In Revenue Procedure. 2024-39, the IRS granted applicable tax-exempt organizations making an elective payment election for certain energy credits under IRC Section 6417(d)(3) an automatic six-month extension to file Form 990-T, Exempt Organization Business Income Tax Return.

The automatic extension is available even if the tax-exempt organization did not timely file Form 8868, Application for Extension of Time to File an Exempt Organization Return. The automatic extension is available to tax-exempt organizations that are not otherwise required to file Form 990-T or have reportable unrelated business income tax (UBTI).

The IRS said it was providing the automatic extension relief because many applicable entities were unfamiliar with the filing and extension process for Form 990-T and could not make a timely electronic election because of limitations in the capabilities of third-party return preparers. Revenue Procedure 2024-39 also provides guidance if a tax-exempt organization receives a notice of late filing despite the automatic six-month extension.

The revenue procedure also temporarily waives the requirement to make an elective payment election on an electronically filed Form 990-T, allowing applicable entities that would otherwise be required to electronically file the Form 990-T to make an elective payment election on a paper-filed Form 990-T if they follow certain procedural requirements.

Background

IRC Section 6417 allows "applicable entities" — defined as tax-exempt entities, government entities, state and local governments, the Tennessee Valley Authority, Indian Tribal governments or an Alaska Native Corporation — to make a direct-pay election to have certain energy tax credits determined without regard to the IRC Section 50(b) limitations. Such credits generated by a renewable energy project allow a wider range of tax-exempt organizations to receive a refund for such activities, regardless of whether they have reportable UBTI. (See Tax Alerts 2022-1281, 2023-1103, 2024-0624).

Treas. Reg. Section 1.6417-2(b)(1)(i) requires an elective payment election to be made on an applicable entity's annual tax return. For tax-exempt organizations not required to file a return under IRC Sections 6011 or 6033(a), Treas. Reg. Section 1.6417-2(b)(3)(i) requires an elective payment election to be made by the 15th day of the fifth month following the end of that entity's tax year. However, subject to guidance specifying the manner in which the entity can request an extension of time to file and make the elective payment election, an automatic six-month extension is deemed to be allowed.

For tax-exempt organizations subject to tax under IRC Section 511 and required to file a return under IRC Sections 6011 or 6033(a), the due date for making an elective payment election is the 15th day of the fifth month following the end of that entity's tax year, including any extensions. There is, however, no deemed automatic extension of time to file and those organizations must file Form 8868 to be eligible for a six-month extension.

Automatic six-month extension relief

Revenue Procedure 2024-39 provides any applicable entity defined in IRC Section 6417(d)(1)(A) and Treas. Reg. Section 1.6417-1(c) with an automatic six-month extension of time to electronically or paper file an original or superseding Form 990-T. The relief does not require a Form 8868 to be filed requesting an extension of time to file the Form 990-T.

To be eligible for the relief, an applicable entity must (1) have had a filing obligation under IRC Section 6011 or 6033(a); (2) have not otherwise received an extension of time to file a return; (3) be filing a Form 990-T to make an elective payment election for a tax year ending on and after December 31, 2023 through November 30, 2024 (regardless of whether a return for that tax year was previously filed); and (4) meet all other requirements for making an elective payment election, including the prefiling registration required by Treas Reg. Section 1.6417-2(b)(2).

Any applicable entity not electronically filing the Form 990-T must mail the paper Form 990-T and all other relevant schedules and forms to the IRS Service Center in Ogden, Utah and write "Paper Filed under Revenue Procedure 2024-39" at the top of the return. An applicable entity that receives a notice stating that an election made during the extended due date was ineffective due to a late-filed return should call IRS Tax Exempt and Government Entities Customer Account Services and reference Revenue Procedure 2024-39.

Implications

The starting date of the automatic extension for elective payment elections (i.e., 15th day of the fifth month after the tax-year ended) gives eligible organizations an additional six months to make the elective payment election for tax years that end on and after December 31, 2023, through November 30, 2024. A tax-exempt organization cannot obtain an additional extension, however, if it has already filed a Form 8868 and obtained a six-month extension of the elective payment election deadline. Tax-exempt organizations should evaluate the timing of their filing and reliance on the automatic six-month extension, as there could be upwards of two years from when the credit was generated to receipt of the direct payment.

Tax-exempt organizations otherwise required to file Form 990-T to report UBTI cannot rely on the automatic extension for purposes other than the elective payment election. In other words, tax-exempt organizations with UBTI reporting obligations must continue to file Form 8868 to request a six-month extension from the original due date.

Despite the automatic six-month extension to make the election, tax-exempt organizations may still receive notices from the IRS about filing an ineffective direct payment election. If a tax-exempt organization receives such a notice, it should work with its tax advisor to contact the IRS for relief under Revenue Procedure 2024-39.

While Revenue Procedure 2024-39 allows temporary relief from electronic filing of the Form 990-T, tax-exempt organizations should still be able to e-file Form 990-T to make elective payment elections for energy credits. However, certain tax software limitations are currently preventing e-filing of the Form 990-T to make these elections. We expect that tax software providers will continue to adjust their transmittal processes to address these limitations. If a tax-exempt organization cannot e-file because of these software limitations and chooses to paper file, it should file Form 990-T by certified mail to obtain receipt of filing.