# Bulletin No. 2024–15

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3Ae71b4e4191fd59fd

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

HIGHLIGHTS
OF THIS ISSUE




Bulletin No. 2024–15
April 8, 2024

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

EXEMPT ORGANIZATIONS
Announcement 2024-15, page 876.

Revocation of IRC 501(c)(3) Organizations for failure to meet
the code section requirements. Contributions made to the
organizations by individual donors are no longer deductible
under IRC 170(b)(1)(A).

INCOME TAX
Notice 2024-31, page 869.

Notice 2024-31 provides for adjustments to the limitation
on housing expenses for purposes of section 911 of the
Internal Revenue Code for the 2024 tax year. These adjustments are made on the basis of geographic differences
in housing costs relative to housing costs in the United
States. If the limitation on housing expenses is higher for
the 2024 tax year than the adjusted limitations on housing
expenses provided in Notice 2023-26, qualified taxpayers
may apply the adjusted limitations in this notice for the
2024 tax year to their 2023 tax year.

Rev. Proc. 2024-17, page 873.

Generally, U.S. citizens or resident aliens living and working abroad are taxed on their worldwide income. However,
if their tax home is in a foreign country and they meet either
the bona fide residence test or the physical presence test,
they can choose to exclude from their income a limited
amount of their foreign earned income (up to $120,000
for 2023). Both the bona fide residence test and the physical presence test contain minimum time requirements.
Revenue Procedure 2024-17 provides a waiver under
section 911(d)(4) for the time requirements for individuals electing to exclude their foreign earned income who

Finding Lists begin on page ii.

must leave a foreign country because of war, civil unrest,
or similar adverse conditions in that country. Rev. Proc.
2024-17 adds Ukraine, Belarus, Sudan, Haiti, Niger, and
Iraq to the list of waiver countries for tax year 2023 for
which the minimum time requirements are waived.

Rev. Proc. 2024-18, page 874.

This revenue procedure supplements Rev. Proc. 2023-32,
2023-41 I.R.B. 1064, by publishing amounts of unused
housing credit carryovers allocated to qualified states
under § 42(h)(3)(D) of the Internal Revenue Code for calendar year 2023 in addition to those amounts published in
Rev. Proc. 2023-32.

T.D. 9988, page 794.

The final regulations describe the rules for the elective
payment of applicable credit amounts in a taxable year,
including definitions and special rules applicable to partnerships and S corporations. In addition, the final regulations provide rules related to a required IRS pre-filing
registration process. Temporary regulations that were
previously issued to describe rules for the pre-filing registration process are removed. The pre-filing registration
process is necessary to complete before filing an effective
elective payment election for applicable credits.

T.D. 9989, page 850.

These final regulations describe the rules for the elective
payment election under section 48D(d) of the Internal Revenue Code, as established by the CHIPS Act of 2022. The
final regulations describe rules related to an IRS pre-filing
registration process as a condition of, and prior to, any
amount being treated as a payment made by or to the
taxpayer. The final regulations also describe special rules
applicable to partnerships and S corporations, repayment
of excessive payments, and basis reduction and r­ ecapture.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

April 8, 2024 

Bulletin No. 2024–15

Part I
26 CFR 1.6417-1 through 1.6417-6; 26 CFR
301.6241-1(a)(6)(iii) and (b)(1); 26 CFR 301.62417(j) through (k)

T.D. 9988
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
Elective Payment of
Applicable Credits
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains
final 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 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 regulations describe rules
related to a required IRS pre-filing registration process. These 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.
DATES: Effective date: These regulations
are effective May 10, 2024.
Applicability date: For dates of applicability, see §§1.6417-1(q), 1.6417-2(f),
1.6417-3(f), 1.6417-4(f), 1.6417-5(d),
1.6417-6(e), 301.6241-1(b)(1), and 301.
6241-7(k)(3).

FOR FURTHER INFORMATION
CONTACT: Concerning these final regulations, Jeremy Milton at (202) 317-5665
and James Holmes at (202) 317-5114 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regulations that amend the Income Tax Regulations (26 CFR part 1) and the Procedure
and Administration Regulations (26 CFR
part 301) to implement the statutory provisions of section 6417 of the Internal
Revenue Code (Code), as enacted by section 13801(a) of Public Law 117-169, 136
Stat. 1818, 2003 (August 16, 2022), commonly known as the Inflation Reduction
Act of 2022 (IRA).
I. Overview of Section 6417
An applicable entity that meets all the
requirements of section 6417 is permitted
to make an election under section 6417
with respect to any applicable credit
determined with respect to the applicable entity for the taxable year (elective
payment election). If an applicable entity
makes an elective payment election, the
applicable entity is treated as making a
payment against Federal income taxes
imposed by subtitle A of the Code (subtitle A) 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 of the Treasury or her delegate
(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 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 6417(d) defines an “applicable entity” and provides generally
applicable rules for making elective payment elections. Section 6417(e) through

1
The reference was intended to be to section 45W(d)(2). See General Explanation of Tax Legislation Enacted in the 117th Congress, JCS-1-23 (December 21, 2023) at 282. Thus, the final
regulations refer to section 45W(d)(2).

April 8, 2024

794

Bulletin No. 2024–15

(h) provide special rules applicable under
section 6417 that are described in part II
of this Background. As described in parts
III and IV of this Background, section
6417(c), (d)(1)(B) through (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
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. Part VI of
this Background describes proposed regulations (REG-101607-23) and temporary
regulations (TD 9975) issued under section 6417.
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;
(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
tax-exempt 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.

Bulletin No. 2024–15

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 political subdivision, agency or instrumentality of the foregoing described in section
6417(d)(1) and for which no return is
required under section 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) 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 a section 45Q credit (see
part III of this Background).

795

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), (ii), and (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 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
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
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

April 8, 2024

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.

Section 6417(f) provides a special rule
relating to any territory2 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(c)(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 Electing
Taxpayers Making An Election Under
Section 6417(d)(1)(B), (C), or (D)
A taxpayer other than an applicable
entity under section 6417(d)(1)(A) (electing taxpayer) may make an election to
be treated as an applicable entity for the
limited purpose of making an elective
payment election with respect to a section
45V credit, a section 45Q credit, or a section 45X credit under section 6417(d)(1)
(B), (C), or (D), respectively. An electing
taxpayer may make an elective payment
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 special rules for such an election are
described in parts III.A, III.B, and III.C of
this Background.

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 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) of the Code
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,

Section 6417(f) uses the term “possession,” but the proposed regulations and these final regulations use the alternative term “territory.”
There is no section 6417(c)(2)(A) and the Treasury Department and the IRS believe Congress intended to refer instead to section 6417(d)(2)(A). See General Explanation of Tax Legislation
Enacted in the 117th Congress, JCS-1-23 (December 21, 2023) at 284. Thus, the proposed and final regulations refer to section 6417(d)(2)(A).
2
3

April 8, 2024

796

Bulletin No. 2024–15

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.
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.
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
tax purposes) a facility or property for
which an applicable credit is determined.
Section 6417(c)(1) provides that, in the

Bulletin No. 2024–15

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 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 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 Department
of the Treasury (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.
Stakeholders submitted more than 200
comments in response to Notice 2022-50.
Feedback in those comments informed the
development of the proposed regulations
and is described in the preamble to the
proposed regulations as appropriate.
VI. Proposed and Temporary Regulations
On June 21, 2023, the Treasury Department and the IRS published proposed

797

regulations under section 6417 (REG101607-23) in the Federal Register (88
FR 40528) to provide guidance on elective
payment elections (proposed regulations).
Those proposed regulations included proposed §1.6417-5, which contained proposed rules identical to the temporary regulations at §1.6417-5T. Those temporary
regulations also were published on June
21, 2023, in the Federal Register (88 FR
40093) to provide guidance on the mandatory information and registration requirements for elective payment elections. The
provisions of the proposed regulations are
explained in greater detail in the preamble
to the proposed regulations.
Summary of Comments and
Explanation of Revisions
This Summary of Comments and
Explanation of Revisions summarizes
the proposed regulations and all the substantive comments submitted in response
to the proposed regulations. The Treasury Department and the IRS received
151 written comments in response to the
proposed regulations. The comments are
available for public inspection at www.
regulations.gov or upon request. A hearing was conducted in person and telephonically on August 21, 2023, during
which 10 presenters provided comments.
After full consideration of the comments
received, these final regulations adopt the
proposed regulations with modifications
in response to the comments described in
this Summary of Comments and Explanation of Revisions.
Comments merely summarizing the
proposed regulations, recommending statutory revisions to section 6417 or other
statutes, or addressing issues that are outside the scope of this rulemaking, such
as the calculation of applicable credits
(including any bonus credit amounts) or
recommended changes to IRS forms, are
beyond the scope of these regulations and
are not adopted.
I. General Rules and Definitions
A. Applicable entities
Section 6417(d)(1) defines applicable entity. Proposed §1.6417-1(c) clarified the statutory definition of applicable

