(2)(i), or the
amount of the payment made pursuant
to proposed § 1.6417–2(a)(2)(ii), with
respect to such facility or property for
such taxable year, over (2) the amount
of the credit that, without application of
section 6417, would be otherwise
allowable (as described in part II.C and
II.D. or IV. of this Explanation of
Provisions and without regard to section
38(c)) under the Code with respect to
such facility or property for such taxable
year.
Several stakeholders asked that the
term ‘‘excessive payment’’ be
determined without any tax credit
utilization rules, such as those found in
sections 38, 49, and 469. Because the
statute provides that the amount of the
credit should not exceed the amount
‘‘otherwise allowable’’ (without
application of sections 38(c), without

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regard to sections 50(b)(3) and (4)(A)(i),
and by treating any property with
respect to which such credit is
determined as used in a trade or
business of the applicable entity), the
Treasury Department and the IRS are
proposing that all other relevant code
sections, including sections 38 (but not
38(c)), 49, and 469, would apply to the
amount treated as a payment that is
made by the applicable entity or
electing taxpayer as described in part II
of this Explanation of Provisions. Thus,
if an applicable entity or electing
taxpayer is an individual, trust, closely
held corporation, or other taxpayer
subject to the rules of section 469, or if
an applicable credit is an investment tax
credit that is determined including the
rules of section 49, then those rules
would apply. However, proposed
§ 1.6417–2(c) would provide additional
rules relating to the determination of
applicable credits, such as the special
rule for investment credit property
acquired by a tax-exempt or government
entity using nontaxable grants or other
nontaxable proceeds, as described in
part II.C. of this Explanation of
Provisions.
In contrast, the amount of the
payment to partnerships and S
corporations described in part IV of this
Explanation of Provisions has different
proposed rules. As discussed in part IV
of this Explanation of Provisions, in
determining the applicable credit
amount that will result in a payment to
a partnership or S corporation, the
partnership or S corporation would be
required to compute the amount of the
applicable credit allowable (without
regard to section 38(c)) as if an elective
payment election were not made.
However, because a partnership or S
corporation is not subject to section 469
(that is, section 469 applies at the
partner or shareholder level), the
amount of the credit determined by a
partnership or S corporation would not
be subject to limitation by section 469.
In addition, because the only applicable
credits for which a partnership or S
corporation may make the elective
payment election are the section 45V
credit, section 45Q credit, and section
45X credit, which are production tax
credits, sections 49 and 50 (applicable
to investment tax credits) would not
apply to limit these applicable credit
amounts.
Stakeholders asked for clarification on
how the excessive payment would be
determined and in which year the
adjustment applies. The Treasury
Department and the IRS anticipate that
excessive payments may arise in a
variety of situations, such as an
improperly claimed bonus credit

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amount, an error in calculating a credit,
inflated basis, failure to apply the
section 38(d) ordering rules, or a
misapplication of the credit utilization
rules, among other things. The statute
provides that the tax is imposed on the
applicable entity in the year the
determination of the excessive payment
is made, despite the fact that this is a
later year than the year in which the
credit was allowable. The Treasury
Department and the IRS request
comments on whether additional
guidance on excessive payments is
needed.
B. Basis Reduction and Recapture
Proposed § 1.6417–6(b) would
provide rules similar to the rules of
section 50 (without regard to section
50(b)(3) and (4)(A)(i)) apply for
purposes of section 6417. (Section
6417(g) erroneously refers to section
6417(c)(2)(A), a provision that does not
exist, and it is evident that such
reference was intended to be to section
6417(d)(2)(A). That error is accounted
for in these proposed regulations.)
One stakeholder asked how entities
that don’t normally file tax returns
should report recapture events. The
stakeholder asked that the reporting and
payment of the recapture amount
should be consistent with the rules
applicable to taxable entities (that is, no
reporting or payment due until a tax
return would be due for the related
calendar year). Proposed § 1.6417–
6(b)(2) would clarify that any reporting
of recapture is made on the taxpayer’s
annual tax return in the manner
prescribed by the IRS in future
guidance, along with supplemental
forms such as Form 4255, Recapture of
Investment Credit.
Stakeholders asked whether recapture
is considered an excessive payment
event. The excessive payment rules
operate separately from the recapture
rules. The excessive payment rules
apply where the credit amount reported
on the original credit source form by the
applicable entity or electing taxpayer
was excessive. Recapture of a tax credit
occurs when the original tax credit
reported would have been correct
without the occurrence of a subsequent
recapture event. Thus, recapture events,
including recapture events under
sections 45Q(f)(4) or 50(a), do not result
in an excessive payment.
Stakeholders asked that the proposed
regulations clarify that basis reduction
and recapture applies only to the
investment tax credits. The section 50
rules, including basis reduction and
recapture, only apply to investment tax
credits so no clarification on this point
is required.

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Stakeholders also asked that guidance
be provided in the form of examples
that illustrate the manner in which
section 50 will be applied for purposes
of basis reduction and recapture.
Proposed § 1.6417–6(b)(3) would
provide an example.
Proposed Applicability Dates
Each of proposed §§ 1.6417–1 through
1.6417–6 is proposed to apply to taxable
years ending on or after the date the
Treasury decision adopting these
regulations as final regulations is
published in the Federal Register.
Entities may rely on these proposed
regulations for elective payments of
applicable credit amounts after
December 31, 2022, in taxable years
ending before the date the Treasury
decision adopting these regulations as
final regulations is published in the
Federal Register, provided the entities
follow the proposed regulations in their
entirety and in a consistent manner with
respect to all elections made under
section 6417. Sections 301.6241–1 and
301.6241–7 are proposed to apply to
taxable years ending on or after the date
these proposed regulations are
published in the Federal Register.
Special Analyses
I. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) (‘‘PRA’’)
generally requires that a federal agency
obtain the approval of the Office of
Management and Budget (OMB) before
collecting information from the public,
whether such collection of information
is mandatory, voluntary, or required to
obtain or retain a benefit. An agency
may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless the
collection of information displays a
valid control number.
The collections of information in
these proposed regulations contain
reporting and recordkeeping
requirements. The recordkeeping
requirements mentioned within these
proposed regulations are considered
general tax records under Section
1.6001–1(e). These records are required
for the IRS to validate that taxpayers
have met the regulatory requirements
and are entitled to make an elective
payment election. For PRA purposes,
general tax records are already approved
by OMB under 1545–0047 for taxexempt organizations and government
entities; 1545–0074 for individuals; and
under 1545–0123 for business entities.
These proposed regulations also
mention reporting requirements related
to making elections as detailed in

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§§ 1.6417–2 and 1.6417–3 and
calculating the claim amounts as
detailed in §§ 1.6417–2 and 1.6417–4.
These elections will be made by
taxpayers on Forms 990–T, 1040, 1120–
S, 1065, and 1120; and credit
calculations will be made on Form 3800
and supporting forms. These forms are
approved under 1545–0047 for taxexempt organizations and governmental
entities; 1545–0074 for individuals; and
1545–0123 for business entities.
These proposed regulations also
mention recapture procedures as
detailed in § 1.6417–6. These recaptures
are performed using Form 4255. This
form is approved under 1545–0047 for
tax-exempt organizations and
governmental entities; 1545–0074 for
individuals; and 1545–0123 for business
entities. These proposed regulations are
not changing or creating new collection
requirements not already approved by
OMB.
These proposed regulations mention a
requirement to register with the IRS to
be able to elect payments as detailed in
§ 1.6417–5. For further information
concerning the registration, where to
submit comments on the collection of
information and the accuracy of the
estimated burden, and suggestions for
reducing this burden, please refer to the
preamble to the corresponding
temporary regulations (T.D. 9975)
published in the Rules and Regulations
section of this issue of the Federal
Register. These proposed regulations are
not changing or creating new collection
requirements beyond the requirements
that are being reviewed and approved
by OMB under the temporary
regulations.
II. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (5 U.S.C. 551 et seq.) and
that are likely to have a significant
economic impact on a substantial
number of small entities. Unless an
agency determines that a proposal is not
likely to have a significant economic
impact on a substantial number of small
entities, section 603 of the RFA requires
the agency to present an initial
regulatory flexibility analysis (IRFA) of
the proposed rule. The Treasury
Department and the IRS have not
determined whether the proposed rule,
when finalized, will likely have a
significant economic impact on a
substantial number of small entities.
This determination requires further
study. However, because there is a

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possibility of significant economic
impact on a substantial number of small
entities, an IRFA is provided in these
proposed regulations. The Treasury
Department and the IRS invite
comments on both the number of
entities affected and the economic
impact on small entities.
Pursuant to section 7805(f), this
notice of proposed rulemaking has been
submitted to the Chief Counsel of
Advocacy of the Small Business
Administration for comment on its
impact on small business.
1. Need for and Objectives of the Rule
The proposed regulations would
provide greater clarity to taxpayers that
intend to take advantage of section
6417’s credit monetization mechanism.
It provides needed definitions, the time
and manner to make the election, and
information about the pre-filing
registration process, among other items.
The Treasury Department and the IRS
intend and expect that giving taxpayers
guidance that allows them to use section
6417 will beneficially impact various
industries, delivering benefits across the
economy, and reduce economy-wide
greenhouse gas emissions.
In particular, section 6417 allows
applicable entities to treat an applicable
credit as a payment against Federal
income taxes and defines applicable
entities to include many entities that
may not have any tax liability. Allowing
entities without sufficient federal
income tax liability to use a business tax
credit to instead make an election to
receive a refund of any overpayment of
taxes created by the elective payment
election will increase the incentive for
taxpayers to invest in clean energy
projects that generate eligible credits
because it will increase the amount of
cash available to those entities, thereby
reducing the amount of financing
needed for clean energy projects.
2. Affected Small Entities
The RFA directs agencies to provide
a description of, and where feasible, an
estimate of, the number of small entities
that may be affected by the proposed
rules, if adopted. The Small Business
Administration’s Office of Advocacy
estimates in its 2023 Frequently Asked
Questions that 99.9 percent of American
businesses meet its definition of a small
business. The applicability of these
proposed regulations does not depend
on the size of the business, as defined
by the Small Business Administration.
As described more fully in the preamble
to this proposed regulation and in this
IRFA, section 6417 and these proposed
regulations may affect a variety of
different entities across several different

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industries as there are 12 different
applicable credits for which an elective
payment election may be made. Further,
the elective payment election for 3 of
the applicable credits may be made both
by applicable entities and by taxpayers
other than applicable entities. Although
there is uncertainty as to the exact
number of small businesses within this
group, the current estimated number of
respondents to these proposed rules is
20,000 taxpayers, as described in the
Paperwork Reduction Act section of the
preamble.
The Treasury Department and the IRS
expect to receive more information on
the impact on small businesses through
comments on this proposed rule and
again when taxpayers start to make the
elective payment election using the
guidance and procedures provided in
these proposed regulations.
3. Impact of the Rules
The proposed regulations provide
rules for how taxpayers can take
advantage of the section 6417 credit
monetization regime. Taxpayers that
elect to take advantage of section 6417
will have administrative costs related to
reading and understanding the rules as
well as recordkeeping and reporting
requirements because of the pre-filing
registration and tax return requirements.
The costs will vary across differentsized entities and across the type of
project(s) in which such entities are
engaged.
The pre-filing registration process
requires a taxpayer to register itself as
intending to make the elective payment
election, to list all applicable credits it
intends to claim, and to list each
applicable credit property that
contributed to the determination of such
credits. This process must be completed
to receive a registration number for each
applicable credit property with respect
to which the applicable taxpayer
intends to make an elective payment
election. To make the elective payment
election and claim the credit, the
taxpayer must file an annual tax return.
The reporting and recordkeeping
requirements for that return would be
required for any taxpayer that is
claiming a general business credit,
regardless of whether the taxpayer was
making an elective payment election
under section 6417.
Although the Treasury Department
and the IRS do not have sufficient data
to determine precisely the likely extent
of the increased costs of compliance, the
estimated burden of complying with the
recordkeeping and reporting
requirements are described in the
Paperwork Reduction Act section of the
preamble.

