Initial Observations Regarding the New Pre-Filing Registration Tool from the IRS

By: Michael Cannon, [email protected]

The IRS has unveiled its new pre-filing registration portal (available here). As discussed in greater detail in our client alerts about the transferability of energy tax credits (available here) and the direct payment rules related to these credits (available here), any potential transferor of credits, or taxpayer intending to seek a direct payment in respect of credits, must complete a pre-filing registration process and obtain a registration number for each eligible credit property. (In the absence of this registration number, no tax credit transfer or direct payment with respect to an energy credit is permitted.)

In connection with rolling out the new pre-filing registration portal, the IRS provided detailed (64 pages, plus appendices) instructions (available here). Based on review of those instructions, below are ten important observations:

1.?????? Lengthy Waiting Period Required – The instructions suggest that the IRS review period for submissions may be lengthy, recommending that taxpayers make sure to budget 120 days for receipt of a registration number after submission, assuming no comments are provided. Many taxpayers had hoped that the process would be much quicker than this, so if it ends up taking 120 days to obtain a number, this will be disappointing to many taxpayers.

2.?????? Get in Line Quickly – The instructions note that applications for registration numbers will be processed in the order that the applications are received. Taxpayers seeking to transfer credits will want to move as quickly as possible to get in line.

3.?????? Don’t Lose Your Spot in Line – If the IRS makes a follow-up request to an applicant before providing a registration number, but the applicant fails to respond that request in a timely fashion, the applicant will be pushed to the back of the line.? Applicants will want to put in place processes to make sure they are carefully monitoring the IRS portal after submitting a request for a registration number.

4.?????? One Registration Package Per Year – The portal allows only one registration package per taxable year per applicant. So, for example, even if an applicant has multiple facilities for which registration numbers are needed, that applicant can submit only one registration package. Once a package is submitted, no adjustments are allowed until the IRS has responded to the package. (An amended submission can be made, but only after the IRS has provided its response.)

5.?????? Advisors May Not be Welcome – The portal requires the person applying for a registration for an entity transferor to certify that the person is “a corporate officer, partner, guardian, executor, receiver, administrator, trustee, or individual other than the taxpayer” and that they “have the legal authority to execute [the] authorization on behalf of the taxpayer.” The instructions go on to state that information submitted will be compared to information in IRS records, and that errors in attempting to authorize a business will lock the person out for 24 hours. Based on these statements, it is not clear whether an advisor can complete the registration on behalf of a taxpayer. It would be useful for the IRS to clarify whether representatives may assist in obtaining registration numbers.

6.?????? Know Which Employer Identification Number (“EIN”) to Use – The instructions for the portal include detailed directions regarding EINs, including rules related to the EIN to use in the case of a disregarded entity (for disregarded entities owned by trusts/individuals, the disregarded entity’s name and EIN is used, and for disregarded entities owned by other taxpayers, the EIN and name of the regarded owner is to be used), and rules that apply to consolidated groups (the EIN for the consolidated parent must be utilized).

7.?????? Collect Necessary Information and Documents in Advance - Applicants are required to submit substantial detail, both about themselves and about the projects for which registration numbers are being sought. In addition, for many of the credits, various documents (or document summaries) are required. While this detail (e.g., longitude and latitude coordinates that pinpoint a project location precisely (within inches)) and these documents will undoubtedly help guard against fraud, it will be important for applicants to collect all needed materials in order to make sure the submission process goes smoothly. ??

8.?????? Bulk Submissions – The online application portal allows applicants to submit requests for registration numbers related to multiple facilities in bulk (using an Excel spreadsheet). This will be particularly useful for applicants that have many projects with many facilities (e.g., a wind farm), given that a separate registration number is required for each facility. ?As mentioned, however, each taxpayer is not allowed to have more than one application process outstanding at a particular time.

9.?????? In Service Dates Are Key. No pre-filing registration is allowed for a facility before the in-service date of the facility. For tax credit transferees that demand that a registration number be obtained before the payment for tax credits, this feature may delay transactions.

10.?? Watch Out for Traps – The pre-filing registration process prioritizes fraud prevention over flexibility. Thus, it is important to remember that a registration number is specific to a type of election (i.e., transferability vs. direct pay), type of credit, facility/property, tax period for the election, and the owner of the facility/property. If any of these changes, a new registration number will be required. ?For corporations, if a corporation has obtained a registration number and subsequently joins a consolidated group, a new registration number will be needed.

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Attorney Advertising: These observations were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials.? The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel.?