April 8, 2024

entity pursuant to the Secretary’s authority
under section 6417(h) to issue regulations
necessary to carry out the purposes of section 6417. Commenters addressed several
aspects of the proposed definitions, as
described in this Part I.A of the Summary
of Comments and Explanation of Revisions.
1. Any Organization Exempt from the
Tax Imposed by Subtitle A
Section
6417(d)(1)(A)(i)
defines
“applicable entity” as including any organization exempt from the tax imposed
by subtitle A. The proposed regulations
would have clarified that “any organization exempt from the tax imposed by
subtitle A” meant (1) any organization
exempt from the tax imposed by subtitle
A by reason of section 501(a) of the Code
and (2) any organization exempt from the
tax imposed by subtitle A because it is
the government of any U.S. territory or a
political subdivision thereof.
A few commenters asked that Puerto
Rico-registered nonprofits (those with
Puerto Rico 1101.01 nonprofit status) be
allowed to file for elective payment of
renewable energy tax credits without having to acquire section 501(c)(3) status.
As the preamble to the proposed regulations noted, stakeholders had previously
responded to Notice 2022-50 by asking
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). The preamble to
the proposed regulations stated that 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 (but
that some of these entities might meet the
requirements of another type of applicable entity, such as a State instrumentality,
and might be an applicable entity on those
grounds). This same answer applies to a
Puerto Rico-registered nonprofit that does
not have section 501(c)(3) status.
Multiple commenters urged that homeowners’ associations described in section
528 of the Code be considered applicable entities under section 6417(d)(1)(A)
because they are “exempt from the tax

4

imposed by subtitle A” by their statutory language. Two of these commenters
noted that other sections within subchapter F of chapter 1 have similar statutory
language, and one of these commenters
thus requested that the final regulations
be modified to include all organizations
considered exempt from income taxes
pursuant to subchapter F of chapter 1. In
response, these final regulations adopt this
comment and define “any organization
exempt from the tax imposed by subtitle
A” to include organizations exempt from
the tax imposed by subtitle A by reason
of subchapter F of chapter 1. Thus, under
these final regulations, any organization
described in sections 501 through 530 of
the Code that meets the requirements to
be recognized as exempt from tax under
those sections is an applicable entity eligible to make an elective payment election.
No commenters opposed the inclusion
of the government of any U.S. territory or
a political subdivision thereof in this definition; thus, these final regulations adopt
this definition as proposed. However,
several commenters recommended that
the final regulations provide an exception
to the general rule in section 50(b)(1) for
territorial applicable entities making elections under section 6417 for investment
tax credits, advocating that such a rule
would provide better parity with domestic
applicable entities making such elections
and would advance the IRA’s purpose by
improving access to clean energy investment tax credits in U.S. territories.
Since before the IRA, investment tax
credits, vehicle-related credits, and energy
efficiency incentives have included
restrictions with respect to property
located or used in U.S. territories by reference to section 50(b)(1). Section 50(b)(1)
provides that “no [investment tax] credit
shall be determined . . . with respect to
any property which is used predominantly
outside the United States”4 unless section 168(g)(4) applies (which provides an
exception for any property that is owned
by a domestic corporation or by a United
States citizen other than a citizen entitled
to the benefits of section 931 or 933 of
the Code, and that is used predominantly
in a possession of the United States by

such a corporation or such a citizen, or
by a corporation created or organized in,
or under the law of, a possession of the
United States). The IRA did not amend
these provisions; instead, the IRA specifically referenced 50(b)(1) in section 30C,
incorporated section 50(b)(1) into section
45W, and did not exclude section 48, 48C,
or 48E from the application of section
50(b)(1). Furthermore, section 6417(d)(2)
provides special rules that enable tax-exempt and government entities to benefit
from section 30C, 45W, 48, 48C, and 48E
because it provides that applicable credits
are determined without regard to sections
50(b)(3) and (4)(A)(i). However, there is
no provision lifting the territory-related
restrictions of section 50(b)(1). Without
specific language in section 6417 or in the
underlying applicable credits addressing
section 50(b)(1), or other compelling evidence of Congressional intent, a special
rule turning off the application of section
50(b)(1) is not supported by the Code.
Therefore, these final regulations do not
adopt this recommendation.
One commenter asked for a process
under which the Puerto Rico Department
of Treasury (or any other agency designated by the Governor of Puerto Rico)
is designated to receive, process, and/or
administer elections for elective payments
from applicable entities and instrumentalities of Puerto Rico, similar to the process
for disbursements of Coronavirus Relief
Funds under the Coronavirus Aid, Relief,
and Economic Security Act, Public Law
116-136, 134 Stat. 281 (March 27, 2020).
The Treasury Department and the IRS
have determined that creating the suggested process is inappropriate for elective
payment elections because section 6417
involves the filing of a tax return with the
IRS. Accordingly, these final regulations
do not adopt this comment.
2. Any State or Political Subdivision
Thereof
Section 6417(d)(1)(A)(ii) defines
“applicable entity” to include any State
or political subdivision thereof. The proposed regulations would have clarified
that this includes the District of Columbia.

Under section 7701(a)(9) of the Code, “[t]he term ‘United States’ when used in a geographical sense includes only the States and the District of Columbia.”

April 8, 2024

798

Bulletin No. 2024–15

No comments addressed this definition, so
these final regulations adopt the definition
as proposed.
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 have included
subdivisions of Indian tribal governments
in this definition. Proposed §1.6417-1(k)
defined the term Indian tribal government as 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 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).
Although no comments were received
that directly addressed the definition of
an Indian tribal government provided in
proposed §1.6417-1(c)(3), these final regulations clarify the proposed definition by
specifying that the most recent list published by the Department of the Interior in
the Federal Register is the one prior to the
date on which a relevant elective payment
election is made. (Comments regarding
Tribal entities other than Indian tribal governments are discussed elsewhere in this
Summary of Comments and Explanation
of Revisions.)
4. Alaska Native Corporations
Section 6417(d)(1)(A)(v) provides that
any Alaska Native Corporation (as defined
in section 3 of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602(m))
(ANC) is an applicable entity. The proposed regulations would have adopted
this definition. The proposed regulations
requested comments regarding the definition in proposed §1.6417-1(c)(4) and
whether additional guidance is necessary
regarding consolidated groups with ANC
common parents. The Treasury Department and the IRS did not receive comments related to this definition, but these
final regulations adopt the proposed reg-

Bulletin No. 2024–15

ulation and broaden it to apply to consolidated groups with any applicable entity
as a common parent, as described in part
I.B.5. of this Summary of Comments and
Explanation of Revisions.
5. Rural Electric Cooperatives
Section 6417(d)(1)(A)(vi) provides
that any corporation operating on a cooperative basis that is engaged in furnishing
electric energy to persons in rural areas is
an applicable entity. The proposed regulations did not elaborate on this definition
but requested comments on whether further clarification of the definition in proposed §1.6417-1(c)(6) is necessary.
A few commenters addressed this definition. Some of these commenters stated
that “clarity would be better achieved”
if the Treasury Department and the IRS
would refer to tax-exempt electric cooperatives as applicable entities described
in 501(c)(12) and taxable electric cooperatives as applicable entities described in
section 1381(a)(2)(C) of the Code. One of
these commenters stated that an electric
cooperative may be described in section
45(e)(2)(A)(iii) as a not-for-profit electric
utility that had or has received a loan or
loan guarantee under the Rural Electrification Act of 1936. Another commenter
asked that the final regulations also allow
a “pre-1962” rural electric cooperative
under section 1381(a)(2)(C) to be eligible to make an elective payment election.
Another commenter asked that the final
regulations clarify that rural electric cooperatives that file either Form 1120, U.S.
Corporation Income Tax Return, or Form
990, Return of Organization Exempt from
Income Tax, be eligible to make an elective payment election.
The Treasury Department and the IRS
have concluded that rural electric cooperatives as described in section 6417(d)
(1)(A)(vi) include rural electric cooperatives that do not meet the requirements
under section 501(c)(12), as cooperatives
that meet the requirements under section
501(c)(12) are already considered tax-exempt entities in section 6417(d)(1)(A)
(i). To avoid rendering section 6417(d)
(1)(A)(vi) superfluous, it is necessary to
include taxable (nonexempt) rural electric
cooperatives in section 6417(d)(1)(A)(vi).
Taxable (nonexempt) rural electric coop-

799

eratives are described in section 1381(a)
(2)(C) as “any corporation operating on
a cooperative basis that is engaged in
furnishing electric energy to persons in
rural areas.” Thus, these final regulations
under §1.6417-1(c)(6) clarify that section
6417(d)(1)(A)(vi) means “any corporation operating on a cooperative basis that
is engaged in furnishing electric energy
to persons in rural areas as described in
section 1381(a)(2)(C) of the Code.” These
final regulations do not include “any electric cooperative described in section 45(e)
(2)(A)(iii)” in the definition because such
section does not exist in the Code, and
the Treasury Department and the IRS are
unsure what cooperatives the commenter
is referencing.
One commenter recommended that the
final regulations clarify that local, publicly
owned utilities (for example, water and
electric) and electric cooperatives (other
than rural) are eligible entities under section 6417(d)(1)(A)(vi), stating that the
proposed definition aligns with Congressional intent and that there are more than
2,800 public owned utilities and cooperatives in operation combined serving
millions of customers across the United
States. Because section 6417(d)(1)(A)(vi)
requires that a cooperative be engaged in
furnishing electric energy to persons “in
rural areas,” these final regulations do not
include these entities in the definition of
rural electric cooperative. However, it
is possible that publicly owned utilities
and non-profit co-ops could qualify as
applicable entities under other definitions
described in these rules, such as if they are
considered agencies or instrumentalities
of a State, local, territorial, or Tribal government.
Multiple commenters asked that the
final regulations expand rural electric
cooperatives to cover workers cooperatives that install solar panels. These commenters also requested clarification as
to how to determine an organization is
(1) operating on a cooperative basis; (2)
furnishing electricity; and (3) furnishing
electricity in a rural area. The commenters
generally suggest adopting existing rules
under subchapter T of chapter 1 of the
Code (subchapter T).
These final regulations do not adopt a
specific rule covering workers cooperatives that install solar panels because the