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4. Alternatives Considered
The Treasury Department and the IRS
considered alternatives to the proposed
regulations. For example, in adopting
the pre-filing registration requirements,
the Treasury Department and the IRS
considered whether such information
could be obtained at the filing of the
relevant annual tax return. However, the
Treasury Department and the IRS
decided that such an option would
increase the opportunity for duplication
fraud, improper payments, or excessive
payments under section 6417 as well as
potentially delaying payments to
qualifying taxpayers. Section 6417(d)(5)
specifically authorizes the IRS to require
such information or registration as the
Secretary deems necessary for purposes
of preventing duplication, fraud,
improper payments, or excessive
payments under section 6417 as a
condition of, and prior to, any amount
being treated as a payment which is
made by an applicable entity under
section 6417. As described in the
preamble to these proposed regulations,
these proposed rules carry out that
Congressional intent as pre-filing
registration allows for the IRS to verify
certain information in a timely manner
and then process the annual tax return
with minimal delays. Having a
distinction between applicable entities
or electing entities that are small
businesses versus others making an
elective payment election would create
a scenario where a subset of taxpayers
seeking to make an elective payment
election would not have been verified or
received registration numbers,
potentially delaying payment not only
to them but to other taxpayers seeking
to use section 6417.
Additionally, when considering how
taxpayers should claim the credits and
make the elective payment election, the
Treasury Department and the IRS
considered creating an election system
outside of the tax return filing system.
However, it was determined that such a
process would not be an efficient use of
resources, especially given the statutory
due date to make an election, which is
the return filing date for the taxpayers
with a filing obligation (which would
include small business taxpayers). The
Treasury Department and the IRS
decided that the most efficient and
reliable method is to use the existing
method for claiming business tax
credits; that is, the filing of the annual
tax return. To create a different method
for small businesses making an elective
payment election than for a small
business claiming the credit (or a larger
business making an elective payment
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create an additional burden for both
small businesses and the IRS, without
any commensurate benefit.
Comments are requested on the
requirements in the proposed
regulations, including specifically
whether there are less burdensome
alternatives that do not increase the risk
of duplication, fraud, improper
payments, or excessive payments under
section 6417.
5. Duplicative, Overlapping, or
Conflicting Federal Rules
The proposed rule would not
duplicate, overlap, or conflict with any
relevant Federal rules. As discussed
above, the proposed rule would merely
provide procedures and definitions to
allow taxpayers to take advantage of the
ability to make an elective payment
election. The Treasury Department and
the IRS invite input from interested
members of the public about identifying
and avoiding overlapping, duplicative,
or conflicting requirements.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated
costs and benefits and take certain other
actions before issuing a final rule that
includes any Federal mandate that may
result in expenditures in any one year
by a State, local, or Indian tribal
government, in the aggregate, or by the
private sector, of $100 million (updated
annually for inflation). This proposed
rule does not include any Federal
mandate that may result in expenditures
by State, local, or Indian tribal
governments, or by the private sector in
excess of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial,
direct compliance costs on State and
local governments, and is not required
by statute, or preempts State law, unless
the agency meets the consultation and
funding requirements of section 6 of the
Executive Order. This proposed rule
does not have federalism implications
and does not impose substantial direct
compliance costs on State and local
governments or preempt State law
within the meaning of the Executive
Order.
VI. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
Executive Order 13175 (Consultation
and Coordination With Indian Tribal
Governments) prohibits an agency from

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publishing any rule that has Tribal
implications if the rule either imposes
substantial, direct compliance costs on
Indian tribal governments, and is not
required by statute, or preempts Tribal
law, unless the agency meets the
consultation and funding requirements
of section 5 of the Executive Order. This
proposed rule does not have substantial
direct effects on one or more federally
recognized Indian tribes and does not
impose substantial direct compliance
costs on Indian tribal governments
within the meaning of the Executive
Order.
Nevertheless, on November 28, 2022,
and November 29, 2022, the Treasury
Department and the IRS held
consultations with Tribal leaders
requesting assistance in addressing
questions related to the elective
payment election under section 6417.
Consultation was also held with Alaska
Native Corporations on December 2,
2022. These consultations informed the
development of these proposed
regulations.
The Treasury Department and the IRS
will hold additional consultations with
Tribal leaders and Alaska Native
Corporations after providing an
opportunity for review of the proposed
regulations and early in the process of
publishing final regulations under
section 6417.
VII. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury
Regulations under Executive Order
12866 (June 9, 2023), tax regulatory
actions issued by the IRS are not subject
to the requirements of section 6 of
Executive Order 12866, as amended.
Therefore, a regulatory impact
assessment is not required.
Comments and Public Hearing
Before these proposed amendments to
the regulations are adopted as final
regulations, consideration will be given
to comments that are submitted timely
to the IRS as prescribed in this preamble
under the ADDRESSES section. The
Treasury Department and the IRS
request comments on all aspects of the
proposed regulations. Any electronic
comments submitted, and any paper
comments submitted, will be made
available at https://www.regulations.gov
or upon request.
Announcement 2023–16, 2023–20
I.R.B. 854 (May 15, 2023), provides that
public hearings will be conducted in
person, although the IRS will continue
to provide a telephonic option for
individuals who wish to attend or
testify at a hearing by telephone. Any

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telephonic hearing will be made
accessible to people with disabilities.
A public hearing is scheduled to be
held in person on August 21, 2023,
beginning at 10:00 a.m. ET, unless no
outlines are received by August 14,
2023. Due to building security
procedures, visitors must enter at the
Constitution Avenue entrance. In
addition, all visitors must present photo
identification to enter the building.
Because of access restrictions, visitors
will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish
to comment by telephone at the hearing
must submit written or electronic
comments and an outline of the topics
to be discussed as well as the time to be
devoted to each topic by August 14,
2023, as prescribed in the preamble
under the ADDRESSES section.
A period of ten minutes will be
allocated to each person for making
comments. After the deadline for
receiving outlines has passed, the IRS
will prepare an agenda containing the
schedule of speakers. Copies of the
agenda will be made available at https://
www.regulations.gov, search IRS and
REG–101607–23. Copies of the agenda
will also be available by emailing a
request to publichearings@irs.gov.
Please put ‘‘REG–101607–23 Agenda
Request’’ in the subject line of the email.
Individuals who want to testify in
person at the public hearing must send
an email to publichearings@irs.gov to
have your name added to the building
access list. The subject line of the email
must contain the regulation number
REG–101607–23 and the language
TESTIFY In Person. For example, the
subject line may say: Request to
TESTIFY In Person at Hearing for REG–
101607–23.
Individuals who want to testify by
telephone at the public hearing must
send an email to publichearings@irs.gov
to receive the telephone number and
access code for the hearing. The subject
line of the email must contain the
regulation number REG–101607–23 and
the language TESTIFY Telephonically.
For example, the subject line may say:
Request to TESTIFY Telephonically at
Hearing for REG–101607–23.
Individuals who want to attend the
public hearing in person without
testifying must also send an email to
publichearings@irs.gov to have your
name added to the building access list.
The subject line of the email must
contain the regulation number REG–
101607–23 and the language ATTEND
In Person. For example, the subject line
may say: Request to ATTEND Hearing In

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Person for REG–101607–23. Requests to
attend the public hearing must be
received by 5:00 p.m. EST on August 17,
2023.
Individuals who want to attend the
public hearing by telephone without
testifying must also send an email to
publichearings@irs.gov to receive the
telephone number and access code for
the hearing. The subject line of the
email must contain the regulation
number REG–101607–23 and the
language ATTEND Hearing
Telephonically. For example, the
subject line may say: Request to
ATTEND Hearing Telephonically for
REG–101607–23. Requests to attend the
public hearing must be received by 5:00
p.m. EST on August 17, 2023.
Hearings will be made accessible to
people with disabilities. To request
special assistance during a hearing
please contact the Publications and
Regulations Branch of the Office of
Associate Chief Counsel (Procedure and
Administration) by sending an email to
publichearings@irs.gov (preferred) or by
telephone at (202) 317–6901 (not a tollfree number) at least August 16, 2023.
Statement of Availability of IRS
Documents
Guidance cited in this preamble is
published in the Internal Revenue
Bulletin and is available from the
Superintendent of Documents, U.S.
Government Publishing Office,
Washington, DC 20402, or by visiting
the IRS website at https://www.irs.gov.
Drafting Information
The principal authors of theses
proposed regulations are Jeremy Milton
and James Holmes, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries), IRS. However,
other personnel from the Treasury
Department and the IRS participated in
their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
parts 1 and 301 as follows:

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PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:

■

Authority: 26 U.S.C. 7805 * * *

*

*
*
*
*
Par. 2. Sections 1.6417–0 through
1.6417–6 are added under the
undesignated heading ‘‘Abatements,
Credits, and Refunds’’ to read as
follows:

■

§ 1.6417–0

Table of contents

This section lists the table of contents
for §§ 1.6417–1 through 1.6417–6.
§ 1.6417–1 Elective Payment of Applicable
Credits.
(a) In general.
(b) Annual tax return.
(c) Applicable entity.
(d) Applicable credit.
(e) Applicable credit property.
(f) Disregarded entity.
(g) Electing taxpayer.
(h) Elective payment amount.
(i) Elective payment election.
(j) Guidance.
(k) Indian tribal government.
(l) Partnership.
(m) S corporation.
(n) Section 6417 regulations.
(o) Statutory references.
(p) U.S. territory.
(q) Applicability date.
§ 1.6417–2 Rules for making elective
payment elections.
(a) Elective payment elections.
(b) Manner of making election.
(c) Determination of applicable credit.
(d) Timing of payment.
(e) Denial of double benefit.
(f) Applicability date.
§ 1.6417–3 Special rules for electing
taxpayers.
(a) In general.
(b) Election with respect to credit for
production of clean hydrogen.
(c) Election with respect to credit for
carbon oxide sequestration.
(d) Election with respect to the advanced
manufacturing production credit.
(e) Election for electing taxpayers.
(f) Applicability date.
§ 1.6417–4 Elective payment election for
electing taxpayers that are partnerships
or S corporations.
(a) In general.
(b) Elections.
(c) Effect of election.
(d) Determination of amount of the credit.
(e) Partnerships subject to subchapter C of
chapter 63.
(f) Applicability Date.
§ 1.6417–5 Additional information and
registration.
(a) Pre-filing registration and election.
(b) Pre-filing registration requirements.
(c) Registration number.
(d) Applicability date.
(e) Expiration date.
§ 1.6417–6 Special rules.

