Internal Revenue Code Section 6417 allows certain tax-exempt entities to make an elective payment election for tax credits, treating the amount of the credit as a payment against federal income taxes. This provision enables those entities to receive tax credits as direct cash payments instead of nonrefundable tax credits.
Entities must file Form 990-T, Exempt Organization Business Income Tax Return, to make the elective payment election. The IRS recently issued revenue procedure 2024-39 which provides certain tax-exempt organizations an automatic six-month extension to file Form 990-T to make an elective payment election. The extension applies to entities that missed the timely filing of Form 8868, the Application for Extension of Time to File an Exempt Organization Return, for purposes of making an elective payment election. This extension applies to taxable years ending between December 31, 2023, and November 30, 2024. If for any reason an entity receives a notice (CP131) that their elective payment election is considered to be ineffective due to late filing, the entity can seek assistance by contacting the IRS.
Additionally, the procedure temporarily waives the requirement to file Form 990-T electronically, allowing applicable entities to submit a paper-filed Form 990-T instead. This relief is aimed at helping entities that were unfamiliar with the filing process or faced issues with electronic filing. The Treasury Department and the IRS recognize that many entities intended to timely and accurately make an elective payment election on Form 990-T electronically and were not able to accomplish it. This is because there are numerous organizations that are unfamiliar with the filing process and that might have encountered issues with electronic filing. Although paper-filed Forms 990-T are allowed at this time, the IRS still strongly urges organizations to utilize electronic filing, when possible, for efficient processing. If an entity is filing on paper, the form must be sent to the IRS with a specific notation at the top indicating that it is filed under revenue procedure 2024-39.
Revenue Procedure 2024-39 was put in place in order to help applicable entities better manage the challenges associated with the filing requirements related to Form 990-T and the elective payment election. This procedure guarantees that entities can benefit from the elective payment election without facing penalties for late submissions.
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