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Taxes

AICPA Comments and Asks for Guidance on Energy Tax Credit Provisions

These proposed temporary regulations provide some guidance to the pre-registration filing requirements, as well as the clarification and definition of applicable entities.

Isaac M. O'Bannon

Aug. 23, 2023

The American Institute of CPAs (AICPA) has submitted comments to the Department of the Treasury and the Internal Revenue Service (IRS) requesting guidance to taxpayers pertaining to energy tax credit provisions of the Inflation Reduction Act (IRA) of 2022 and on section 48D advanced manufacturing investment credit provisions of the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022.

These proposed temporary regulations provide some guidance to the pre-registration filing requirements, as well as the clarification and definition of applicable entities. However, they also create unnecessary and negative tax implications, making the purchaser of the credit subject to passive activity and Section 469 rules, though the transferee (purchaser) does not hold ownership interest in the entity.

The letter outlines the following recommendations:

  • Consider an expedited process for the issuance of quick refunds for applicable entities eligible for direct pay.
  • Provide additional clarity and simplify the pre-filing registration process by:
  • Providing clarity about the pre-filing process; including timeline, process time and mode, and specified changes regarding amendment.
  • Providing clarity about the pre-filing process specific to the credits using qualified progress payments made in 2022.
  • Consider allowing partnerships with all tax-exempt partners to be considered “applicable entities.”
  • Consider allowing partnerships with all tax-exempt partners to be considered “applicable entities.”
  • Provide further guidance on the definition of Restricted Tax-Exempt Amount
  • Retain in the final regulations the clarification of “applicable entities” and the definitions as included in Prop. Reg. § 1.6417-1(c).
  • Omit the 5-step computation rule and provide guidance that allows taxpayers to elect to treat the advanced manufacturing investment and energy tax credits as a payment against tax “equal to the amount of such credit” under the direct payment final regulations.
  • Provide in the final regulations that taxpayers who perform the carbon capture and receive the section 45Q tax credit in a transfer from the property owner be allowed to transfer the credit to another third party.
  • Remove section 469 from Prop. Reg. § 1.6418-2(d)(1) and Prop. Reg § 1.6418-2(f)(3)(ii) in its entirety.

The AICPA has requested the removal of the reference to Section 469 in the proposed regulations in its entirety. Currently, the partnerships with all tax-exempt partners are not considered “applicable entities,” however the AICPA recommends they be considered as such.