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(a) Excessive payment.
(b) Basis reduction and recapture.
(c) Mirror code territories.
(d) Partnerships subject to subchapter C of
chapter 63 of the Code.
(e) Applicability date.

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§ 1.6417–1 Elective payment election of
applicable credits.

(a) In general. An applicable entity
may make an elective payment election
with respect to any applicable credit
determined with respect to such
applicable entity in accordance with
section 6417 of the Code and the section
6417 regulations. Paragraphs (b) through
(p) of this section provide definitions.
See § 1.6417–2 for rules and procedures
under which all elective payment
elections must be made, rules for
determining the amount and the timing
of payments, and statutory rules
denying double benefits. See § 1.6417–
3 for special rules pertaining to electing
taxpayers. See § 1.6417–4 for special
rules pertaining to electing taxpayers
that are partnerships or S corporations.
See § 1.6417–5 for pre-filing registration
requirements and other information
required to make any elective payment
election effective. See § 1.6417–6 for
special rules related to excessive
payments, basis reduction and
recapture, any U.S. territory with a
mirror code tax system, and payments
made to partnerships subject to
subchapter C of chapter 63 of the Code.
(b) Annual Tax Return. The term
annual tax return means, for purposes
of section 6417 and the section 6417
regulations, the following returns (and
for each, any successor return)—
(1) For any taxpayer normally
required to file an annual tax return
with the IRS, such annual return
(including the Form 1065 for
partnerships and the Form 990–T for
organizations with unrelated business
income tax or a proxy tax under section
6033(e));
(2) For any taxpayer that is not
normally required to file an annual tax
return with the IRS (such as taxpayers
located in the U.S. territories), the
return they would be required to file if
they were located in the United States,
or, if no such return is required (such as
for governmental entities), the Form
990–T; and
(3) For short tax year filers, the short
year tax return.
(c) Applicable entity. The term
applicable entity means—
(1) Any organization exempt from the
tax imposed by subtitle A—
(i) By reason of section 501(a) of the
Code; or
(ii) Because it is the government of
any U.S. territory or a political
subdivision thereof;

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(2) Any State, the District of
Columbia, or political subdivision
thereof;
(3) An Indian tribal government or a
subdivision thereof;
(4) Any Alaska Native Corporation (as
defined in section 3 of the Alaska Native
Claims Settlement Act, 43 U.S.C.
1602(m));
(5) The Tennessee Valley Authority;
(6) Any corporation operating on a
cooperative basis that is engaged in
furnishing electric energy to persons in
rural areas; and
(7) An agency or instrumentality of
any applicable entity described in
paragraphs (1)(ii), (2), or (3).
(d) Applicable credit. The term
applicable credit means each of the
following:
(1) So much of the credit for
alternative fuel vehicle refueling
property determined under section 30C
of the Code that, pursuant to section
30C(d)(1), is treated as a credit listed in
section 38(b) of the Code (section 30C
credit);
(2) So much of the renewable
electricity production credit determined
under section 45(a) as is attributable to
qualified facilities that are originally
placed in service after December 31,
2022 (section 45 credit);
(3) So much of the credit for carbon
oxide sequestration determined under
section 45Q(a) as is attributable to
carbon capture equipment that is
originally placed in service after
December 31, 2022 (section 45Q credit);
(4) The zero-emission nuclear power
production credit determined under
section 45U(a) (section 45U credit);
(5) So much of the credit for
production of clean hydrogen
determined under section 45V(a) as is
attributable to qualified clean hydrogen
production facilities that are originally
placed in service after December 31,
2012 (section 45V credit);
(6) In the case of a tax-exempt entity
described in section 168(h)(2)(A)(i), (ii),
or (iv) of the Code, the credit for
qualified commercial vehicles
determined under section 45W by
reason of section 45W(d)(2) (section
45W credit);
(7) The credit for advanced
manufacturing production determined
under section 45X(a) (section 45X
credit);
(8) The clean electricity production
credit determined under section 45Y(a)
(section 45Y credit);
(9) The clean fuel production credit
determined under section 45Z(a)
(section 45Z credit);
(10) The energy credit determined
under section 48 (section 48 credit);

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(11) The qualifying advanced energy
project credit determined under section
48C (section 48C credit); and
(12) The clean electricity investment
credit determined under section 48E
(section 48E credit).
(e) Applicable credit property. The
term applicable credit property means
each of the following units of property
with respect to which the amount of an
applicable credit is determined:
(1) In the case of a section 30C credit,
a qualified alternative fuel vehicle
refueling property described in section
30C(c).
(2) In the case of a section 45 credit,
a qualified facility described in section
45(d).
(3) In the case of a section 45Q credit,
a single process train described in
§ 1.45Q–2(c)(3).
(4) In the case of a section 45U credit,
a qualified nuclear power facility
described in section 45U(b)(1).
(5) In the case of a section 45V credit,
a qualified clean hydrogen production
facility described in section 45V(c)(3).
(6) In the case of a section 45W credit,
a qualified commercial clean vehicle
described in section 45W(c).
(7) In the case of a section 45X credit,
a facility that produces eligible
components, as described in guidance
under sections 48C and 45X.
(8) In the case of a section 45Y credit,
a qualified facility described in section
45Y(b)(1).
(9) In the case of a section 45Z credit,
a qualified facility described in section
45Z(d)(4).
(10) Section 48 credit property—(i) In
general. In the case of a section 48 credit
and except as provided in paragraph
(d)(10)(ii) of this section, an energy
property described in section 48.
(ii) Pre-filing registration and
elections. At the option of an applicable
entity or electing taxpayer, and to the
extent consistently applied for purposes
of the pre-filing registration
requirements of § 1.6417–5 and the
elective payment election requirements
of §§ 1.6417–2 through 1.6417–4, an
energy project as described in section
48(a)(9)(A)(ii) and defined in guidance.
(11) In the case of a section 48C
credit, an eligible property described in
section 48C(c)(2).
(12) In the case of a section 48E credit,
a qualified facility described in section
48E(b)(3) or, in the case of a section 48E
credit relating to a qualified investment
with respect to energy storage
technology, an energy storage
technology described in section
48E(c)(2).
(f) Disregarded entity. The term
disregarded entity means an entity that
is disregarded as an entity separate from

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its owner for Federal income tax
purposes.
(g) Electing taxpayer. The term
electing taxpayer means any taxpayer
that is not an applicable entity
described in paragraph (b) of this
section but makes an election in
accordance with §§ 1.6417–2(b), 1.6417–
3, and, if applicable, 1.6417–4, to be
treated as an applicable entity for a
taxable year with respect to applicable
credits determined with respect to an
applicable credit property described in
§ 1.6417–1(e)(3), (5), or (7).
(h) Elective payment amount—(1) In
general. The term elective payment
amount means, with respect to an
applicable entity or an electing taxpayer
that is not a partnership or an S
corporation, the applicable credit(s) for
which an applicable entity or electing
taxpayer makes an elective payment
election to be treated as making a
payment against the tax imposed by
subtitle A for the taxable year, which is
equal to the sum of—
(i) The amount (if any) of the current
year applicable credit(s) allowed as a
general business credit under section 38
for the taxable year, as provided in
§ 1.6417–2(e)(2)(iii), and
(ii) The amount (if any) of unused
current year applicable credits which
would otherwise be carried back or
carried forward from the unused credit
year under section 39 and that are
treated as a payment against tax, as
provided in § 1.6417–2(e)(2)(iv).
(2) Elective payment amount with
respect to partnerships and S
corporations. With respect to an electing
taxpayer that is a partnership or an S
corporation, the term elective payment
amount means the sum of the applicable
credit(s) for which the partnership or S
corporation makes an elective payment
election and that results in a payment to
such partnership or S corporation equal
to the amount of such credit(s) (unless
the partnership owes a Federal tax
liability, in which case the payment
may be reduced by such tax liability).
(i) Elective payment election. The
term elective payment election means an
election made in accordance with
§ 1.6417–2(b) for applicable credit(s)
determined with respect to an
applicable entity or electing taxpayer.
(j) Guidance. The term guidance
means guidance published in the
Federal Register or Internal Revenue
Bulletin, as well as administrative
guidance such as forms, instructions,
publications, or other guidance on the
IRS.gov website. See §§ 601.601 and
601.602 of this chapter.
(k) Indian tribal government. The term
Indian tribal government means the
recognized governing body of any

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Indian or Alaska Native tribe, band,
nation, pueblo, village, community,
component band, or component
reservation, individually identified
(including parenthetically) in the most
recent list published by the Department
of the Interior in the Federal Register
pursuant to section 104 of the Federally
Recognized Indian Tribe List Act of
1994 (25 U.S.C. 5131).
(l) Partnership. The term partnership
has the meaning provided in section 761
of the Code.
(m) S corporation. The term S
corporation has the meaning provided
in section 1361(a)(1) of the Code.
(n) Section 6417 regulations. The term
section 6417 regulations means
§§ 1.6417–1 through 1.6417–6.
(o) Statutory references—(1) Chapter
1. The term chapter 1 means chapter 1
of the Code.
(2) Code. The term Code means the
Internal Revenue Code.
(3) Subchapter K. The term
subchapter K means subchapter K of
chapter 1.
(4) Subtitle A. The term subtitle A
means subtitle A of the Code.
(p) U.S. territory. The term U.S.
territory means the Commonwealth of
Puerto Rico, Guam, the U.S. Virgin
Islands, American Samoa, and the
Commonwealth of the Northern Mariana
Islands.
(q) Applicability date. This section
applies to taxable years ending on or
after date of publication of final rule.
§ 1.6417–2 Rules for making elective
payment elections.

