As covered in our prior alerts, the Inflation Reduction Act[1] (IRA) modified and reinstated existing renewable energy credits, enacted new renewable energy credits, and enacted under § 6417 an election that allows applicable taxpayers to treat the amount of certain tax credits as a payment of U.S. federal income tax. This election, known as a direct pay election, allows certain non-taxable entities (as defined below) that ordinarily would not benefit from renewable energy credits to claim an equivalent amount of tax credits in the form of direct payments from the Internal Revenue Service (IRS), while certain taxable entities (i.e., taxpayers that qualify for renewable credits under § 45Q, § 45V, § 45X) will have another way to monetize certain renewable credits.
