Treasury/IRS Issues IRA Elective Pay Update

On October 11, the Internal Revenue Service (IRS) published an update for entities seeking elective pay (aka direct-pay) for eligible clean energy projects. The announcement highlighted three key updates for eligible entities provided in Revenue Procedure 2024-39.

• First, certain eligible entities that were required to but did not file a timely extension for filing an annual return (Form 990-T) will be granted a six-month automatic extension of time from the original return due date. The 990-T is the tax form eligible entities will use to make their elective payment election. For most GFOA members, this extension generally will not apply since most local governments have already received an automatic six-month extension.  
• Second, the IRS is temporarily waiving the requirement to e-file Form 990-T (along with Form 3800 and other forms depending on the credit being sought). The temporary waiver only applies to returns filed for a taxable year ending on any day between, and including, December 31, 2023 through November 30, 2024. For example, if an eligible entity is filing a return based on a calendar year 2023 tax year, the entity may file a paper return following the steps in Section 4 of Revenue Procedure 2024-39.
• Finally, Revenue Procedure 2024-39 also outlines the procedure for eligible entities that previously filed on paper and received a notice that their election was ineffective because the return on which it was made was filed after the due date of the return.

Keep in mind, the filing of the annual return is one of the last steps in seeking direct pay of the credits for clean energy projects under the Inflation Reduction Act. Click here for GFOA’s IRA Implementation page for resources and to learn more about the credits.