(a) Elective payment elections—(1)
Elections by applicable entities—(i) In
general. An applicable entity that makes
an elective payment election in the
manner provided in paragraph (b) of
this section will be treated as making a
payment against the Federal income
taxes imposed by subtitle A for the
taxable year with respect to which an
applicable credit is determined in the
amount determined under paragraph (c)
of this section.
(ii) Disregarded entities. If an
applicable entity is the owner (directly
or indirectly) of a disregarded entity that
directly holds an applicable credit
property, the applicable entity may
make an elective payment election in
the manner provided in paragraph (b) of
this section for applicable credits
determined with respect to the
applicable credit property held directly
by the disregarded entity.
(iii) Undivided ownership interests. If
an applicable entity is a co-owner in an
applicable credit property through an
arrangement properly treated as a
tenancy-in-common for Federal income

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40549

tax purposes, or through an organization
that has made a valid election under
section 761(a) of the Code to be
excluded from the application of
subchapter K, then the applicable
entity’s undivided ownership share of
the applicable credit property will be
treated as a separate applicable credit
property owned by such applicable
entity, and the applicable entity may
make an elective payment election in
the manner provided in paragraph (b) of
this section for the applicable credits
determined with respect such
applicable credit property.
(iv) Partnerships and S corporations
not applicable entities. Partnerships and
S corporations are not applicable
entities described in § 1.6417–1(c), and
thus are not eligible to make any
election under paragraph (b) of this
section, unless the partnership or S
corporation is an electing taxpayer. This
is the case no matter how many of the
partners of a partnership are described
in § 1.6417–1(c)(1), including if all of a
partnership’s partners are so described.
(v) Members of a consolidated group
of which an Alaska Native Corporation
is the common parent. In the case of a
consolidated group (as defined in
§ 1.1502–1) the common parent of
which is an Alaska Native Corporation,
any member that is an electing taxpayer
may make an elective payment election
with respect to applicable credits
determined with respect to the member.
See § 1.1502–77 (providing rules
regarding the status of the common
parent as agent for its members).
(2) Electing taxpayers—(i) Electing
taxpayers that are not partnerships or S
corporations. An electing taxpayer other
than a partnership or an S corporation
that has made an elective payment
election in accordance with § 1.6417–3
and paragraph (b) of this section will be
treated as making a payment against the
Federal income taxes imposed by
subtitle A for the taxable year with
respect to which the applicable credit is
determined in the amount determined
under paragraph (c) of this section.
(ii) Electing taxpayers that are
partnerships or S corporations. In the
case of an electing taxpayer that is a
partnership or S corporation that has
made an elective payment election in
accordance with §§ 1.6417–3 and
1.6417–4 and paragraph (b) of this
section, the Internal Revenue Service
will make a payment to such
partnership or S corporation equal to
the amount of such credit determined
under paragraph (c) of this section and
§ 1.6417–4(d) (unless the partnership
owes any Federal income tax liability,
in which case the payment may be
reduced by such tax liability).

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(iii) Partners and S corporation
shareholders prohibited from making
any elective payment election. Under
section 6417(c)(1) of the Code, any
elective payment election with respect
to applicable credit property held
directly by a partnership or S
corporation must be made by the
partnership or S corporation. As
provided under section 6417(c)(2) of the
Code, no partner in a partnership, or
shareholder of an S corporation, may
make an elective payment election with
respect to any applicable credit
determined with respect to such
applicable credit property.
(iv) Disregarded entities. If an electing
taxpayer is the owner (directly or
indirectly) of a disregarded entity that
directly holds any applicable credit
property, the electing taxpayer may
make an elective payment election in
the manner provided in paragraph (b) of
this section for applicable credits
determined with respect to the
applicable credit property held directly
by the disregarded entity.
(v) Undivided ownership interests. If
an electing taxpayer is a co-owner in an
applicable credit property through an
arrangement properly treated as a
tenancy-in-common for Federal income
tax purposes, or through an organization
that has made a valid election under
section 761(a) of the Code to be
excluded from the application of
subchapter K, then the electing
taxpayer’s undivided ownership interest
in or share of the applicable credit
property will be treated as a separate
applicable credit property owned by
such electing taxpayer, and the electing
taxpayer may make an elective payment
election in the manner provided in
paragraph (b) of this section for the
applicable credits determined with
respect to such applicable credit
property.
(vi) Members of a consolidated group.
A member of a consolidated group may
make an elective payment election with
respect to applicable credits determined
with respect to the member. See
§ 1.1502–77 (providing rules regarding
the status of the common parent as
agent for its members).
(3) Special rules for certain credits—
(i) Renewable electricity production
credit. Any election under this
paragraph (a) with respect to a section
45 credit—
(A) Applies separately with respect to
each qualified facility;
(B) Must be made in the manner
provided in paragraph (b) of this section
for the taxable year in which such
qualified facility is originally placed in
service; and

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(C) Applies to such taxable year and
to any subsequent taxable year that is
within the period described in section
45(a)(2)(A)(ii) with respect to such
qualified facility.
(ii) Credit for carbon oxide
sequestration. Except as provided in
§ 1.6417–3(c), which provides a special
rule for electing taxpayers, any election
under this paragraph (a) with respect to
a section 45Q credit—
(A) Applies separately with respect to
the carbon capture equipment originally
placed in service by the applicable
entity during a taxable year;
(B) Must be made in the manner
provided in paragraph (b) of this section
for the taxable year in which such
qualified facility is originally placed in
service; and
(C) Applies to such taxable year and
to any subsequent taxable year that is
within the period described in section
45Q(3)(A) or (4)(A) with respect to such
equipment.
(iii) Credit for production of clean
hydrogen. Except as provided in
§ 1.6417–3(b), which provides a special
rule for electing taxpayers, any election
under this paragraph (a) with respect to
a section 45V credit—
(A) Applies separately with respect to
each qualified clean hydrogen
production facility;
(B) Must be made in the manner
provided in paragraph (b) of this section
for the taxable year in which such
facility is placed in service (or within
the 1-year period after August 16, 2022,
for facilities placed in service before
December 31, 2022); and
(C) Applies to such taxable year and
all subsequent taxable years with
respect to such facility.
(iv) Clean electricity production
credit. Any elective payment election
with respect to a section 45Y credit—
(A) Applies separately with respect to
each qualified facility;
(B) Must be made in the manner
provided in paragraph (b) of this section
for the taxable year in which such
facility is placed in service; and
(C) Applies to such taxable year and
to any subsequent taxable year which is
within the period described in section
45Y(b)(1)(B) with respect to such
facility.
(v) Advanced manufacturing
production credit. Any elective payment
election with respect to a section 45X
credit applies separately with respect to
each facility (whether the facility
existed on or before, or after, December
31, 2022) at which a taxpayer produces,
after December 31, 2022, eligible
components (as defined in section
45X(c)(1)) during the taxable year.

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(b) Manner of making election—(1) In
general—(i) Election is made on the
annual tax return. An elective payment
election is made on the annual tax
return, as defined in § 1.6417–1(b), in
the manner prescribed by the IRS in
guidance, along with any required
completed source credit form(s) with
respect to the applicable credit property,
a completed Form 3800, General
Business Credit, (or its successor), and
any additional information, including
supporting calculations, required in
instructions.
(ii) Election must be made on original
return. An election must be made on an
original return (including any revisions
on a superseding return) filed not later
than the due date (including extensions
of time) for the original return for the
taxable year for which the applicable
credit is determined. No elective
payment election may be made or
revised on an amended return or by
filing an administrative adjustment
request under section 6227 of the Code.
There is no relief available under
§§ 301.9100–1 through 301.9100–3 of
this chapter for an elective payment
election that is not timely filed.
(2) Pre-filing registration required.
Pre-filing registration in accordance
with § 1.6417–5 is a condition for
making an elective payment election.
An elective payment election will not be
effective with respect to credits
determined with respect to an
applicable credit property unless the
applicable entity or electing taxpayer
received a valid registration number for
the applicable credit property in
accordance with § 1.6417–5(c) and
provided the registration number for
each applicable credit property on its
Form 3800 (or its successor) attached to
the tax return, in accordance with
guidance.
(3) Due date for making the election.
To be effective, an elective payment
election must be made no later than:
(i) In the case of any taxpayer for
which no Federal income tax return is
required under sections 6011 or 6033(a)
of the Code, the due date (including an
extension of time) for the original return
that would be due under section 6033(a)
if such applicable entity were described
in that section. Under section 6072(e),
that date is the 15th day of the fifth
month after the taxable year determined
by section 441 of the Code. Subject to
issuance of guidance that specifies the
manner in which an entity for which no
Federal income tax return is required
under sections 6011 or 6033(a) of the
Code could request an extension of time
to file, an automatic paperless sixmonth extension from the original due
date is deemed to be allowed.

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(ii) In the case of any taxpayer that is
not normally required to file an annual
tax return with the IRS (such as
taxpayers located in the U.S. territories),
the due date (including extensions of
time) that would apply if the taxpayer
was located in the United States.
(iii) In any other case, the due date
(including extensions of time) for the
original return for the taxable year for
which the election is made, but in no
event earlier than February 13, 2023.
(4) Election is not revocable—(i) In
general. Except as provided in
subparagraphs (ii) and (iii) of this
paragraph, any elective payment
election, once made, is irrevocable and
applies with respect to any applicable
credit for the taxable year for which the
election is made.
(ii) Election lasts for a period of years
for certain credits. For elective payment
elections with respect to section 45
credits described in § 1.6417–1(d)(2) or
section 45Y credits described in
§ 1.6417–1(d)(8), the election applies to
each taxable year in the 10-year period
provided in section 45(a)(2)(A)(ii) or
45Y(b)(1)(B), respectively, beginning on
the date the facility was originally
placed in service. For elective payment
elections with respect to section 45Q
credits described in § 1.6417–1(d)(3),
the election applies to each taxable year
in the 12-year period provided in
section 45Q(a)(3)(A) or (4)(A) beginning
on the date the carbon capture
equipment was originally placed in
service. For elective payment elections
with respect to section 45V credits
described in § 1.6417–1(d)(5), the
election applies to the taxable year in
which the qualified clean hydrogen
production facility was originally
placed in service and all subsequent
taxable years.
(iii) Electing taxpayers. For electing
taxpayers who make an elective
payment election, the election applies
for one five-year period per applicable
credit property, but such election may
be revoked once per applicable credit
property, as provided in § 1.6417–3.
(5) Scope of election. An elective
payment election applies to the entire
amount of applicable credit(s)
determined with respect to each
applicable credit property that was
properly registered for the taxable year,
resulting in an elective payment amount
that is the entire amount of applicable
credit(s) determined with respect to the
applicable entity or electing taxpayer for
a taxable year.
(c) Determination of applicable
credit—(1) In general. In the case of any
applicable entity making an elective
payment election, any applicable credit
is determined—

