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What happened?
Congress preserved the pathways for exempt organizations (EOs) to access and monetize clean energy tax credits across a broad set of technologies and structures. Changes made by the One Big Beautiful Bill Act (OBBBA) place greater emphasis on eligibility and documentation diligence requirements, including restrictions related to prohibited foreign entities (PFEs), without disrupting the direct pay (elective payment) option that allows EOs to treat applicable credits as refundable overpayments when properly elected on timely filed returns.
Why is it important?
EOs remain eligible to fully participate in clean energy incentives, an opportunity previously limited to entities subject to federal income tax. The direct pay election allows an EO that complies with time-sensitive IRS pre-filing registration requirements and makes a valid election on a timely-filed return to treat clean energy credits as a refundable overpayment, effectively converting these credits into cash.
Actions to consider
For EOs with a September 30 year end that plan to file their Form 990-T by the extended due date of August 17, 2026, a pre-filing registration generally should be submitted for each credit-eligible property by April 17, 2026, to allow sufficient time for the IRS to complete its review and issue a registration number within a 120-day timeframe.
Observation: EOs may be able to comply with IRS pre-filing registration requirements, even if the submission occurs less than 120 days before the extended due date of their Form 990-T, but timing risk increases substantially. Since a registration number is a statutory condition to a valid direct pay election, late submission can jeopardize eligibility if the number is not issued before filing.
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