April 8, 2024

revision to the definition of rural electric
cooperatives in the final regulations is
sufficient to clarify the meaning of the
term. As these final regulations include
any corporation operating on a cooperative basis that is engaged in furnishing
electric energy to persons in rural areas
as described in section 1381(a)(2)(C), it is
the law that applies to those corporations
that will apply in making the determination with respect to any respective corporation.
With respect to operating on a cooperative basis, a summary of the taxation of
nonexempt rural electric cooperatives may
be helpful in explaining the key principles.
The rules for tax treatment of most nonexempt cooperatives and their patrons were
codified with the enactment of subchapter
T as part of the Revenue Act of 1962. Public Law No. 87-834 (H.R. 10650). However, section 1381(a)(2)(C) states that
subchapter T is not applicable to an organization engaged in furnishing electric
energy (or providing telephone service)
to persons in rural areas. According to the
Senate Finance Committee Report accompanying the 1962 Act, the intent of Congress was that nonexempt rural electric
cooperatives would continue to be treated
as under “present law” as of 1962. While
subchapter T does not expressly control
the taxation of nonexempt rural electric
cooperatives, its foundations rest upon
pre-1962 cooperative tax law. As a result,
there are certain basic parallels between
the tax treatment of nonexempt utility
(electric and telephone) cooperatives and
treatment of other cooperative organizations under subchapter T. Therefore, to
extent that subchapter T reflects cooperative taxation as it existed prior to 1962,
it is instructive in resolving certain issues
facing rural electric cooperatives. This is
because Congress stated that, in enacting
subchapter T, it was merely codifying the
long common law history of cooperative
taxation (with the exception of ensuring at
least one annual level of tax at the cooperative or patron level. See S. Rep. No.
1881, 87th Cong., 1st Sess. 113 (1962)).
Arguably, the case law post-enactment is
merely a continuation and refinement of
the pre-enactment common law.
Perhaps the most succinct definition of
the term “cooperative” for Federal income
tax purposes was provided by the U.S.

April 8, 2024

Tax Court in Puget Sound Plywood, Inc.
v. Commissioner, 44 T.C. 305 (1965), acq.
1966-1 C.B. 3:
 nder the cooperative association form
U
or organization . . . , the worker-members of the association supply their own
capital at their own risk; select their
own management and supply their own
direction for the enterprise, through
worker meetings conducted on a democratic basis; and then themselves
receive the fruits of their cooperative
endeavors, through allocations of the
same among themselves as coworkers,
in proportion to the amounts of their
active participation in the cooperative
undertaking.
The Tax Court went on to describe
three guiding principles at the core of economic cooperative theory as, id. at 308:
(1) Subordination of capital, both as
regards control over the cooperative
undertaking, and as regards the ownership of the pecuniary benefits arising therefrom; (2) democratic control
by the worker-members themselves;
and, (3) the vesting in and allocation
among the worker-members of all
fruits and increases arising from their
cooperative endeavor (i.e., the excess
of operating revenues over the costs
incurred in generating those revenues),
in proportion to the worker-members
active participation in the cooperative
endeavor.
The mechanism by which rural electric
cooperatives achieve operation at cost is
the patronage dividend (or capital credit).
The payment of patronage dividends (and
operation at cost) is critical to achieving
cooperative status as defined by Puget
Sound, so any organization must analyze
this issue to determine whether it is operating on a cooperative basis.
The comments related to the definition
of “furnishing” electricity for purposes
of section 6417(d)(1)(A)(vi) varied. For
example, some commenters suggested
using the language in §1.1381-1(b)(4) as
the standard, and some suggested the term
should not be limited to generating and
transmitting electricity. One commenter
suggested that a percentage of rural name-

800

plate capacity be applied for purposes of
the definition of “furnishing” electricity, while another commenter stated that
a more than de minimis standard should
be used to meet furnishing requirements.
Consistent with the determination that
section 6417(d)(1)(A)(vi) will cover rural
electric cooperatives described in section
1381(a)(2)(C), the Treasury Department
and the IRS conclude that “furnishing”
electricity under section 6417(d)(1)(A)
(vi) should be interpreted in the same manner as the language in §1.1381-1(b)(4),
which provides “[a]ny organization which
is engaged in generating, transmitting, or
otherwise furnishing electric energy.” The
purpose of this language in §1.1381-1(b)
(4) is to identify rural electric cooperatives described in section 1381(a)(2)(C).
Using a similar interpretation for purposes
of section 6417 means that a cooperative
furnishing electric energy under §1.13811(b)(4) would meet this portion of the
definition. Such a cooperative would not
be subject to subchapter T as a result of
section 1381(a)(2)(C), assuming the electricity is provided to rural areas.
With respect to this conclusion, the
Treasury Department and the IRS note that
some of the commenters identified themselves as cooperatives subject to the provisions of subchapter T. The definition of
applicable entity in section 6417(d)(1)(A)
(vi) would not include a cooperative that
is subject to subchapter T, as a cooperative
cannot be both subject to subchapter T and
excepted from subchapter T. Further, the
definition of furnishing in §1.1381-1(b)
(4), and thus for purposes of section 6417,
does not include the activity of installation
of energy equipment (such as the installation of solar panels), as that alone is
not the generation or other furnishing of
electricity. Thus, organizations evaluating whether their operations include furnishing electricity for purposes of section
6417 should take this into account.
Consistent with including rural electric
cooperatives described in section 1381(a)
(2)(C) and the use of §1.1381-1(b)(4) to
determine whether a cooperative is “furnishing” electricity, the Treasury Department and the IRS reach a similar conclusion with respect to defining “rural” for
purposes of section 6417 by reference
to §1.1381-1(b)(4). Section 1.1381-1(b)
(4) provides that the term rural area has

Bulletin No. 2024–15

the meaning assigned to [it] in section 5
of the Rural Electrification Act of 1936,
as amended (7 U.S.C. 924). Currently
7 U.S.C. 924(b) provides that the term
‘rural area’ is deemed to mean any area
of the United States not included within
the boundaries of any incorporated or
unincorporated city, village, or borough
having a population in excess of 5,000
inhabitants.
6. Tennessee Valley Authority
Section 6417(d)(1)(A)(iii) states that
the Tennessee Valley Authority is an
applicable entity. The proposed regulations would have adopted this definition.
No commenters addressed this definition,
so these final regulations adopt the definition as proposed.
7. An Agency or Instrumentality of
Certain Applicable Entities
Proposed §1.6417-1(c)(7) would have
clarified that an agency or instrumentality of (1) any U.S. territory or a political
subdivision thereof; (2) any State, the District of Columbia, or political subdivision
thereof; or (3) an Indian tribal government
or a subdivision thereof is also an applicable entity eligible to make an elective payment election. The proposed regulations
requested comments on this approach
to defining applicable entities and on
whether further guidance is necessary.
Commenters addressed both the scope
of the definition and whether it should be
expanded to include Federal agencies and
instrumentalities.
i. Scope of the definition of “agency” and
“instrumentality”
Several commenters asked for additional clarity on the definition of agencies
and instrumentalities, such as whether
joint powers authorities, housing authorities, transit authorities, air authorities,
publicly owned utilities, or tax-exempt
entities in the water sector are included
(and one commenter requested a similar
clarification pertaining to political subdivisions). Various commenters mentioned
application of Rev. Rul. 57-128, 1957-1
C.B. 311, while two of these commenters
asked how the facts and circumstances

Bulletin No. 2024–15

analysis in the revenue ruling would apply
to their specific facts. One commenter
requested a rule stating that whether an
entity is an agency or an instrumentality
is determined based on (or at least influenced by) State or local law. Finally, one
commenter asked that the final regulations allow tribes to determine what is
an agency or instrumentality of an Indian
tribal government.
The determination of whether an entity
is an agency, instrumentality, or a political subdivision (or subdivision in the
case of an Indian tribal government) is
governed by Federal tax law that is outside the scope of these final regulations.
Federal tax determinations of whether an
entity is an agency or instrumentality of
any government typically are analyzed on
a facts and circumstances basis. In determining whether an entity is an agency or
instrumentality for Federal tax purposes,
Federal courts have applied a test similar
to the six-factor test in Rev. Rul. 57-128,
which generally provides guidance on
whether an entity is an instrumentality for
purposes of the exemption from employment taxes under sections 3121(b)(7) and
3306(c)(7). See, e.g., Bernini v. Federal
Reserve Bank of St. Louis, Eighth District,
420 F. Supp. 2d 1021 (E.D. Mo. 2005)
and Rose v. Long Island Railroad Pension
Plan, 828 F.2d 910, 918 (2d Cir. 1987),
cert. denied, 485 U.S. 936 (1988).
Rev. Rul. 57-128 looks to the following
six factors:
(1) Whether the organization is used for a
governmental purpose and performs a
governmental function;
(2) Whether performance of the organization’s function is on behalf of one
or more States or political subdivisions;
(3) Whether there are any private interests involved, or whether the States or
political subdivisions involved have
the powers and interests of an owner;
(4) Whether control and supervision of
the organization is vested in public
authority or authorities;
(5) If express or implied statutory or
other authority is necessary for the
creation and/or use of such an instrumentality, and whether such authority
exists; and
(6) The degree of financial autonomy and
the source of its operating expenses.