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(i) Without regard to section 50(b)(3)
and (4)(A)(i) of the Code, and
(ii) By treating any property with
respect to which such credit is
determined as used in a trade or
business of the applicable entity.
(2) Effect of trade or business rule.
The trade or business rule in paragraph
(c)(1)(ii) of this section—
(i) Allows the applicable entity to
treat an item of property as if it is of a
character subject to an allowance of
depreciation (such as under sections
30C and 45W); to produce items in the
ordinary course of a trade or business of
the taxpayer (such as in sections 45V
and 45X); and to state that an item of
property is one for which depreciation
(or amortization in lieu of depreciation)
is allowable (such as in sections 48,
48C, and 48E);
(ii) Allows the applicable entity to
apply the capitalization and accelerated
depreciation rules (such as sections 167,
168, 263, and 263A of the Code) that
apply to determining the basis and the
depreciation allowance for property
used in a trade or business;
(iii) Makes applicable general credit
limitations by those persons engaged in
the conduct of a trade or business and
to which such limitations apply, such as
section 49 in the context of investment
tax credits and section 469 for all
applicable credits; and
(iv) Does not create any presumption
that the trade or business is related (or
unrelated) to a tax-exempt entity’s
exempt purpose.
(3) Special rule for investment-related
credit property acquired with income,
including income from certain grants
and forgivable loans, that is exempt
from taxation. For purposes of section
6417, income, including income from
certain grants and forgivable loans, that
is exempt from taxation under subtitle
A and used to purchase, construct,
reconstruct, erect, or otherwise acquire
an applicable credit property described
in sections 30C, 45W, 48, 48C, or 48E
(investment-related credit property) are
included in basis for purposes of
computing the applicable credit amount
determined with respect to the
applicable credit property, regardless of
whether basis is required to be reduced
(in whole or in part) by such amounts
under general tax principles. However,
if an applicable entity receives a grant,
forgivable loan, or other income exempt
from taxation under subtitle A for the
specific purpose of purchasing,
constructing, reconstructing, erecting, or
otherwise acquiring an investmentrelated credit property (Restricted Tax
Exempt Amount), and the Restricted
Tax Exempt Amount plus the applicable
credit otherwise determined with

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respect to that investment-related credit
property exceeds the cost of the
investment-related credit property, then
the amount of the applicable credit is
reduced so that the total amount of
applicable credit plus the amount of any
Restricted Tax Exempt Amount equals
the cost of investment-related credit
property.
(4) Credits must be determined with
respect to the applicable entity or
electing taxpayer. Any credits for which
an elective payment election is made
must have been determined with respect
to the applicable entity or electing
taxpayer. An applicable credit is
determined with respect to an
applicable entity or electing taxpayer in
cases where the applicable entity or
electing taxpayer owns the underlying
eligible credit property or, if ownership
is not required, otherwise conducts the
activities giving rise to the underlying
eligible credit. Thus, no election may be
made under this section for any credits
purchased pursuant to section 6418,
transferred pursuant to section
45Q(f)(3), acquired by a lessee from a
lessor by means of an election to pass
through the credit to a lessee under
former section 48(d) (pursuant to
section 50(d)(5)), owned by a third
party, or otherwise not determined with
respect to the applicable entity or
electing taxpayer.
(5) Examples. The following examples
illustrate the rules of this paragraph (c).
(i) Example 1. School district A
receives a tax exempt grant in the
amount of $400,000 from the
Environmental Protection Agency to
purchase electric school bus B. A
purchases B for $400,000. A’s basis in
B is $400,000. B qualifies for the
maximum section 45W credit, $40,000.
However, because the amount of the
restricted tax exempt grant plus the
amount of the section 45W credit
exceeds the cost of B, A’s section 45W
credit is reduced by the amount
necessary so that the total amount of the
section 45W credit plus the restricted
tax exempt amount equals the cost of B.
A’s section 45W credit is therefore
reduced by $40,000 to zero.
(ii) Example 2. Assume the same facts
as in paragraph (c)(5)(i) of this section
(Example 1), except that the grant is in
the amount of $300,000. A purchases B
using the grant and $100,000 of A’s
unrestricted funds. A’s basis in B is
$400,000 and A’s section 45W credit is
$40,000. Since the amount of the
restricted tax exempt grant plus the
amount of the section 45W credit
($340,000) is less than the cost of B, A’s
45W credit under section 6417(b)(6) is
not reduced.

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(iii) Example 3. Public charity B
receives a $60,000 grant from a private
foundation to build energy property, P,
a qualified investment credit property
that costs $80,000. B uses $20,000 of its
own funds plus the $60,000 grant to
build P. B’s basis in P is $80,000. Based
upon acquisition cost, B can earn a
section 48 investment credit (with
bonus credit amounts) of $40,000 (50%
of basis). However, because the amount
of the restricted tax exempt grant
($60,000) plus the section 48 credit
($40,000) exceeds P’s cost by $20,000,
B’s section 48 applicable credit is
reduced by $20,000 so that the total
amount of the section 48 investment
credit plus the restricted tax exempt
grant equals the cost of P.
(iv) Example 4. Taxpayer Q is engaged
in the business of capturing carbon
oxide. Q properly elects to be treated as
an applicable entity with respect to the
section 45Q credit determined with
respect to single process trains A, B, and
C for 2024. In the same year, Q also
purchases section 45Q credits under
section 6418 from an unrelated taxpayer
and has section 45Q credits transferred
to itself pursuant to section 45Q(f)(3). Q
can make an elective payment election
only with respect to section 45Q
applicable credits determined with
respect to A, B, and C. Q cannot make
an elective payment election with
respect to any credits transferred to Q
pursuant to sections 6418 and 45Q(f)(3).
(d) Timing of payment. Except as
provided in § 1.6417–4(d) (relating to
payments to partnerships and S
corporations), the elective payment
amount will be treated as made—
(1) In the case of any taxpayer for
which no return is required under
sections 6011 or 6033(a), on the later
of—
(i) The date that a return would be
due under section 6033(a) (determined
without regard to extensions) if the
taxpayer were described in that section,
or
(ii) The date on which such taxpayer
submits a claim for credit or refund in
accordance with paragraph (b) of this
section.
(2) In any other case, on the later of—
(i) The due date (determined without
regard to extensions) of the return for
the taxable year, or
(ii) The date on which such return is
filed.
(e) Denial of double benefit—(1) In
general. Under section 6417(e), in the
case of an applicable entity or electing
taxpayer making an elective payment
election with respect to an applicable
credit, such credit is reduced to zero
and is, for any other purposes of the
Code, deemed to have been allowed as

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a credit to such entity or taxpayer for
such taxable year. Paragraphs (e)(2) and
(e)(3) of this section explain the
application of the section 6417(e) denial
of double benefit rule to an applicable
entity or electing taxpayer (other than a
partnership or S corporation). The
application of section 6417(e) for an
electing taxpayer that is a partnership or
S corporation is provided in § 1.6417–
4(c)(1)(ii).
(2) Application of the Denial of
Double Benefit Rule. An applicable
entity or electing taxpayer (other than
an electing taxpayer that is a
partnership or S corporation) making an
elective payment election applies
section 6417(e) by taking the following
steps:
(i) Compute the amount of the Federal
income tax liability (if any) for the
taxable year, without regard to the GBC,
that is payable on the due date of the
return (without regard to extensions),
and the amount of the Federal income
tax liability that may be offset by GBCs
pursuant to the limitation based on
amount of tax under section 38.
(ii) Compute the allowed amount of
GBC carryforwards carried to the taxable
year plus the amount of current year
GBCs (including current applicable
credits) allowed for the taxable year
under section 38 (including, for clarity
purposes, the ordering rules in section
38(d)). Because the election is made on
an original return for the taxable year for
which the applicable credit is
determined, any business credit
carrybacks are not considered when
determining the elective payment
amount for the taxable year.
(iii) Apply the GBCs allowed for the
taxable year as computed under
paragraph (e)(2)(ii) of this section,
including those attributable to
applicable credits as GBCs, against the
tax liability computed in paragraph
(e)(2)(i) of this section.
(iv) Identify the amount of any excess
or unused current year GBC, as defined
under section 39, attributable to current
year applicable credit(s) for which the
applicable entity is making an elective
payment election. Treat the amount of
such unused applicable credits as a
payment against the tax imposed by
subtitle A for the taxable year with
respect to which such credits are
determined (rather than having them
available for carryback or carryover) (net
elective payment amount).
(v) Reduce the applicable credits for
which an elective payment election is
made by the amount (if any) allowed as
a GBC under section 38 for the taxable
year, as provided in paragraph (e)(2)(iii)
of this section, and by the net elective
payment amount (if any) that is treated

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as a payment against tax, as provided in
paragraph (e)(2)(iv) of this section,
which results in the applicable credits
being reduced to zero.
(3) Use of applicable credit for other
purposes. The full amount of the
applicable credits for which an elective
payment election is made is deemed to
have been allowed for all other purposes
of the Code, including, but not limited
to, the basis reduction and recapture
rules imposed by section 50 and
calculation of any underpayment of
estimated tax under sections 6654 and
6655 of the Code.
(4) Examples. The following examples
illustrate the rules of this paragraph (e).
(i) Example 1. U is a tax-exempt
university described in section 501(c)(3)
whose fiscal year runs from July 1 to
June 30. U places in service P, energy
property eligible for a section 48 credit,
in June 2024. P is an asset used in
connection with its unrelated business.
U completes the pre-filing registration
in accordance with § 1.6417–5 as an
applicable entity that has placed P into
service and intends to make an elective
payment election with respect to section
48 credits determined with respect to P.
U timely files its 2024 Form 990–T on
November 15, 2024. On its return, U
properly determines that it has $500,000
of Unrelated Business Income Tax
(UBIT) under section 512. On its Form
3800 attached to its return, U calculates
its limitation of GBC under section 38(c)
(simplified) is $375,000 (paragraph
(e)(2)(i) of this section). U attaches Form
3468 to claim a section 48 credit of
$100,000 with respect to P (its GBC for
the taxable year) (paragraph (e)(2)(ii) of
this section). Under paragraph (e)(2)(iii)
of this section, the section 48 credit
reduces U’s UBIT liability to $400,000.
U pays its $400,000 tax liability on
November 15, 2024. Because there is no
unused current year applicable credit,
paragraph (e)(2)(iv) of this section does
not apply. Under paragraph (e)(2)(v) of
this section, the $100,000 of section 48
credit is reduced by the $100,000 of
applicable credits claimed as GBCs for
the taxable year, which results in the
applicable credits being reduced to zero.
However, the $100,000 of current year
section 48 credit is deemed to have been
allowed to U for 2024 for all other
purposes of the Code (paragraph (e)(3)
of this section).
(ii) Example 2. Assume the same facts
as in paragraph (e)(4)(i) of this section
(Example 1), except that U has $80,000
of Unrelated Business Income Tax
(UBIT) under section 512, and
calculates its limitation of GBC under
section 38(c) (simplified) is $60,000
(paragraph (e)(2)(i) of this section). U
uses $60,000 of its $100,000 of section

