After a long wait the IRS has finally released the portal that sellers of credits need to complete to register their tax credits for sale. The IRS issued a 67 page guide to assist taxpayers with completing the pre-filing registration. Here are some key takeaways:
- A tax credit seller needs to get a registration number with respect to any credit that it plans to sell.
- Both the seller and the buyer of the tax credit will need to include that number on their tax returns.
- The pre-filing application cannot be submitted until both:
- the beginning of the taxable year in which the credit is earned; and
- the property that will generate the credit has been placed in service.
- The IRS recommends that tax credit sellers submit the pre-filing registration at least 120 days before they plan to make the election on their tax return.
- The IRS indicated that it believes this will allow sufficient time for them to review the registration and for the applicant to respond if the IRS requests additional information.
Atheva Insight: For many taxpayers that plan to transfer (or have transferred) their 2023 tax credits, and that don’t plan to extend the time for filing their tax return, they are already within the 120 period before signing their returns.
Atheva Insight: Although not specifically noted by the IRS, buyers of credits will need the registration number for their returns so sellers will need to have a registration number ready before the filing date of the buyer's returns as well.
Atheva Recommendation: We recommend that sellers submit their pre-filing application as soon as possible so that they can receive their registration number sooner.
- The IRS intends to review and process registration submissions through the portal in the order it receives them.
- An applicant cannot request expedited handling.
- An applicant cannot make a registration for a property if it has an application pending for another property.
Atheva Insight: This is an important factor and applicants should consider what other credits that might arise during the year after the submission and whether they want to wait to include those other credits.
- The IRS indicated that they will work to issue a registration number even when the registration submission is made close in time before the registrant’s filing deadline.
- However, the guide noted that the applicant should anticipate that the tax return on which the election is may undergo heightened scrutiny to mitigate the risk of fraud and duplication that pre-filing registration is intended to address before a payment is issued.
Atheva Insight: While there does seem that there may be an accelerated process as filing deadlines approach, there is no guarantee that this will take place. Further, this may lead to a heightened review of the entire tax return which is probably something all taxpayers would choose to avoid.
How Atheva Can Help with the Registration Process
Atheva is already helping its sellers with guidance and tools to assist them with the application process. If you want to learn more about how Atheva can help you list and sell your tax credits (and with the IRS pre-registration process), please contact us.