801

The Treasury Department and the IRS
are unaware of any different Federal tax
authority or standard that applies to determine whether an entity qualifies as an
instrumentality of an Indian tribal government for Federal tax purposes. The
application of the facts-and-circumstances
analysis in Rev. Rul. 57-128 to any particular entity is outside the scope of this
rulemaking.
With respect to political subdivisions,
Rev. Rul. 78-276, 1978-2 C.B. 256, states
that the term “political subdivision” has
been defined consistently for all Federal tax
purposes as denoting either (1) a division of
a State or local government that is a municipal corporation, or (2) a division of such
State or local government that has been
delegated the right to exercise sovereign
power by the State or local government.
The three generally acknowledged sovereign powers are the power to tax, the power
of eminent domain, and the police power.
See Commissioner v. Estate of Shamberg,
3 T.C. 131 (1944), acq., 1945 C.B. 6, aff’d
144 F.2d 998 (2d Cir. 1944), cert. denied,
323 U.S. 792 (1945). It is not necessary
that all three sovereign powers enumerated
in Shamberg be delegated. See Rev. Rul.
77-164, 1977-1 C.B. 20. However, possession of only an insubstantial amount of any
or all sovereign powers is not sufficient.
In determining whether an entity is a
division of a State or local governmental unit, important considerations are the
extent that the entity is (1) controlled by
the State or local government unit, and
(2) motivated by a wholly public purpose.
See., e.g., Rev. Rul. 78-276, 1978-2 C.B.
256 and Rev. Rul. 83-131, 1983-2 C.B.
184.
Determination of agency, instrumentality, or political subdivision (or subdivision
in the case of an Indian tribal government)
status is based on all the facts and circumstances, and additional guidance on
this subject is beyond the scope of these
final regulations. Generally, however, taxpayers may request a private letter ruling
from the IRS Office of Chief Counsel to
apply applicable law to the organization’s
specific set of facts. See Rev. Proc. 20241, I.R.B. 2024-1 (containing procedures
for letter rulings) and Rev. Proc. 2024-3,
I.R.B. 2024-1 (containing a list of areas of
the Code relating to matters on which the
IRS will not issue letter rulings).

April 8, 2024

One commenter asked that an instrumentality be eligible to make an elective
payment election with respect to its assets
that are operated and maintained by a private partner under a public-private partnership. While it is not clear what kind
of entity the commenter means by “public-private partnership,” if the arrangement is treated as a partnership for Federal
tax purposes, then the partnership would
not be an applicable entity listed in section 6417(d)(1)(A). See part I.B.4 of this
Summary of Comments and Explanation
of Revisions.
ii. Federal agencies and instrumentalities
Several commenters asked that the
final regulations include Federal agencies
and instrumentalities within the definition
of applicable entity. Commenters specifically mentioned the United States Postal
Service, Federal hydropower agencies,
Federal Power Marketing Administrations
(PMAs), the Army Corps of Engineers,
and the Bureau of Reclamation.
One commenter stated that the proposed
regulations did not provide a justification
for why Federal agencies or instrumentalities were not included. This commenter
did, however, note that, absent statutory
authorization to the contrary, agency-collected user fees and charges already must
be deposited in the Treasury General
Fund. Several commenters suggested that
the cross-reference in section 6417(b)
(6) – the provision setting out the list of
applicable credits – to section 168(h)(2)
(A)(i) should be read to provide Federal
agencies and instrumentalities with the
ability to make an elective payment election for at least section 45W credits. Similarly, one commenter asked that PMAs be
able to apply, file, and receive all elective
payments under section 6417 on behalf of
the power generating agencies of regional
Federal power programs. This commenter
stated that PMAs serve as the Federal entities responsible for facilitating the funding
of and ensuring repayment for the regional
power program, both expensed annual
maintenance and capital improvements,
and that it would be beneficial to eliminate unnecessary overlap, confusion, and
administrative burdens to efficiently use
elective payments for applicable projects.
Section 6417(a)(1), however, authorizes

April 8, 2024

an election of an applicable credit only by
an applicable entity under section 6417(d)
(1)(A). Although the Treasury Department and the IRS solicited comments on
the issue, no commenter addressed how
appropriations issues raised by including
Federal agencies and instrumentalities
(beyond the Tennessee Valley Authority,
which is specifically listed in the statute)
or PMAs within the definition of applicable entities could or should be resolved.
The Treasury Department and the IRS
have thus retained the proposed approach
and have not extended the definition of
applicable entities to those additional entities in these final regulations.
8. Electing Taxpayers
Certain taxpayers that are not listed
in section 6417(d)(1)(A) or described
in the preceding paragraphs may nevertheless make an election to be treated
as an applicable entity with respect to
applicable credit property giving rise to
a section 45Q credit, section 45V credit,
or section 45X credit, as described more
fully in part III of this Summary of Comments and Explanation of Revisions. Proposed §1.6417-1(g) would have defined
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).
No commenters addressed this definition;
thus, these final regulations adopt the definition as proposed.
B. Entities related to an applicable entity
or an electing taxpayer
Proposed §1.6417-2(a) would have
provided rules for elective payment elections made by entities related to applicable
entities or electing taxpayers. Commenters addressed several of these proposed
rules.
1. Disregarded Entities
Proposed §1.6417-1(f) defined “disregarded entity” as an entity that is dis-

802

regarded as an entity separate from its
owner for Federal income tax purposes.
Proposed §1.6417-2(a)(1)(ii) would have
provided 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.
Several commenters asked that the
final regulations clarify whether Tribal
corporations formed under section 17 of
the Indian Reorganization Act of 1934
are considered applicable entities. In
response, these final regulations clarify
the definition of disregarded entity under
§1.6417-1(f), consistent with the current
rule in §301.7701-1(a)(3), to expressly
state that the term includes a Tribal corporation incorporated under section 17 of
the Indian Reorganization Act of 1934,
as amended (25 U.S.C. 5124), or under
section 3 of the Oklahoma Indian Welfare
Act, as amended (25 U.S.C. 5203), that is
not recognized as an entity separate from
the tribe for Federal tax purposes, and
therefore is disregarded as an entity separate from its owner for purposes of section
6417.
One commenter asked that the final
regulations treat an applicable entity that is
the sole shareholder of an S corporation as
eligible to make an elective payment election for all applicable credits determined
with respect to applicable property held
by the S corporation, in the same manner
as an applicable entity that is the owner of
a disregarded entity would be eligible to
make an elective payment election for all
applicable credits determined with respect
to applicable credit property held by the
disregarded entity. Another commenter
asked that any entity wholly owned by an
applicable entity be treated as an applicable entity. This commenter anticipated
that many applicable entities will want to
create special purpose entities to own their
tax credit eligible projects, but that the
classification of such entities as an applicable entity can be uncertain. As an example, the commenter suggested that a city
that would normally issue bonds through
an industrial development authority that is
treated as an agency or instrumentality of

Bulletin No. 2024–15

the city may want the industrial development authority to create a wholly-owned
corporation or limited liability company
to be the owner of the project. The commenter stated that it may be difficult to
determine whether such wholly-owned
entity of an industrial development authority would also be treated as an agency or
instrumentality since it is based on a facts
and circumstances analysis. Moreover,
under §301.7701-2(b)(6), the commenter
pointed out that a limited liability company that is wholly owned by an agency
or instrumentality of a State or local governmental unit may be treated as a separate corporation and, therefore, may not
be treated as a disregarded entity. In sum,
the commenter stated that it saw no policy
reason why an entity wholly owned by an
applicable entity should not be treated as
an applicable entity.
The Treasury Department and the IRS
have determined that special rules disregarding an entity’s Federal tax status for
purposes of section 6417(d)(1)(A) are
not appropriate. Section 6417(d)(1)(A) is
specific as to the types of entities afforded
applicable entity status. Any regarded
entity that has a Federal tax status separate from its owner(s) and is not separately
listed in section 6417(d)(1)(A) cannot be
treated as an applicable entity. This is
consistent with the rule for taxable C corporations discussed in part I.B.2 of this
Summary of Comments and Explanation
of Revisions.
2. Taxable C Corporations
The proposed regulations would have
provided that, 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 §1.64171(c)(1) as an applicable entity, 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). These final regulations
adopt §1.6417-1(c)(1) as proposed.