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48 credit against its tax liability
(paragraph (e)(2)(iii) of this section). U’s
net elective payment amount is $40,000
(paragraph (e)(2)(iv) of this section). U
reduces its applicable credit by the
$60,000 claimed against tax in
paragraph (e)(2)(iii) of this section and
by the $40,000 net elective payment
amount determined in paragraph
(e)(2)(iv) of this section, resulting in the
applicable credit being reduced to zero
(paragraph (e)(2)(v) of this section).
When the IRS processes U’s 2024 Form
990–T, the net elective payment amount
results in a $40,000 refund to U.
However, for other purposes of the
Code, the $100,000 section 48 credit is
deemed to have been allowed to U for
2024 (paragraph (e)(3) of this section).
(iii) Example 3. V is a city located in
the United States that never has Federal
income tax liability, so paragraph
(e)(2)(i) of this section does not apply.
V timely completes pre-filing
registration in accordance with
§ 1.6417–5 as an applicable entity that
will be eligible to make an elective
payment election, with regard to its
annual accounting period ending in
2024, for the credit determined under
section 30C(a) from properties A, B, and
C; the credit determined under section
45(a) for facility D; the credit
determined under section 45U(a) for
facility E; the credit determined under
section 45W(a) with respect to vehicles
F, G, and H; and the credit determined
under section 48(a) with respect to
property I and J. V timely files its 2024
Form 990–T. V properly completes and
attaches the relevant source credit forms
and Form 3800 with registration
numbers and all required information in
the instructions, properly making the
elective payment election for all of the
credits, and properly determining that
the amount of applicable credits
determined with respect to A, B, C, D,
E, F, G, H, I, and J is $500,000 (its GBC
for the taxable year) (paragraph (e)(2)(ii)
of this section). Paragraph (e)(2)(iii) of
this section does not apply. Under
paragraph (e)(2)(iv) of this section, the
entire $500,000 is a net elective
payment amount. When the IRS
processes V’s 2024 Form 990–T, the net
elective payment amount results in a
$500,000 refund to V. V’s elective
payment amount is reduced by the net
elective payment amount, so all
applicable credits for 2024 are reduced
to zero. However, for other purposes of
the Code, the $500,000 of applicable
credits are deemed to have been allowed
to V for its annual accounting period
ending in 2024 (paragraph (e)(3) of this
section).
(iv) Example 4. W is a business
taxpayer engaged in the manufacturing

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of components, including eligible
components as defined in section
45X(c)(1) at facility F. W completes prefiling registration in accordance with
§ 1.6417–5 stating that it intends to elect
to be treated as an applicable entity with
respect to eligible components produced
at F in 2024. In 2024, W timely files its
2024 return electing to be treated as an
applicable entity, calculating its federal
income tax before GBCs of $125,000 and
that its limitation of GBC under section
38(c) (simplified) is $100,000 (paragraph
(e)(2)(i) of this section). W attaches
Form 7207 to claim a current section
45X credit of $50,000 with respect to
eligible components produced at F (its
applicable credits). W also attaches
Form 5884 to claim a current work
opportunity tax credit (WOTC) of
$50,000 (WOTC is not an applicable
credit). W also completes and attaches
Form 3800 which shows the amount of
each current credit, including current
section 45X credit with registration
number, and business credit
carryforwards of $25,000 (its GBC for
the taxable year) (paragraph (e)(2)(ii) of
this section). Using the ordering rules in
sections 38(d), W is allowed $25,000 of
the carryforwards, $50,000 of WOTC
plus only $25,000 of section 45X credit
against net income tax, as defined under
section 38(c)(1)(B), leaving $25,000 of
tax liability (paragraph (e)(2)(iii) of this
section). The $25,000 of unused section
45X credit is the net elective payment
amount that results in a $25,000
payment against tax by W (paragraph
(e)(2)(iv) of this section). On its return,
W shows net tax liability of $25,000
($125,000¥$100,000 allowed GBC) and
the net elective payment of $25,000
which W applied to net tax liability,
resulting in zero tax owed on the return.
Under paragraph (e)(2)(v) of this section,
W’s applicable credit is reduced by the
$25,000 of section 45X credit claimed as
a GBC for the taxable year, as provided
in paragraph (e)(2)(iii) of this section, as
well as by the $25,000 net elective
payment amount determined in
paragraph (e)(2)(iv) of this section,
resulting in the $50,000 of applicable
credit being reduced to zero. However,
for all other purposes of the Code, the
$50,000 of 45X applicable credits are
deemed to have been allowed to W for
2024 (paragraph (e)(3) of this section).
(v) Example 5. Assume the same facts
as in paragraph (e)(4)(iv) of this section
(Example 4), except W filed the return
on a timely filed extension after the due
date of the return (without extensions).
Even though W did not owe tax after
applying the net elective payment
amount against its net tax liability, W
may be subject to the section 6655

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penalty for failure to pay estimated
income tax. The net elective payment is
not an estimated tax installment, rather,
it is treated as a payment made at the
filing of the return.
(f) Applicability date. This section
applies to taxable years ending on or
after date of publication of final rule.
§ 1.6417–3 Special rules for electing
taxpayers.

(a) In general. This section relates to
the election available to electing
taxpayers. An electing taxpayer that
makes an elective payment election in
accordance with this section is treated
as an applicable entity for the duration
of the election period, but only with
respect to the applicable credit property
described in proposed § 1.6417–1(e)(3),
(5), or (7), respectively, that is the
subject of the election. See paragraphs
(b), (c), and (d) of this section for the
specific rules regarding taxpayers
making an election under section
6417(d)(1)(B), (C), or (D), respectively.
See paragraph (e) for rules relating to
the making the election. See § 1.6417–4
for special rules related to electing
taxpayers that are partnerships or S
corporations.
(b) Elections with respect to the credit
for production of clean hydrogen. An
electing taxpayer that has placed in
service applicable credit property
described in § 1.6417–1(e)(5) (in other
words, a qualified clean hydrogen
production facility as defined in section
45V(c)(3)) during the taxable year may
make an elective payment election for
such taxable year (or by August 16,
2023, in the case of facilities placed in
service before December 31, 2022), but
only with respect to the qualified clean
hydrogen production facility, only with
respect to the applicable credit
described in § 1.6417–1(d)(5) (in other
words, the section 45V credit), and only
if the pre-filing registration required by
§ 1.6417–5 was properly completed. An
electing taxpayer that elects to treat
qualified property that is part of a
specified clean hydrogen production
facility as energy property under section
48(a)(15) may not make an elective
payment election with respect to such
facility.
(c) Election with respect to the credit
for carbon oxide sequestration. An
electing taxpayer that has, after
December 31, 2022, placed in service
applicable credit property described in
§ 1.6417–1(e)(3) (in other words, a single
process train described in § 1.45Q–
2(c)(3) at a qualified facility (as defined
in section 45Q(d)) during the taxable
year may make an elective payment
election for such taxable year, but only
with respect to the single process train,

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only with respect to the applicable
credit described in § 1.6417–1(d)(3) (in
other words, the section 45Q credit),
and only if the pre-filing registration
required by § 1.6417–5 was properly
completed.
(d) Election with respect to the
advanced manufacturing production
credit. An electing taxpayer that
produces, after December 31, 2022,
eligible components (as defined in
section 45X(c)(1)) at an applicable credit
property described in § 1.6417–1(e)(7)
during the taxable year (whether the
facility existed on or before, or after,
December 31, 2022) may make an
elective payment election for such
taxable year, but only with respect to
the facility at which the eligible
components are produced by the
electing taxpayer in that year, only with
respect to the applicable credit
described in § 1.6417–1(d)(7) (in other
words, the section 45X credit), and only
if the pre-filing registration required by
§ 1.6417–5 was properly completed.
(e) Election for electing taxpayers—(1)
In general. If an electing taxpayer makes
an elective payment election under
1.6417–2(b) with respect to any taxable
year in which the electing taxpayer
places in service a qualified clean
hydrogen production facility for which
a section 45V credit is determined,
places in service a single process train
at a qualified facility for which a section
45Q credit is determined, or produces,
after December 31, 2022, eligible
components (as defined in section
45X(c)(1)) at a facility, respectively, the
electing taxpayer will be treated as an
applicable entity for purposes of making
an elective payment election for such
taxable year and during the election
period described in paragraph (e)(3) of
this section, but only with respect to the
applicable credit property described in
§ 1.6417–1(e)(3), (5), or (7), as
applicable, that is the subject of the
election. The taxpayer must otherwise
meet all requirements to earn the credit
in the electing year and in each
succeeding year during the election
period described in paragraph (e)(3) of
this section.
(2) Election is per applicable credit
property. An elective payment election
under § 1.6417–2(b) is made separately
for each applicable credit property,
which is, respectively, a qualified clean
hydrogen production facility placed in
service for which a section 45V credit is
determined, a single process train
placed in service at a qualified facility
for which a section 45Q credit is
determined, or a facility at which
eligible components are produced for
which a section 45X credit is
determined. Only one election may be

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made with respect to any specific
applicable credit property.
(3) Election period—(i) In general.
Except as provided in paragraph
(e)(3)(ii) of this section, if an electing
taxpayer makes an elective payment
election under § 1.6417–2(b) with
respect to applicable credit property
described in § 1.6417–1(e)(3), (5), or (7)
for which an applicable credit is
determined under § 1.6417–1(d)(3), (5),
or (7), the election period during which
such election applies includes the
taxable year in which the election is
made and each of the four subsequent
taxable years that end before January 1,
2033. The election period cannot be less
than a taxable year but may be made for
a taxable period of less than 12 months
within the meaning of section 443 of the
Code.
(ii) Revocation of election. An electing
taxpayer may, during a subsequent year
of the election period described in
paragraph (e)(3)(i) of this section, revoke
the elective payment election with
respect to an applicable credit property
described in § 1.6417–1(e)(3), (5), or (7),
in accordance with forms and
instructions. See § 601.602 of this
chapter. Any such revocation, if made,
applies to the taxable year in which the
revocation is made (which cannot be
less than a taxable year but may be
made for a taxable period of less than
12 months as described in section 443
of the Code) and each subsequent
taxable year within the election period.
Any such revocation may not be
subsequently revoked.
(4) No transfer election under section
6418(a) permitted while an elective
payment election is in effect. No transfer
election under section 6418(a) may be
made by an electing taxpayer with
respect to any applicable credit under
§ 1.6417–1(d)(3), (5), or (7) determined
with respect to applicable credit
property described in § 1.6417–1(e)(3),
(5), or (7) during the election period for
that applicable credit property.
However, if the election period is no
longer in effect with respect to an
applicable credit property, any credit
determined with respect to such
applicable credit property can be
transferred pursuant to a transfer
election under section 6418(a), as long
as the taxpayer meets the requirements
of section 6418 and the 6418
regulations.
(f) Applicability date. This section
applies to taxable years ending on or
after date of publication of final rule.

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§ 1.6417–4 Elective payment election for
electing taxpayers that are partnerships or
S corporations.

