Kutak Rock tax partner Matthias Edrich led a comment project for the American Bar Association’s (ABA) Section of Taxation, Tax Exempt Financing Committee, resulting in a comment letter submitted August 14, 2023, to the Treasury Department and the Internal Revenue Service. The letter was prepared in response to a request for comments regarding Proposed Regulations 1.6417-1 through 1.6417-6 with respect to elective payments of applicable tax credits.  

The Proposed Regulations relate to Section 6417 of the Internal Revenue Code of 1986, introduced by the Inflation Reduction Act of 2022. Section 6417 allows certain taxpayers (including tax-exempt organizations, state and local governments and political subdivisions thereof, and certain others) (referred to as “applicable entities”) to elect to treat the amount of certain tax credits (referred to as “applicable credits”) as refundable payments of income tax. This means applicable entities may elect to receive cash payments from the federal government in lieu of applicable credits. This provision or election is sometimes referred to in the industry as the elective pay provision or direct pay election.

The ABA Section of Taxation’s comment letter addresses the Proposed Regulations and requests clarification on certain matters relevant to tax-exempt bonds and their relationship to applicable credits, including what constitutes an applicable entity, how tax-exempt bond proceeds should be allocated in light of certain credit reduction provisions, the treatment of interim tax-exempt financing, and tax form instructions.

The ABA Section of Taxation comment letter can be viewed here.

Similar comments were also recently provided as part of a submission by the Novogradac Renewable Energy Working Group, prepared in part by Matthias Edrich and other members of the firm. The RE Working Group comment letter can be viewed here. Matthias Edrich and his tax colleague, Jillian Christiansen, also participated in a similar comment project by the Tax Committee of the National Association of Bond Lawyers. The NABL comment letter can be viewed here.

Matthias Edrich serves as Chair of the ABA Tax Section’s Tax Exempt Financing Committee. He is a member of Kutak Rock’s national federal tax and public finance practices. His work focuses on U.S. tax aspects of financial instruments, with an emphasis on tax-exempt and tax credit bonds and related matters. Matthias also currently serves on the Executive Board of the National Association of Bond Lawyers.