3. Undivided Ownership Interests
Proposed §1.6417-2(a)(1)(iii) would
have provided that, if an applicable entity
is a co-owner in an applicable credit property through an arrangement properly
treated as a tenancy-in-common (TIC) 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 of chapter 1 (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 for the applicable credits determined with respect to such
applicable credit property. Commenters
addressed TICs, valid section 761(a) elections, and joint ownership under section
48E.
i. Tenancies in common and organizations
that have made a valid election under
section 761(a)
Several commenters asked for additional guidance and examples illustrating
how an applicable entity’s undivided ownership share of applicable credit property
is determined in the context of renewable energy projects such as wind and
solar projects, clean hydrogen projects,
and electric vehicle infrastructure. These
comments are beyond the scope of these
final regulations. The ownership share of
a party to a transaction will be determined
based upon the agreement of the parties and other relevant facts and circumstances.
Several commenters stated that the
mechanisms for co-ownership allowed
under the proposed regulations are in common practice today and would allow applicable entities to join with other entities in
developing applicable credit properties
without precluding elective payment election choices by project participants. However, other commenters stated that TICs
and joint operating agreements (JOAs)

that have validly elected out of subchapter
K are not commonly used in the renewable energy marketplace (even by private
entities) and can deprive participants of
limited liability. These commenters stated
that these arrangements may be less familiar to applicable entities as compared to
traditional partnership structures used
between public and private entities for
the development of clean energy projects.
Commenters also opined that applicable
entities may not be sufficiently resourced
to navigate these newer commercial law
relationships and would be disadvantaged
compared to non-applicable entities, who
can avail themselves of partnership structures in the form of limited partnerships
or limited liability companies, which provide most members with limited liability
for State law purposes.
Commenters asked for clear guidance
and clarifications as to how a renewable
energy project could meet the requirements for electing out of subchapter K.
For example, one commenter asked how
§1.761-2(a) could be applicable in the
context of a jointly operated renewable
energy project. Section 1.761-2(a) provides, in relevant part, that an unincorporated organization the members of which
are able to compute their income without
the necessity of computing partnership
taxable income, and that is not an organization classifiable as an association,
may be excluded from the application of
subchapter K if the organization is availed
of (1) for investment purposes only and
not for the active conduct of a business,
or (2) for the joint production, extraction,
or use of property, but not for the purpose
of selling services or property produced
or extracted. Specifically, the commenter
stated that it is unclear how parties jointly
operating a renewable energy project can
do so without conducting a business selling services or property produced (that is,
selling electricity).5
Another commenter asked for clarity
on what a delegation of authority under
§1.761-2(a)(3)(iii) would cover for a JOA
of applicable credit property that produces
electricity. Section 1.761-2(a)(3)(iii) pro-

The commenter also raised Rev. Proc. 2002-22, 2002-1 CB 733 (specifying the conditions under which the IRS will consider a request for a private letter ruling that an undivided fractional
interest in rental real property is not an interest in a business entity), and noted that: “if the parties to a joint venture combine capital or services with the intent of conducting a business or
enterprise and of sharing the profits and losses from the venture, a partnership (or other business entity) is created.”
5

Bulletin No. 2024–15

803

April 8, 2024

vides, in relevant part, that a participant
to a JOA may delegate authority to sell
its share of any property produced or
extracted, but not for a period in excess
of the minimum needs of the industry, and
in no event for more than one year. This
commenter also asked for examples of
compliant JOAs that would allow electricity generated through the joint ownership
of applicable credit property to be sold
pursuant to a power purchase agreement.
Commenters also requested guidance
permitting a single entity or taxpayer
to handle the administrative affairs and
day-to-day management activities of
operating an applicable credit property
on behalf of the other joint owners without impacting the owners’ ability to be
properly excluded from the application of
subchapter K. One commenter stated that
it would be useful to illustrate a range of
JOAs likely to result in exclusion from the
application of subchapter K and suggested
that key elements of such fact patterns
might include: an agreement to share revenues in proportion with the co-owners’
respective ownership interests; an agreement to share revenues out of proportion
with the co-owners’ respective ownership
interests; an agreement in which rights to
dispose of property or take other significant actions are reserved to a subset of the
co-owners; and/or an agreement to receive
debt financing based on the anticipation of
funds expected to result from an elective
payment election in a case in which the
lender is not a co-owner.
A commenter stated that it would also
be helpful to clarify the application of
§1.761-2(a)(3)(iii) to co-ownership ventures in cases in which co-owners generate and sell power as a collective rather
than on their separate accounts, or alternatively if the collective entity sells power
to each of the participating co-owners
and then those co-owners sell power to
third parties on their own accounts but the
collective may sell some other services
or property incidental to the activity for
which the credit is determined. This commenter highlighted that, in California and
some other States, local government agencies often pool resources under a Joint
Powers Authority (JPA). The commenter
asked that guidance clarify the conditions
under which a JPA could be treated as an
organization that has made a valid elec-

April 8, 2024

tion under section 761(a) of the Code to
be excluded from the application of subchapter K, including if the JPA is a separate legal entity and sells power under its
own account.
One commenter stated that existing guidance allowing for clean energy
arrangements to validly elect out of subchapter K, including through the use of
TIC structures, is limited and should be
updated. This commenter stated that a
partnership is defined in the Code and in
the Treasury Regulations under sections
761 and 7701, but the distinction between
an arrangement treated as a partnership for
Federal tax purposes and one that has validly elected out of subchapter K, including a valid TIC, is not well defined in the
energy generation context. The commenter
pointed out that pre-IRA partnership guidance, including guidance allowing for the
use of tax-equity partnership structures,
is widely used as a basis for structuring
projects within the renewable industry
and is well understood. However, existing
guidance for arrangements in the energy
generation context that will not be treated
as a partnership for Federal tax purposes
is limited and outdated. The commenter
urged the Treasury Department and the
IRS to provide clear, updated, and timely
guidance on clean energy arrangements
that would not be treated as partnerships
for Federal tax purposes.
The Treasury Department and the IRS
agree that additional guidance is needed on
joint ownership arrangements of applicable credit property that produce electricity
that can be excluded from the application
of subchapter K. As a result, the Treasury
Department and the IRS have proposed
regulations in the Proposed Rules section
of this edition of the Federal Register
that would add certain exceptions to the
requirements contained in the regulations
under section 761(a) and provide an example. These exceptions generally would
allow any applicable entity described in
section 6417(d)(1)(A) and §1.6417-1(c)
that jointly owns applicable credit property that produces electricity to (1) own
its interests through an entity (other than
an entity required to be treated as a corporation under the Code) and (2) delegate
its authority to an agent to sell its share of
the electricity produced from such applicable credit property for a period of more

804

than 1 year, provided that the delegation
authority to the agent is not for more than
1 year. See Election to Exclude Certain
Unincorporated Organizations Owned by
Applicable Entities from the Application
of Subchapter K, REG-101552-24, in the
Proposed Rules section of this edition of
the Federal Register.
ii. Applying the undivided ownership
interests rule to qualified property
One commenter requested some clarifying edits to address how proposed
§1.6417-2(a)(1)(iii), the rule for undivided
ownership interests, would operate with
respect to a section 48E credit. This commenter noted that proposed §1.6417-1(e)
(12) defines “applicable credit property”
for purposes of section 48E as “a qualified facility described in section 48E(b)
(3);” however, section 48E(b) allows a
section 48E credit to be claimed only with
respect to a qualified investment in a qualified facility. The commenter asked for
clarification on what part of the qualified
investment is owned by such joint tenant,
and suggested adding language to the final
regulations to clarify that an applicable
entity should be able to claim applicable credits with respect to the applicable
credit property in proportion to its share of
qualified property.
The Treasury Department and the IRS
agree with the commenter that a section
48E credit is determined, in part, based on
an applicable entity’s qualified investment
with respect to a qualified facility, but do
not believe that further language is needed
because this concept is already covered in
the language under proposed §1.6417-2(a)
(1)(iii), which provides that an applicable
entity will be treated as owning a separate applicable credit property equal to
its undivided ownership share. An applicable entity’s undivided ownership share
is determined under Federal income tax
ownership principles and is outside the
scope of these final regulations. Thus,
these final regulations do not adopt the
commenter’s suggestion.
4. Partnerships
The proposed regulations would have
provided that partnerships and S corporations are not applicable entities described