(a) In general. In the case of any
applicable credit determined with
respect to any applicable credit property
described in § 1.6417–1(e)(3), (5), or (7)
that is held directly (or treated as held
directly because it is held by a
disregarded entity) by an electing
taxpayer that is a partnership or S
corporation, any elective payment
election under § 1.6417–2(b) must be
made by the partnership or S
corporation.
(b) Elections. If an electing taxpayer
that is a partnership or S corporation
makes an elective payment election
under § 1.6417–2(b) with respect to any
taxable year in which the electing
taxpayer places in service applicable
credit property described in § 1.6417–
1(e)(3) or (5), or produces, after
December 31, 2022, eligible components
(as defined in section 45X(c)(1)) at an
applicable credit property described in
§ 1.6417–1(e)(7), the electing taxpayer
will be treated as an applicable entity
for purposes of making an elective
payment election for such taxable year
and during the election period
described in § 1.6417–3(e)(3), but only
with respect to the applicable credit
property described in § 1.6417–1(e)(3),
(5), or (7), respectively, that is the
subject of the election. In addition, the
taxpayer must otherwise meet all
requirements to earn the credit in the
electing year and in each succeeding
year during the election period
described in § 1.6417–3(e)(3).
(c) Effect of election—(1) In general. If
a partnership or S corporation electing
taxpayer makes an elective payment
election, with respect to the section
45V, 45Q, or 45X credit—
(i) The Internal Revenue Service will
make a payment to such partnership or
S corporation equal to the amount of
such credit, determined in accordance
with paragraph (d) of this section
(unless the partnership or S corporation
owes a Federal tax liability, in which
case the payment may be reduced by
such tax liability);
(ii) Before determining any partner’s
distributive share, or S corporation
shareholder’s pro rata share, of such
credit, such credit is reduced to zero
and is, for any other purposes under the
Code, deemed to have been allowed
solely to such entity (and not allocated
or otherwise allowed to its partners or
shareholders) for such taxable year;
(iii) Any amount with respect to
which such election is made is treated
as tax exempt income for purposes of
sections 705 and 1366 of the Code;

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(iv) A partner’s distributive share of
such tax exempt income is equal to such
partner’s distributive share of the
otherwise applicable credit for each
taxable year, as determined under
§ 1.704–1(b)(4)(ii);
(v) An S corporation shareholder’s pro
rata share (as determined under section
1377(a) of the Code) of such tax exempt
income for each taxable year (as
determined under sections 444 and
1378(b) of the Code) is equal to the S
corporation shareholder’s pro rata share
(as determined under section 1377(a)) of
the otherwise applicable credit for each
taxable year; and
(vi) Such tax exempt income resulting
from such election is treated as received
or accrued, including for purposes of
sections 705 and 1366 of the Code, as
of the date the applicable credit is
determined with respect to the
partnership or S corporation. (such as,
for investment credit property, the date
the property is placed in service).
(2) Electing partnerships in tiered
structures. If a partnership (upper-tier
partnership) is a direct or indirect
partner of a partnership that makes an
elective payment election (electing
partnership) and directly or indirectly
receives an allocation of tax exempt
income resulting from the elective
payment election made by the electing
partnership, the upper-tier partnership
must determine its partners’ distributive
shares of such tax exempt income in
proportion to the partners’ distributive
shares of the otherwise applicable credit
as provided in paragraph (c)(1)(iv) of
this section.
(3) Character of tax exempt income.
Tax exempt income resulting from an
elective payment election by an S
corporation or a partnership is treated as
arising from an investment activity and
not from the conduct of a trade or
business within the meaning of section
469(c)(1)(A). As such, the tax exempt
income is not treated as passive income
to any partners or shareholders who do
not materially participate within the
meaning of section 469(c)(1)(B).
(d) Determination of amount of the
credit—(1) In general. In determining
the amount of an applicable credit that
will result in a payment under
paragraph (c)(1)(i) of this section, the
partnership or S corporation must
compute the amount of the applicable
credit allowable as if an elective
payment election were not made.
Because a partnership or S corporation
is not subject to sections 38(b) and (c)
and 469 (that is, those sections apply at
the partner or S corporation shareholder
level), the amount of applicable credit
determined by a partnership or S
corporation is not subject to limitation

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by those sections. In addition, because
the only applicable credits with respect
to which a partnership or S corporation
may make an elective payment election
are not investment credits under section
46, sections 49 and 50 do not apply to
limit the amount of the applicable
credits.
(2) Example. The rules of this
paragraph (d) are illustrated in the
following example. A and B each
contributed cash to P, a calendar-year
partnership, for the purpose of
manufacturing clean hydrogen at V, a
qualified clean hydrogen facility that
meets the definition of section
45V(c)(3). The partnership agreement
provides that A and B share equally in
all items of income, gain, loss,
deduction and credit of P. P completes
the pre-filing registration process with
respect to the section 45V credit at V for
2023 in accordance § 1.6417–5. P places
V in service in 2023. P timely files its
2023 Form 1065 and properly makes the
elective payment election in accordance
with §§ 1.6417–2(b),1.6417–3, and
1.6417–4. On its Form 1065, P properly
determined that the amount of the
section 45V credit with respect to the
clean hydrogen produced at V for 2023
is $100,000. The IRS processes P’s
return and makes a $100,000 payment to
P. Before determining A’s and B’s
distributive shares, P reduces the credit
to zero. While the $100,000 section 45V
credit is deemed to have been allowed
to P for 2023 for any other purpose
under this title, the credit is not
allocated or otherwise allowed to its
partners. The $100,000 is treated as tax
exempt income for purposes of section
705, and is treated as arising from an
investment activity and not from the
conduct of a trade or business within
the meaning of section 469(c)(1)(A). P
allocates the tax exempt income from
the elective payment election
proportionately among the partners
based on each partner’s distributive
share of the otherwise eligible section
45V credit as determined under § 1.704–
1(b)(4)(ii). Under that section, if
partnership receipts or expenditures
give rise to a credit, the partner’s
interest in the partnership with respect
to such credit is in the same proportion
as such partners’ distributive shares of
such receipt, loss, or deduction. Section
45V credits arise based on the amount
of clean hydrogen produced at a facility.
Under the partnership agreement, A and
B share all items equally. Thus, A and
B will each be allocated $50,000 of tax
exempt income for 2023. P will
continue to be treated as an applicable
entity with respect to V for taxable years
2024–2027 unless P revokes its election

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in accordance with § 1.6417–3(e)(3)(ii).
At the end of 2023, A and B increase
their respective tax bases in their
partnership interest and capital
accounts by $50,000 each (that is, their
share of the $100,000 of tax exempt
income).
(e) Partnerships subject to subchapter
C of chapter 63. For the application of
subchapter C of chapter 63 of the Code
to section 6417, see § 301.6241–7 of this
chapter.
(f) Applicability date. This section
applies to taxable years ending on or
after date of publication of final rule.
§ 1.6417–5 Additional information and
registration.

(a) Pre-filing registration and election.
An applicable entity or electing
taxpayer is required to satisfy the prefiling registration requirements in
paragraph (b) of this section as a
condition of, and prior to, making an
elective payment election. An
applicable entity or electing taxpayer
must use the pre-filing registration
process to register itself as intending to
make the elective payment election, to
list all applicable credits it intends to
claim, and to list each applicable credit
property that contributed to the
determination of such credits as part of
the pre-filing submission (or amended
submission). An applicable entity or
electing taxpayer that does not obtain a
registration number under paragraph
(c)(1) of this section or report the
registration number on its annual tax
return, as defined in § 1.6417–1(b),
pursuant to paragraph (c)(5) of this
section with respect to an otherwise
applicable credit property, is ineligible
to receive any elective payment amount
with respect to the amount of any credit
determined with respect to that
applicable credit property. However,
completion of the pre-filing registration
requirements and receipt of a
registration number does not, by itself,
mean the applicable entity or electing
taxpayer is eligible to receive a payment
with respect to the applicable credits
determined with respect to the
applicable credit property.
(b) Pre-filing registration
requirements—(1) Manner of pre-filing
registration. Unless otherwise provided
in guidance, an applicable entity or
electing taxpayer must complete the
pre-filing registration process
electronically through the IRS electronic
portal and in accordance with the
instructions provided therein.
(2) Pre-filing registration and election
for members of a consolidated group. A
member of a consolidated group is
required to complete pre-filing
registration as a condition of, and prior

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to, making an elective payment election.
See § 1.1502–77 (providing rules
regarding the status of the common
parent as agent for its members).
(3) Timing of pre-filing registration.
An applicable entity or electing
taxpayer must satisfy the pre-filing
registration requirements of this
paragraph (b) and receive a registration
number under paragraph (c) of this
section prior to making an elective
payment election under § 1.6417–2(b)
on the applicable entity’s or electing
taxpayer’s annual tax return for the
taxable year at issue.
(4) Each applicable credit property
must have its own registration number.
An applicable entity or electing
taxpayer must obtain a registration
number for each applicable credit
property with respect to which it
intends to make an elective payment
election.
(5) Information required to complete
the pre-filing registration process.
Unless modified in future guidance, an
applicable entity or electing taxpayer
must provide the following information
to the IRS to complete the pre-filing
registration process:
(i) The applicable entity’s or electing
taxpayer’s general information,
including its name, address, taxpayer
identification number, and type of legal
entity.
(ii) Any additional information
required by the IRS electronic portal,
such as information regarding the
taxpayer’s exempt status under section
501(a) of the Code; that the applicable
entity is a political subdivision of a
State, the District of Columbia, an
Indian Tribal government, or a U.S.
territory; or that the applicable entity is
an agency or instrumentality of a State,
the District of Columbia, an Indian
Tribal government, or a U.S. territory.
(iii) The taxpayer’s taxable year, as
determined under section 441 of the
Code.
(iv) The type of annual tax return(s)
normally filed by the applicable entity
or electing taxpayer, or that the
applicable entity or electing taxpayer
does not normally file an annual tax
return with the IRS.
(v) The type of applicable credit(s) for
which the applicable entity or electing
taxpayer intends to make an elective
payment election.
(vi) For each applicable credit, each
applicable credit property that the
applicable entity or electing taxpayer
intends to use to determine the credit
for which the applicable entity or
electing taxpayer intends to make an
elective payment election.
(vii) For each applicable credit
property listed in paragraph (b)(4)(vi) of

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this section, any further information
required by the IRS electronic portal,
such as—
(A) The type of applicable credit
property;
(B) Physical location (that is, address
and coordinates (longitude and latitude)
of the applicable credit property);
(C) Any supporting documentation
relating to the construction or
acquisition of the applicable credit
property (such as State, District of
Columbia, Indian Tribal, U.S. territorial,
or local government permits to operate
the applicable credit property;
certifications; evidence of ownership
that ties to a land deed, lease, or other
documented right to use and access any
land or facility upon which the
applicable credit property is constructed
or housed; U.S. Coast Guard registration
numbers for offshore wind vessels; and
the vehicle identification number of an
eligible clean vehicle with respect to
which a section 45W credit is
determined);
(D) The beginning of construction
date and the placed in service date of
the applicable credit property.
(E) If an investment-related credit
property (as defined § 1.6417–2(c)(3)),
the source of funds the taxpayer used to
acquire the property; and
(F) Any other information that the
applicable entity or electing taxpayer
believes will help the IRS evaluate the
registration request.
(viii) The name of a contact person for
the applicable entity or electing
taxpayer. The contact person is the
person whom the IRS may contact if
there is an issue with the registration.
The contact person must either (1)
possess legal authority to bind the
applicable entity or electing taxpayer or
(2) must provide a properly executed
power of attorney on Form 2848, Power
of Attorney and Declaration of
Representative.
(ix) A penalties of perjury statement,
effective for all information submitted
as a complete application, and signed by
a person with personal knowledge of the
relevant facts that is authorized to bind
the registrant.
(x) Any other information the IRS
deems necessary for purposes of
preventing duplication, fraud, improper
payments, or excessive payments under
this section that is provided in
guidance.
(c) Registration number—(1) In
general. The IRS will review the
information provided and will issue a
separate registration number for each
applicable credit property for which the
applicable entity or electing taxpayer
provided sufficient verifiable
information.

