On June 14, 2023, the IRS released proposed regulations and additional guidance describing rules for applicable taxpayers to benefit from investments in renewable energy projects through a direct payment of the tax credit amount or by transferring (i.e., selling) the tax credit to an unrelated taxpayer in exchange for cash.

Taxpayers seeking direct payment or transferability of credits must complete a pre-filing registration with the IRS. The registration process includes providing information regarding the taxpayer, which tax credits the taxpayer intends to earn, and which projects the taxpayer intends to qualify for the tax credits. Upon completion of the registration process, the IRS will issue the taxpayer a separate registration number for each applicable credit property that contributes to an applicable credit. The registration numbers are used when filing annual tax returns.

The energy community has eagerly anticipated the release of guidance relating to direct pay and transferability. The guidance released today will allow transactions to start moving forward, but it also will require some of the transactions negotiated in advance of guidance to be restructured. Those seeking assistance in navigating these new monetization opportunities should consult with experienced energy project finance counsel.

Tags: GT Insight, IRS, renewable energy, tax credits
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Photo of Margaret J. Weil Margaret J. Weil

Margaret J. Weil focuses her practice on tax planning and advice for private equity transactions, mergers and acquisitions, financings, and other commercial transactions. She advises domestic and international corporations, partnerships, and high-net-worth individuals on a broad range of tax matters, including domestic and…

Margaret J. Weil focuses her practice on tax planning and advice for private equity transactions, mergers and acquisitions, financings, and other commercial transactions. She advises domestic and international corporations, partnerships, and high-net-worth individuals on a broad range of tax matters, including domestic and cross-border M&A, securities offerings, restructurings, tax compliance, and the federal, state, and international tax developments that affect their transactions and ongoing business operations.

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Photo of Braxton Roam Braxton Roam

Braxton T. Roam focuses his practice on energy project finance and taxation. Braxton advises tax equity investors, lenders, developers, and sponsors in the renewable energy space—particularly those relating to wind, solar, biomass, and other emerging technologies—with structuring and closing transactions that rely on…

Braxton T. Roam focuses his practice on energy project finance and taxation. Braxton advises tax equity investors, lenders, developers, and sponsors in the renewable energy space—particularly those relating to wind, solar, biomass, and other emerging technologies—with structuring and closing transactions that rely on federal and state tax incentives. His experience includes matters involving Internal Revenue Code section 48 Investment Tax Credits (ITC), section 45 Production Tax Credits (PTC), section 45Q Carbon Oxide Sequestration Credits, section 1400Z Qualified Opportunity Zones, and the section 1603 Treasury Grant Program under the American Recovery and Reinvestment Act of 2009, among other federal and state tax incentives.

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Benjamin Almy ‡

Ben Almy utilizes deep in-house tax experience to advise his clients. In his managerial role at AES Clean Energy, he led tax analysis on utility-scale and distributed generation renewable project acquisitions – particularly relating to solar, wind, stand-alone storage, and green hydrogen projects.

Ben Almy utilizes deep in-house tax experience to advise his clients. In his managerial role at AES Clean Energy, he led tax analysis on utility-scale and distributed generation renewable project acquisitions – particularly relating to solar, wind, stand-alone storage, and green hydrogen projects. His experience includes drafting and reviewing commercial contracts for project acquisitions, equipment procurement, construction, and partnership formation, with a focus on tax provisions. He advises on federal and state tax incentives, state and local tax compliance, and tax-efficient structuring.

‡ Admitted to practice in Montana. Not admitted in the District of Columbia. Practice in D.C. supervised by shareholders admitted to practice in D.C. Practice limited to Federal Courts and Agencies.

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