Bulletin No. 2024–15

in section 6417(d)(1)(A), but requested
comments on whether any entity described
in section 6417(d)(1)(A)(i) through (vi)
or proposed §1.6417-1(c) could include
an entity organized as a partnership or S
corporation for Federal tax purposes. No
commenter stated that an entity described
in section 6417(d)(1)(A)(i) through (vi) or
proposed §1.6417-1(c) could include an
entity organized as a partnership or S corporation for Federal tax purposes. Therefore, these final regulations adopt the rule
as proposed.
Under the proposed regulations and
these final regulations, a partnership or an
S corporation is eligible to make the elective payment election only with respect to
a section 45V credit, section 45Q credit,
and section 45X credit (assuming all the
other requirements to make the election
with respect to these credits are met). This
rule applies no matter how many of the
partners or shareholders are applicable
entities described in section 6417(d)(1)
(A) and §1.6417-1(c), including if all of
the partners or shareholders are applicable entities described in section 6417(d)
(1)(A) and §1.6417-1(c). However, as the
proposed regulations noted, because section 6418(f)(2) defines “eligible taxpayer”
for purposes of transfer eligibility as “any
taxpayer which is not described in section
6417(d)(1)(A)” (and thus not in proposed
§1.6417-1(c)), such a partnership or S
corporation would be an eligible taxpayer
described in section 6418(f)(2) and may
be eligible to transfer eligible credits.6
A number of commenters requested
that the final regulations allow applicable
entities to make elective payment elections through an entity treated as a partnership for Federal tax purposes, either
if all the partners in the partnership are
applicable entities described in section
6417(d)(1)(A) or if at least one partner
in the partnership is an applicable entity
described in section 6417(d)(1)(A). Commenters advocating for including partnerships composed entirely of applicable
entities as an applicable entity stated that
such a rule would help cover capital needs,
diversify risk, and fill gaps in expertise
between applicable entities. Commenters

advocating for mixed partnerships (that is,
partnerships consisting of both applicable
entities and entities that are not applicable entities) said that not allowing applicable entities to make elective payment
elections for applicable credit property
held through mixed partnerships would
reduce economic incentives to invest in
clean energy, undermining the objectives
of the IRA. Several commenters stated
that applicable entities lack the required
resources to engage in green energy projects themselves and asked that the final
regulations permit a partnership to make
an elective payment election with respect
to the portion of the underlying credits
allocable to an applicable entity. A few
commenters stated that structures eligible
to elect out of subchapter K have numerous requirements and complexities that
limit their usefulness. One commenter
recommended that the final regulations
either (1) allow a partnership to make an
elective payment election on one hundred
percent of the credits so long as the partnership is majority owned by an applicable entity, or (2) allow a partnership with
majority applicable entity ownership to
make an elective payment election on the
portion of credits allocable to such applicable entities.
Based on the language in section
6417(c)(1) that treats a partnership as
the owner of any applicable credit property held directly by the partnership and
requires a partnership to make any elective payment election with respect to such
property, these final regulations retain
the proposed regulations’ entity view of
partnerships under section 6417(c)(1).
Because an entity described in section
6417(d)(1)(A)(i) through (vi) or proposed
§1.6417-1(c) does not include an entity
treated as a partnership for Federal tax
purposes (or as an S corporation), these
final regulations do not adopt commenters’ suggestions and do not allow entities
treated as partnerships for Federal tax purposes (or S corporations) to make elective
payment elections, except with respect
to a section 45V credit, section 45Q
credit, and section 45X credit. However,
these restrictions do not apply to entities,

whether comprised of only applicable
entities or comprised of a mix of applicable and non-applicable entities, that have
made a valid election out of subchapter K
under section 761(a), including through
the exception for certain joint ownership
arrangements of applicable credit property identified in the proposed regulations
under section 761 described in part I.B.3.i
of this Summary of Comments and Explanation of Revisions.
A few commenters asked that taxable
entities be permitted to serve as an administrative member or manager of a State law
entity to which an applicable entity owns
all of the other interests without creating
a partnership for Federal tax purposes,
provided that such taxable entities do not
receive distributive shares of partnership
items or partnership distributions. These
final regulations do not attempt to establish any additional criteria by which a taxpayer can provide administrative or managerial services for an applicable entity
without creating a partnership between the
taxpayers for Federal tax purposes. However, as previously described, the Treasury
Department and the IRS are simultaneously issuing proposed regulations under
section 761 in the Proposed Rules section
of this edition of the Federal Register that
provide additional guidance for certain
renewable energy arrangements that can
validly elect out of subchapter K.
Multiple commenters asked that the
final regulations provide further clarity
on Tribal entities and allow co-ownership
of projects. A few commenters asked that
the final regulations allow Tribal Energy
Development Organizations (TEDOs), or
other wholly owned Tribal enterprises,
to be applicable entities regardless of
how they are chartered. Some commenters asked that the final regulations allow
tribes to form special purpose vehicles
under an LLC structure to jointly own
renewable energy projects and employ
the distributive share rules for allocating the “applicable credit” to each LLC
member, regardless of the tax status of
that member. Commenters also asked that
inter-governmental partnerships, whether
formed under State law such as JPAs, or

The Treasury Department and the IRS acknowledge that section 6418 does not contain a provision parallel to section 6417(d)(2) providing that section 50(b)(3) and (4)(A)(i) do not apply
to limit the determination of a credit in section 6417. Thus, section 50(b)(3) and (4)(A)(i) may limit eligible investment tax credits determined with respect to a partnership or S corporation
with applicable entity partners or shareholders for purposes of section 6418.
6

Bulletin No. 2024–15

805

April 8, 2024

formed under Tribal law as inter-tribal
consortiums, should be eligible to make
an elective payment election.
While it is possible that in certain cases
a Tribal law entity (including a TEDO)
and/or inter-governmental partnership
could be an applicable entity, such a determination is outside the scope of these
final regulations. However, the Treasury
Department and the IRS are actively working on guidance regarding the Federal tax
status of Tribal law entities organized and
controlled by tribes. The Treasury Department and the IRS will not release final
guidance in advance of additional Tribal
consultation.
Commenters also stated that, if the
Treasury Department and the IRS allow
for section 6417 elections to be made on
behalf of applicable entity partners, the
final regulations should make conforming
clarifications, including clarifying that the
“applicable credit” that is reduced to zero
under section 6417(e) is only the portion
of the credit for which a section 6417 election has been made and clarifying the distributive share rules. Because these final
regulations do not allow section 6417
elections to be made on behalf of applicable entity partners, these final regulations
do not adopt the suggested conforming
changes.
5. Consolidated Groups
Proposed §1.6417-2(a)(1)(v) would
have provided that, for members 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. Proposed §1.6417-2(a)(2)
(vi) would have provided the same rule
with respect to electing taxpayers. See
§1.1502-77 (providing rules regarding the
status of the common parent as agent for
its members). The proposed regulations
would also have provided that a member of a consolidated group is required to
complete pre-filing registration as a condition of, and prior to, making an elective
payment election.
The preamble to the proposed regulations stated that an ANC may be the
common parent of a consolidated group

April 8, 2024

of corporations (ANC-parented group)
and noted that some stakeholders had
inquired whether non-ANC members of
an ANC-parented group may separately
make an elective payment election with
respect to a section 45V credit, section
45Q credit, or section 45X credit determined with respect to such member. In
response, the preamble to the proposed
regulations stated 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 nonANC 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 preamble to the proposed regulations requested comments (1) regarding
the definition in proposed §1.6417-1(c)
(4) and whether additional guidance is
necessary regarding consolidated groups
with ANC common parents; (2) 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; and (3) regarding the application
of section 6417 to consolidated groups
with electing taxpayers (for example,
whether special rules are necessary for
consolidated groups to apply the “denial
of double benefit” rule under proposed
§1.6417-2(e)(2)).
No commenter addressed these issues
relating to ANCs. However, the Treasury
Department and the IRS have determined
that the text of proposed §1.6417-2(a)
(1)(v), which referred to consolidated
groups “of which an Alaska Native Corporation is the common parent,” was too
limiting and should apply to any consolidated group with an applicable entity
parent. Therefore, these final regula-

806

tions expand the definition by removing
the specific reference to Alaska Native
Corporations in §1.6417-2(a)(1)(v) and
broaden the rule to apply to any consolidated group of which an applicable entity
is the common parent.
A few commenters requested confirmation that the “entity-specific” rules of
section 6417 apply to an elective payment
election made by a partnership that has as
its only partners two or more members of
the same consolidated group and suggested
an example confirming the treatment. The
commenters wanted confirmation that the
election would be made by the partnership, as required by section 6417(c)(1)
and proposed §1.6417-4(a), rather than by
the partnership’s members, as provided in
proposed §1.6417-2(a)(2)(vi). The Treasury Department and the IRS agree that
any entity treated as a partnership for Federal tax purposes, and not any of its partners (regardless of the identity or Federal
tax status of the partners), would make an
elective payment election with respect to
section 45Q credits, section 45V credits,
or section 45X credits pursuant to section
6417(c)(1) and §1.6417-4(a), but disagree
that an example illustrating this point is
needed.
6. Pooled Investment Vehicles
The proposed regulations did not provide a special rule for employee plans that
are subject to the Employee Retirement
Income Security Act of 1974 (ERISA)
if they choose to invest through pooled
investment vehicles, whether the vehicles
are organized as partnerships or otherwise. One commenter stated that ERISA
plans typically make investments through
pooled investment vehicles, which often
are organized as limited partnerships or
LLCs, and take minority interests in them
in order to avoid subjecting the vehicles to
fiduciary, prohibited transaction, and other
rules under ERISA’s “plan asset’’ rules.
The commenter believed that, if pooled
investment vehicles are not considered
to be applicable entities, then employee
plans generally cannot benefit from elective payment elections under section 6417
with respect to some or all of the applicable credits listed in section 6417(b). The
commenter suggested that ERISA plan
fiduciaries might choose not to invest in

Bulletin No. 2024–15

applicable credit activities at all. The commenter requested that the final regulations
provide a mechanism by which ERISA
plan investors indirectly investing through
pooled investment vehicles can make an
elective payment election.
The Treasury Department and the IRS
understand the commenter’s concern that
ERISA plans may be discouraged from
investing in certain entities engaged in
applicable credit activities under the
proposed regulations. Other applicable
entities have similar concerns that investments in certain entities engaged in applicable credit activities under the proposed
regulations will not be investments in
applicable entities. While there are rules
outside of these final regulations that may
impact how ERISA plans make investments, there is no indication in section
6417 that ERISA plans can or should be
subject to rules different than those that
apply to other applicable entities. Thus,
these final regulations do not provide a
special rule for ERISA plans investing
in pooled investment vehicles that would
allow ERISA plans to be eligible to make
an elective payment election if investing
through a partnership structure.
II. Rules for Making Elective Payment
Elections
A. In general
Proposed §1.6417-2 would have provided general rules for an applicable entity
or electing taxpayer to make an elective
payment election under section 6417 with
respect to any applicable credit determined with respect to such entity. Commenters addressed many aspects of these
proposed rules, which are discussed in this
part II of the Summary of Comments and
Explanation of Revisions. These final regulations adopt the rules as proposed, with
the modifications described in this part II.
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 §1.64172(b) would have provided the particular requirements for properly and timely
making the election.

