Key Takeaways:
- Governments can leverage energy tax credits to fund clean energy projects and receive direct payments, even without federal income tax liability.
- Key filing deadlines, such as pre-filing registration and May 15 submissions, require careful planning to align with project timelines and optimize credit opportunities.
- Bonus credits offer additional financial benefits, requiring strategic planning and documentation.
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For state and local governments, leveraging energy tax credits can drive impactful projects while optimizing budgets. The recently finalized guidance for the Inflation Reduction Act (IRA) offers clarity on maximizing these benefits. Whether you’re planning for 2024 filings or strategizing for future projects, this guide will take you through the process, timelines, and key considerations to help your community thrive.
Background: The Energy Tax Credit and Elective Pay
The energy tax credit became available to governments in 2023, providing a new pathway for state and local entities to benefit from clean energy investments. Through the elective pay mechanism, governments can receive direct payments equivalent to the value of the tax credit — even though they do not owe federal income taxes. This approach enables governments to fund clean energy projects effectively and generate tangible returns on investments.

Understanding the Timeline for 2024 Filing
The 2024 filing year brings opportunities for your government to claim credits for eligible energy projects. Staying organized and proactive is essential to meet requirements and deadlines. Here’s how to stay on track:
- Pre-filing registration: Pre-filing registration with the IRS is a foundational step. This process involves registering eligible projects and submitting necessary documentation to the IRS portal. For governments filing by May 15, plan to finish pre-filing by January or February.
- Identify your tax year: Governments have flexibility in selecting a calendar year or fiscal year for filings. Consider the timing of your expenses and project completions. For example, if most significant expenses occur by June, a short tax year (January to June 2024) may make sense. Alternatively, a full calendar year filing might better suit projects completed by December 2024. More on this below.
- File early: Given the potential for legislative changes with the new administration, filing as soon as possible reduces the risks of retroactive adjustments that could impact eligibility. By filing before May 15, you may better position yourself to avoid complications related to legislative changes.
Key Deadlines for Energy Tax Credits
Meeting critical deadlines is essential to take full advantage of energy tax credits. Here are the key dates to keep in mind:
- Pre-filing registration: Complete this step at least 120 days before your filing deadline.
- Bonus credit applications: Applications for the bonus credit are due by June 27, 2025.
Filing Deadlines:
- Calendar year filers: File returns for January–December 2024 by May 15, 2025 (without an extension) or November 15, 2025 (with an extension).
- Short tax year filers: For a January–June 2024 short tax year, file by October 15, 2024 (without an extension) or April 15, 2025 (with an extension).
What Tax Year Makes the Most Sense for Your Government?
Choosing the right tax year depends on your government’s specific circumstances and project timelines. Many governments operate on a fiscal year ending June 30, which influences their tax year planning. For 2024, you have two primary options:
- Full calendar year (January–December 2024): This option is ideal if you have significant projects completing by the end of the year or if you want to maximize a full year’s worth of expenses. It also allows for flexibility in adapting to potential legislative changes that might impact credits.
- Short tax year (January–June 2024): Transitioning to a fiscal year can align filings with your operational calendar, making future filings simpler. For governments with material expenses concentrated in the first half of the year, this approach may reduce the risk of losing out on eligible credits and allow for simplicity moving forward.
If there are major projects placed in service at the end of 2024, opting for a calendar year may safeguard millions in credits. Conversely, governments anticipating minimal activity in the latter half of the year might benefit from the short-year filing.
Carefully evaluate the timing of your projects and expenses, as well as the potential impact of legislative uncertainties, to determine the most strategic approach.
Avenues for Consideration: Immediate, Near-Term, and Long-Range
Planning for energy tax credits involves three primary approaches, depending on your government’s current needs and long-term goals:
Current Tax Year Focus (2024):
- Focus on eligible projects placed in service during 2024.
- Complete cost allocation and credit computation early to avoid delays.
- Follow IRS guidance on eligible costs, such as renewable energy properties and infrastructure improvements.
Next Year’s Planning (2025):
- Evaluate the impact of projects starting construction before January 2025.
- Adjust for new requirements, including stricter emissions standards for some credits.
- Develop strategies to maximize credit claims under the upcoming Clean Electricity Investment Tax Credit guidelines.
Future Projects (2026 and Beyond):
- Lay groundwork for long-term projects by building robust documentation and tracking systems.
- Explore opportunities under the Low-Income Communities Bonus Credit and other location-based programs. Applications for the bonus credit program are due by June 27, 2025.

Key Opportunities: Bonus Credit Programs
Bonus credits offer additional financial incentives that can significantly enhance the return on investment for clean energy projects. Here are some examples to consider:
- Energy communities: Add up to 10% for projects located in designated energy communities.
- Low-income communities: Gain an additional 10% to 20% based on project location and community eligibility.
- Domestic content: By using equipment sourced from U.S. based manufacturers, projects may qualify for extra credits, adding value to infrastructure investments.
Eligibility often depends on geographic and socioeconomic factors. Conduct a detailed review of your project’s location and characteristics to identify opportunities.
Preparing for Uncertainty
While the IRA’s energy tax credits are set to last until 2032, political and legislative shifts could change their availability. To avoid disruptions:
- Submit filing returns promptly to reduce risks associated with retroactive legislative adjustments.
- Keep thorough and organized documentation for all projects, including contracts, costs, and location details.
- Strategize fund allocation to align with restrictions on restricted and unrestricted funds while maximizing credit eligibility.
For governments planning multi-year projects, maintaining flexibility in approach and staying informed about legislative developments is critical.
Action Steps to Take Now
- Finalize your project list for 2024: Identify eligible energy projects and begin the pre-filing process.
- Evaluate tax year options: Decide whether a short tax year or a full calendar year filing better suits your government’s expenses and project timeline.
- Review bonus credit eligibility: Assess your projects’ locations and characteristics to determine if they qualify for additional credits.
- Work with experienced tax professionals: Tax credit advisors can provide guidance to streamline the process and help avoid missed opportunities.
By taking these steps and leveraging available opportunities, your government can make the most of energy tax credits while advancing sustainability and innovation. The time to act is now — lay the groundwork for success and maximize benefits for your community.
How MGO Can Help
Navigating energy tax credits can be complex. Our Tax Credits and Incentives team simplifies the process, assisting with elective pay, credit opportunities, and IRS compliance. From identifying eligible projects to computing costs and meeting critical deadlines, we help your government get the most from the benefits available — whether filing for 2024 or planning for future projects.
Reach out to our team today to advance your sustainability goals and improve your financial efficiency.