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(2) Registration number is only valid
for one taxable year. A registration
number is valid only with respect to the
applicable entity or electing taxpayer
that obtained the registration number
under this section and only for the
taxable year for which it is obtained.
(3) Renewing registration numbers. If
an elective payment election will be
made with respect to an applicable
credit property for a taxable year after a
registration number under this section
has been obtained, the applicable entity
or electing taxpayer must renew the
registration for that subsequent taxable
year in accordance with applicable
guidance, including attesting that all the
facts previously provided are still
correct or updating any facts.
(4) Amendment of previously
submitted registration information if a
change occurs before the registration
number is used. As provided in
instructions to the pre-filing registration
portal, if specified changes occur with
respect to one or more applicable credit
properties for which a registration
number has been previously obtained
but not yet used, an applicable entity or
electing taxpayer must amend the
registration (or may need to submit a
new registration) to reflect these new
facts. For example, if the owner of a
facility previously registered for an
elective payment election for applicable
credits determined with respect to that
facility and the facility undergoes a
change of ownership (incident to a
corporate reorganization or an asset
sale) such that the new owner has a
different employer identification
number (EIN) than the owner who
obtained the original registration, the
original owner of the facility must
amend the original registration to
disassociate its EIN from the applicable
credit property and the new owner must
submit separately an original
registration (or if the new owner
previously registered other credit
properties, must amend its original
registration) to associate the new
owner’s EIN with the previously
registered applicable credit property.
(5) Registration number is required to
be reported on the return for the taxable
year of the elective payment election.
The applicable entity or electing
taxpayer must include the registration
number of the applicable credit property
on its annual tax return as provided in
§ 1.6417–2(b) for the taxable year. The
IRS will treat an elective payment
election as ineffective with respect to an
applicable credit determined with
respect to an applicable credit property
for which the applicable entity or
electing taxpayer does not include a

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valid registration number on the annual
tax return.
(d) Applicability date. This section
applies to taxable years ending on or
after date of publication of final rule.

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§ 1.6417–6

Special rules.

(a) Excessive payment—(1) In general.
In the case of any elective payment
amount which the IRS determines
constitutes an excessive payment, the
tax imposed on such entity by chapter
1, regardless of whether such entity or
taxpayer would otherwise be subject to
chapter 1 tax, for the taxable year in
which such determination is made will
be increased by an amount equal to the
sum of—
(i) The amount of such excessive
payment, plus
(ii) An amount equal to 20 percent of
such excessive payment.
(2) Reasonable cause. The amount
described in paragraph (a)(1)(ii) of this
section will not apply to an applicable
entity or electing taxpayer if the
applicable entity or electing taxpayer
demonstrates to the satisfaction of the
IRS that the excessive payment resulted
from reasonable cause.
(3) Excessive payment defined. For
purposes of this section, the term
excessive payment means, with respect
to an applicable credit property for
which an elective payment election is
made under § 1.6417–2(b) for any
taxable year, an amount equal to the
excess of—
(i) The amount treated as a payment
under § 1.6417–2(a)(1)(i) or (a)(2)(i), or
the amount of the payment made
pursuant to § 1.6417–2(a)(2)(ii), with
respect to such applicable credit
property for such taxable year, over
(ii) The amount of the credit which,
without application of this section,
would be otherwise allowable under the
Code (as determined pursuant to
§ 1.6417–2(c) and (e) or § 1.6417–4(d)(1)
and (3), and without regard to the
limitation based on tax in section 38(c))
with respect to such applicable credit
property for such taxable year.
(4) Example. This example illustrates
the principles of this paragraph (a). B,
an instrumentality of state M, places in
service in 2023 facility F, which is
eligible for the energy credit determined
under section 48. B properly completes
the pre-filing registration as an
applicable entity that will earn the
energy credit from F in accordance with
§ 1.6417–5, and receives a registration
number for F. B timely files its 2023
Form 990–T, properly providing the
registration number for F and otherwise
complying with § 1.6417–2(b). On its
Form 990–T, B calculates that the
amount of energy credit determined

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with respect to F is $100,000 and that
the net elective payment amount is
$100,000. B receives a refund in the
amount of $100,000. In 2025, the IRS
determines that the amount of energy
credit properly allowable to B in 2023
with respect to F (as determined
pursuant to § 1.6417–2(c) and (e) and
without regard to the limitation based
on tax in section 38(c)) was $60,000. B
is unable to show reasonable cause for
the difference. The excessive payment
amount is $40,000 ($100,000 treated as
a payment—$60,000 allowable amount).
In 2025, the tax imposed under chapter
1 on B is increased in the amount of
$48,000 ($40,000 + (20% * $40,000).)
(b) Basis reduction and recapture—(1)
In general. Rules similar to the rules of
section 50 (without regard to section
50(b)(3) and (4)(A)(i)) apply for
purposes of this section.
(2) Reporting recapture. Any reporting
of recapture is made on the annual tax
return of the applicable entity or
electing taxpayer in the manner
prescribed by the IRS in any guidance,
along with supplemental forms such as
Form 4255, Recapture of Investment
Credit.
(3) Example. This example illustrates
the principles of this paragraph (b). In
December 2023, G, a government entity,
places in service P, which is energy
property eligible for the energy credit
determined under section 48 (section 48
credit). G properly completes the prefiling registration in accordance with
§ 1.6417–5 as an applicable entity to
make an election under section 6417 for
2023. G timely files its 2023 Form 990–
T in 2024, properly making the elective
payment election in accordance with
§ 1.6417–2 for a section 48 energy credit
determined with respect to P. On its
Form 990–T, G properly determines that
the amount of section 48 credit
determined with respect P is $100,000
and that its net elective payment
amount is $100,000. The IRS sends G a
$100,000 refund. Pursuant to section
50(c), G reduces its basis in P by
$50,000. In July 2025, P ceases to be
investment credit property with respect
to G. Because this occurs before the
close of the recapture period set forth in
section 50, section 50(a)(1)(A) provides
that the tax under chapter 1 for 2025 is
increased by the recapture percentage of
the aggregate decrease in the credits
allowed under section 38 for all prior
taxable years which would have
resulted solely from reducing to zero
any credit determined under subpart E
of part IV of subchapter A of chapter 1
with respect to such property. Because
P ceased to be investment credit
property within 2 full years after P was
placed in service, section 50(a)(1)(B)

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provides that the recapture percentage is
80%. G must properly report the
recapture event in 2025, paying an
$80,000 tax. Because G is a government
entity, G reports the recapture event on
a Form 990–T or any Form provided in
further guidance, along with
supplemental forms such as Form 4255,
Recapture of Investment Credit. G’s
basis in P is increased by $40,000.
(c) Mirror code territories. Pursuant to
section 6417(f) of the Code, section 6417
and the section 6417 regulations are not
treated as part of the income tax laws of
the United States for purposes of
determining the income tax law of any
U.S. territory with a mirror code tax
system (as defined in section 24(k) of
the Code), unless such U.S. territory
elects to have section 6417 and the
section 6417 regulations be so treated.
The applicable territory tax authority for
a U.S. territory determines whether such
an election has been made.
(d) Partnerships subject to subchapter
C of chapter 63 of the Code. See
§ 301.6241–7(j) of this chapter for rules
applicable to payments made to
partnerships subject to subchapter C of
chapter 63 of the Code for a partnership
taxable year.
(e) Applicability date. This section
applies to taxable years ending on or
after date of publication of final rule.
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 3. The authority citation for part
301 is amended by adding entries in
numerical order for §§ 301.6241–1 and
301.6241–7 to read in part as follows:

■

Authority: 26 U.S.C. 7805.

*

*

*

*

*

Section 301.6241–1 also issued under
sections 48D(d), 6241, and 6417.

*

*

*

*

*

Section 301.6241–7 also issued under
sections 48D(d), 6241, and 6417.

*

*
*
*
*
Par. 4. Section 301.6241–1 is
amended by:
■ 1. Adding a sentence after the second
sentence of paragraph (a)(6)(iii); and
■ 2. Adding a sentence to the end to the
end of paragraph (b)(1).
The additions and revisions read as
follows:
■

§ 301.6241–1

Definitions

(a) * * *
(6) * * *
(iii) * * * Notwithstanding the
previous two sentences, any tax,
penalty, addition to tax, or additional
amount imposed on the partnership
under chapter 1 is an item or amount
with respect to the partnership. * * *
(b) * * *

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(1) * * * The third sentence of
paragraph (a)(6)(iii) applies to
partnership taxable years ending on or
after June 21, 2023. * * *
*
*
*
*
*
■ Par. 5. Section 6241–7 is amended by:
■ 1. Redesignating paragraph (j) as
paragraph (k);
■ 2. Adding new paragraph (j);
■ 3. Revising the first sentence of newly
redesignated paragraph (k)(1); and
■ 4. Adding paragraph (k)(3).
The additions and revisions read as
follows:
§ 301.6241–7 Treatment of special
enforcement matters

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*

*

*

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*

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(j) Elections resulting in payments to
a partnership. The IRS may adjust any
election that results or could result in a
payment to the partnership in lieu of a
Federal tax credit or deduction without
regard to subchapter C of chapter 63.
The IRS may also make determinations,
without regard to subchapter C of
chapter 63, about the payment itself as
well as any partnership-related item
relevant to adjusting the election or the
payment.
*
*
*
*
*
(k) Applicability date—(1) In general.
Except as provided in paragraph (k)(2)
(relating to paragraph (b) of this section)
and paragraph (k)(3) of this section

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(relating to paragraph (j) of this section),
this section applies to partnership
taxable years ending on or after
November 20, 2020. * * *
*
*
*
*
*
(3) Elections resulting in payments to
a partnership. Paragraph (j) of this
section applies to taxable years ending
on or after June 21, 2023.
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2023–12798 Filed 6–14–23; 11:15 am]
BILLING CODE 4830–01–P

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