Bulletin No. 2024–15

1. Return Requirements
Proposed §1.6417-2(b)(1)(i) would
have provided that an applicable entity
makes an elective payment election on the
applicable entity’s or electing taxpayer’s
annual tax return, as defined in proposed
§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.
To avoid any confusion about how
the elective payment election should
be made, proposed §1.6417-1(b) would
have defined “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, Exempt Organization
Business Income Tax Return (and proxy
tax under section 6033(e)), 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 a State; the District of Columbia; or local or Indian tribal
governments), the Form 990-T; and (3)
for taxpayers filing a return for a taxable
year of less than 12 months (short year),
the short year tax return. These final regulations make minor, nonsubstantive edits
to the definition in the proposed regulations to avoid using the phrase annual tax
return in defining the term.
Several commenters requested that the
IRS use a new or different form than Form
990-T or revise certain forms (including
Forms 990, 990-T, 1120, 3468, 3800,
8038-CP, and 8911). Several commenters
also requested a detailed list of the documents required to complete the filing
process, information on how to complete
required forms, or reduced information
requirements for filers who had previously

807

not been required to file any returns with
the IRS.
The Treasury Department and the IRS
recognize that some taxpayers may not
have experience or a historical filing obligation and will consider providing simplified instructions or the need for a new form
in future years. The Treasury Department
and IRS are committed to developing educational and outreach tools to assist tribes,
government entities, their instrumentalities, and exempt organizations to complete the forms required solely to make
an elective payment election. It is outside
of the scope of these final regulations to
address comments related to individual
forms or the kind of documentation that
may be required to complete those forms.
Thus, these final regulations adopt the
rules as proposed.
Several commenters requested confirmation that, for those taxpayers that normally file the Form 1120 with the IRS,
the Form 1120 can be used to make the
elective payment election. The Treasury
Department and the IRS confirm that this
is the intent of the language in §1.64171(b)(1), which states “[f]or any taxpayer
normally required to file an annual tax
return with the IRS, such annual return,”
and have added the Form 1120, as well as
other examples of annual tax forms, to the
parenthetical.
Other commenters requested that the
elective payment election could be made
on the Form 1120-W. As the Form 1120-W
is not an annual income tax return, these
final regulations do not adopt that suggestion.
2. Original Return Requirements
Proposed §1.6417-2(b)(1)(ii) would
have provided that an elective payment
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. The proposed regulations stated
that no elective payment election may be
made “or revised” on an amended return
or by filing an administrative adjustment
request (AAR) under section 6227 of the
Code. The proposed regulations also did
not provide for relief under §301.9100-1

April 8, 2024

through 301.9100-3 (9100 relief) for
an elective payment election that is not
timely filed.
Multiple commenters asked that an
elective payment election be permitted on
an amended return or AAR and/or that a
taxpayer be permitted an extension of time
under the 9100 relief procedures to make
a late election. Commenters stated that not
allowing a late election is an unreasonable
result for new market entrants and creates significant barriers for entities with
limited resources. Some commenters recommended that applicable entities should
be allowed to make the elective payment
election on late returns and also be able to
claim a six-month automatic extension of
time to file the election under §301.91002(b). Commenters requested that the final
regulations provide some form of relief for
taxpayers that acted in good faith and made
a reasonable effort in complying, particularly for new filers who may not have had a
prior filing obligation. Commenters further
suggested that providing additional time to
make an election would increase market
participation and promote equity.
In response to these comments, these
final regulations remove the words “or
revised” in §1.6417-2(b)(1)(ii) and provide “[n]o elective payment election may
be made for the first time on an amended
return, withdrawn on an amended return,
or made or withdrawn by filing an administrative adjustment request under section
6227, although a numerical error with
respect to a properly claimed elective
payment election may be corrected on an
amended return or by filing an administrative adjustment request under section
6227 if necessary.” This clarification is
intended to address situations in which
a taxpayer intended to make an elective
payment election but made a reporting
error with respect to an element of a valid
election (for example, miscalculating the
amount of the credit on the original return
or making a typographical error in the process of inputting a registration number),
and to allow the taxpayer to correct any
errors that would result in a disallowance
of the election or to correct an excessive
payment before an excessive payment
determination is made by the IRS. Consistently, it is appropriate to allow taxpayers to correct errors that would result
in a larger payment than indicated on

April 8, 2024

the original return as long as such larger
amount is accurate. This provision cannot be used to revoke an election or to
make an election for the first time on an
amended return. In addition, the taxpayer’s original return, which must be signed
under penalties of perjury, must contain
all of the information, including a registration number, required by these final
regulations. To properly correct an error
on an amended return or AAR, a taxpayer
must have made an error in the information included on the original return such
that there is a substantive item to correct; a
taxpayer cannot correct a blank item or an
item that is described as being “available
upon request.”
These final regulations also modify the
proposed regulations to permit an extension of time under §301.9100-2(b) to
allow for an automatic six-month extension of time from the due date of the
return (excluding extensions) to make the
election prescribed in section 6417(d)(3),
which provides relief for applicable entities or electing taxpayers who have a filing
obligation and file by the due date of the
return. The elective payment election is a
statutory election because its due date is
prescribed by statute. As such, the section
9100 relief procedures apply only insofar
as the late election is being filed pursuant
to §301.9100-2(b), which requires that
the taxpayer timely filed its return for the
year the election should have been made.
Relief under this provision applies only to
taxpayers that have not received an extension of time to file a return after the original due date. Taxpayers eligible for this
relief must take corrective action under
§301.9100-2(c) within the six-month
extension period and follow the procedural requirements of §301.9100-2(d).
A few commenters requested clarification on superseding returns. One
commenter stated that the proposed regulations appeared ambiguous regarding
whether a return filed after the original
due date, but within the automatic extension period, is considered a superseding
return. This commenter recommended
clarifying that this would be considered a
superseding return.
Neither the Code nor regulations define
a superseding return, but administrative
IRS guidance provides that a superseding return is a return filed subsequent to

808

the originally-filed return but before the
due date for filing the return (including
extensions). For example, if an applicable entity subject to an automatic 6-month
extension files an original return on the
due date (excluding extensions) and then
files a subsequent return within the automatic extension period, the subsequent
return would generally be considered a
superseding return. Unlike a superseding
return, an amended return is a return filed
after the taxpayer filed an original return
and after the due date for filing the return
(including extensions).
One commenter stated that the reference to a superseding return seems to be
an acknowledgment that some taxpayers
will use a provisional tax return filed on
the due date (before extensions) to hasten the election process. This commenter
asked whether, if a taxpayer files a provisional return on March 15, 2024, and
files a superseding return on September
15, 2024, the taxpayer would be treated
as making payment against tax under section 6417(d)(4) on March 15, 2024. The
Treasury Department and the IRS note
that the designation “provisional” return
has no basis in the Code or regulations
and accordingly, such returns are not
treated differently by the IRS upon filing.
Taxpayers are reminded that a tax return
is signed under penalties of perjury that
the return is true, correct, and complete.
If an original return is filed on March 15,
2024, and contains a valid elective payment election, the taxpayer is treated as
making a payment against tax on that day.
A superseding return could increase or
reduce the amount of the net elective payment election. If the amount is increased,
the additional elective payment is treated
as paid on the date the superseding return
was filed. Taxpayers should be aware that
filing a superseding return could result in
a delay in processing the additional elective payment amount. If the net elective
payment amount is reduced because of the
superseding return, the taxpayer could be
subject to interest and, if the taxpayer fails
to pay the difference with the superseding
return, penalties.
3. Pre-filing Registration Requirements
Proposed §1.6417-2(b)(2) would have
specified that pre-filing registration (as is

Bulletin No. 2024–15

required under §1.6417-5T and 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). The proposed regulations stated that 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 receives a valid registration number for the applicable credit property and provides the registration number
for each applicable credit property on its
Form 3800 (or its successor) attached to
the tax return, in accordance with guidance. These final regulations clarify in
§1.6417-2(b)(2) that a valid registration
number must also be included on any
required completed source credit form(s)
with respect to the applicable credit property. Additional information about the
pre-filing registration process is described
in part V of this Summary of Comments
and Explanation of Revisions.
4. Due Date Requirements
Section 6417(d)(3)(A)(i) provides that
any election under section 6417(a) must
be made not later than (1) 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 6033(a), such date as is determined appropriate by the Secretary, or (2)
in any other case, the due date (including
extensions of time) for the return of tax 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 (February 13, 2023). Section 6417 is
applicable to taxable years beginning after
December 31, 2022.
Proposed §1.6417-2(b)(3) would have
implemented this provision as follows.
In the case of any taxpayer for which no
income tax return is required under section 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) of the Code,
that date is the 15th day of the fifth month

Bulletin No. 2024–15

after the taxable year determined by section 441 of the Code. Subject to the issuance of guidance that specifies the manner
in which an entity for which no Federal
income tax return is required under section
6011 or 6033(a) of the Code could request
an extension of time to file, the proposed
regulations would have provided that an
automatic paperless six-month 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 proposed regulations would have provided that 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 filing Form 1040 or for corporations filing
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 the individual
filed an extension, on or before the 15th
day of October following the close of the
calendar year.
The proposed regulations would have
provided that, 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.
Commenters did not address the second or third provisions, and they are
adopted without change. However, with
respect to the first provision, these final
regulations simplify the provision in proposed §1.6417-2(b)(3), which stated that
an elective payment elective must be
made no later than, “[i]n the case of any
taxpayer for which no Federal income
tax return is required under section 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,”

809

to simply provide that an elective payment election must be made no later than,
“[i]n the case of any taxpayer for which
no Federal income tax return is required
under sections 6011 or no Federal return
is required under 6033(a) of the Code . . . ,
the 15th day of the fifth month after the
taxable year.”
Commenters asked that the final regulations clarify the determination of taxable year for an entity that does not have
a filing requirement under section 6011 or
6033(a), stating that the reference to “the
taxable year determined by section 441 of
the Code” is confusing and that the Code
provides latitude to taxpayers in determining their applicable taxable year (including calendar year, fiscal year, and short
years as applicable). Commenters gave
the example of an applicable entity that
is filing Form 990-T for the sole reason
of making an elective payment election
for an applicable credit. If the applicable
entity uses a fiscal year beginning July 1
and ending June 30, placed in service a
project for which an applicable credit was
determined during the first six months
of 2023, and used its fiscal year for purposes of establishing a taxable year, then
the applicable entity would be ineligible
to make an elective payment election for
such project because the fiscal year during
which the project was placed in service
began on July 1, 2022, which is a fiscal
year beginning before December 31,
2022. Commenters noted that similarly
situated taxpayers who file their returns on
a calendar year basis would be eligible to
make an elective payment election. Commenters requested that they be allowed
to choose a calendar taxable year for
purposes of making an elective payment
election, or, alternatively, that they be permitted to file using a short year beginning
January 1, 2023, and ending on the date of
their next fiscal year.
These final regulations delete the reference to section 441 and clarify that, for
purposes of section 6417, an applicable
entity that is not required to file a Federal income tax return pursuant to section
6011 or Federal return pursuant to section
6033(a) (such as a State; the District of
Columbia; an Indian tribal government;
any U.S. territory; a political subdivision of a State, the District of Columbia,
or a U.S. territory, or a subdivision of an

April 8, 2024

Indian tribal government; certain agencies
or instrumentalities of a State, the District
of Columbia, an Indian tribal government,
or a U.S. territory; or a taxpayer excluded
from filing pursuant to section 6033(a)
(3)), but is filing solely to make an elective
payment election, may choose whether to
file its first Form 990-T (and thus adopt
a taxable year for purposes of section
6417) based upon a calendar or fiscal
year, provided that such entity maintains
adequate books and records, including a
reconciliation of any difference between
its regular books of account and its chosen taxable year, to support making an
elective payment election on the basis of
its chosen taxable year. This should allow
an applicable entity that is not required to
file a Federal income tax return pursuant
to section 6011 or Federal return pursuant
to section 6033, but has placed in service
an applicable credit property in 2023, to
file Form 990-T based on a calendar year
and make an elective payment election
with respect to the applicable credit property regardless of when the property was
placed in service during 2023.
These final regulations continue to
provide, consistent with the proposed regulations, that, subject to issuance of guidance that specifies the manner in which
an entity for which no Federal income
tax return is required under section 6011
or no Federal return is required under
section 6033(a) could request an extension of time to file and make the elective
payment election, an automatic paperless
six-month extension from the 15th day
of the fifth month after the taxable year is
deemed to be allowed.
The Treasury Department and the IRS
note that a taxpayer that has filed a Federal
income tax return under section 6011 or a
Federal return under section 6033(a) with
the IRS must continue to use that taxable
year unless the taxpayer requests a change
of annual accounting period pursuant to
section 442 of the Code.
5. Irrevocability Requirement
Proposed §1.6417-2(b)(4) would have
provided 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.

April 8, 2024

Under section 6417, the election period
applies for a period of years with respect
to certain applicable credits. Specifically,
for a 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 a section 45Q credit, the election applies to the
12-year period beginning on the date the
equipment was originally placed in service. For a 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), (d)
(3)(C), and (d)(3)(D), and would have
been provided in proposed §1.6417-3 (as
described in part III of this Explanation of
Provisions).
No commenters addressed the irrevocability rule, and these final regulations
adopt the rule without change.

making an election is treated as making
a payment against the income tax “equal
to the amount of” the applicable credit,
which does not provide the flexibility to
make an election equal to a portion of the
applicable credit. Thus, these final regulations adopt the proposed regulations without change.

6. No Partial Elections

In accordance with section 6417(d)
(2), proposed §1.6417-2(c)(1) would have
provided 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) would have
elaborated on the effect of the “trade or
business” rule in section 6417(d)(2) and
proposed §1.6417-2(c)(1)(ii). Proposed
§1.6417-2(c)(2)(i) would have allowed
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 amorti-

Proposed §1.6417-2(b)(5) would have
provided 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 amount of applicable credit(s)
determined with respect to the applicable
entity or electing taxpayer for a taxable
year. As a result, the proposed regulations
would require that an applicable entity
make an elective payment election for the
entire amount of the credit determined
with respect to each applicable credit
property.
A few commenters advocated for
allowing partial elections, stating that this
flexibility would be helpful. The Treasury
Department and the IRS note that the statute and the proposed regulations already
provide considerable flexibility because
taxpayers can register none, some, or
all of their applicable credit properties.
Further, as opposed to section 6418(a),
which allows an eligible taxpayer to elect
to transfer all (or any portion specified in
the election) of an eligible credit, section
6417(a) provides that an applicable entity

810

C. Determination of applicable credit
Proposed §1.6417-2(c) would have
provided three rules relating to the determination of any applicable credit: (1) special rules for tax-exempt organizations
and government entities; (2) a special
rule for investment-related credit property acquired with income that is exempt
from taxation under subtitle A; and (3) a
rule that credits must be determined with
respect to the applicable entity or electing
taxpayer.
1. Special Rules for Tax-exempt
Organizations and Government Entities

Bulletin No. 2024–15

zation in lieu of depreciation) is allowable
(such as in sections 48, 48C, and 48E). No
commenter addressed this rule, but these
final regulations made nonsubstantive
edits to this proposed version.
Proposed §1.6417-2(c)(2)(ii) would
have allowed the 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. One
commenter asked whether applicable entities can use section 266 of the Code to capitalize carrying charges. In response, these
final regulations add section 266 to the list
of capitalization and accelerated depreciation rules that applicable entities can use in
§1.6417-2(c)(2)(ii).
Proposed §1.6417-2(c)(2)(iii) would
have made limitations on the use of credits
generally applicable to persons engaged in
the conduct of a trade or business applicable to the making of an elective payment
election under section 6417, such as the
at-risk rules of section 49 of the Code in
the context of investment credits determined under sections 48, 48C, and 48E,
and the passive activity rules under section 469 of the Code that apply to all applicable credits. For section 49 to apply to
investment tax credits for which an elective payment election is made, the property must be placed in service by an applicable entity or electing taxpayer described
in section 465(a)(1) of the Code (for
example, an individual or a C corporation
with respect to which the stock ownership
requirements of section 542(a)(2) of the
Code are met). For section 469 to apply
to applicable credits for which an elective
payment election is made, 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 limitations
apply with respect to the determination of
applicable credits for purposes under section 6417.
The proposed regulations requested
comments on whether any additional clarification is needed regarding the application of sections 49 and 469 to applicable
entities or electing taxpayers determining

Bulletin No. 2024–15

the amount of an applicable credit. Two
commenters asked that the final regulations clarify that section 49 does not apply
to limit credits available to tribes or Tribal
entities that use direct loan or Federal
loan guarantee programs. The Treasury
Department and the IRS note that section
49 generally applies only to individuals and C corporations meetin

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Ae71b4e4191fd59fd. Public record. Not legal advice.