IRS Publication 5817-B – IRS Forms, Instructions, Pubs 2026 – In the evolving landscape of clean energy incentives, IRS Publication 5817-B serves as a critical guide for U.S. territorial governments seeking to leverage elective pay under the Inflation Reduction Act (IRA). This publication outlines how territories can access refundable tax credits for qualifying clean energy projects, even if they don’t owe federal income taxes. As of 2026, recent legislative changes have impacted the availability of certain credits, making it essential for territorial entities to stay informed about eligibility and processes.
Elective pay, often referred to as direct pay, transforms non-refundable tax credits into direct refunds from the IRS, enabling tax-exempt and governmental entities to invest in sustainable infrastructure without traditional tax liability barriers. For U.S. territories like Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, and the Northern Mariana Islands, this mechanism opens doors to funding for renewable energy, electric vehicles, and more.
What Is Elective Pay and Why Does It Matter for Territories?
Elective pay allows eligible entities to treat certain clean energy tax credits as payments against tax liability, resulting in a refund for any excess amount. This is particularly beneficial for U.S. territorial governments, their political subdivisions, agencies, and instrumentalities, which typically do not pay federal income taxes and thus couldn’t previously fully utilize these credits.
Introduced through the IRA in 2022, elective pay democratizes access to clean energy incentives. For territories, it supports projects that enhance energy security, reduce reliance on imported fuels, and promote economic development. However, as detailed in Publication 5817-B (revised April 2024), there are specific geographic and ownership restrictions to consider. For instance, investment-related credits like Sections 30C, 45W, 48, 48C, and 48E generally exclude property used predominantly outside the 50 states and D.C., unless owned by a U.S. corporation or citizen. Production credits (e.g., Sections 45, 45Q, 45U, 45V, 45X, 45Y, and 45Z) face no such territorial restrictions.
In 2026, the program’s relevance persists amid broader tax policy shifts, but entities must act promptly as some credits are phasing out.
Eligibility Requirements for U.S. Territorial Governments
To qualify for elective pay under Publication 5817-B, an entity must be a U.S. territory government, a political subdivision, agency, or instrumentality thereof. This includes governments in Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, and the Northern Mariana Islands.
Key eligibility criteria include:
- Meeting all requirements for the specific tax credit, including any bonus credits.
- Maintaining documentation to substantiate claims.
- Ensuring the credit property is placed in service before obtaining a registration number.
- Possessing a valid Employer Identification Number (EIN) or Taxpayer Identification Number (TIN).
Recent 2026 IRS bulletins clarify that certain tribal entities and corporations may also be treated as instrumentalities for elective pay purposes, though this primarily applies to mainland contexts. Territories should confirm their status via IRS resources to avoid compliance issues.
Applicable Tax Credits for Elective Pay in Territories
Publication 5817-B cross-references Publication 5817-G for a full list of eligible credits, focusing on clean energy initiatives. Common ones include:
| Credit Section | Description | Territorial Applicability |
|---|---|---|
| 30C | Alternative Fuel Vehicle Refueling Property Credit | Restricted; property must meet U.S. ownership rules. Expires June 30, 2026. |
| 45W | Commercial Clean Vehicle Credit | Similar restrictions; up to $40,000 for heavy-duty EVs. Expired September 30, 2025. |
| 45, 45Q, etc. | Production Tax Credits (e.g., wind, solar, carbon sequestration) | No territorial restrictions; available through at least 2031, subject to phaseouts. |
| 48, 48E | Investment Tax Credits for Energy Property | Ownership rules apply; bonuses for domestic content starting 2024. |
As of 2026, the One Big Beautiful Bill Act (OBBBA), enacted in July 2025, has phased out several IRA credits, including those for electric vehicles (30D, 25E) and added restrictions on Chinese-manufactured components. Territories pursuing projects should verify current availability, as domestic content requirements now mandate stricter compliance for full credit values.
The Registration and Election Process
Securing elective pay involves a structured process outlined in Publication 5817-B:
- Identify the Project: Select a qualifying clean energy activity and determine the applicable credit.
- Establish Tax Year: Align with your fiscal or calendar year for filing deadlines.
- Place in Service: Ensure the property is operational before registration.
- Pre-Filing Registration: Use the IRS’s online tool to register each project, providing entity details, credit information, and project specifics. Receive a unique registration number. Refer to Publication 5884 for user guidance.
- Meet Eligibility: Gather substantiating documents.
- File Tax Return: Submit Form 990-T with the relevant credit form, including the registration number.
Electronic filing is encouraged, and registration must occur in time for tax return submission. In 2026, updates emphasize that partnerships are ineligible for elective pay, reinforcing the need for direct governmental ownership.
Filing Requirements, Payments, and Timelines
Territorial governments must file Form 990-T annually, attaching the form for the claimed credit. Due dates are typically 4.5 months after the tax year-end for non-UBIT entities, extendable by six months. Upon validation, the IRS issues a refund equal to the credit amount.
Processing times vary, but as of early 2026, over 600 governmental entities have successfully filed for reimbursements across states and territories. Entities should anticipate delays and plan accordingly, especially with phaseouts looming.
2026 Updates and Considerations
The IRS’s January 2026 bulletin finalizes rules treating certain entities as instrumentalities for elective pay, enhancing clarity for territories. However, the OBBBA has curtailed many credits, expiring EV incentives in 2025 and imposing new rules against foreign-sourced materials. For ongoing projects, binding contracts entered before expiration dates may preserve eligibility.
Domestic content mandates, effective for facilities beginning construction in 2026, require U.S.-manufactured steel, iron, and components to avoid credit reductions. Territories should consult updated IRS FAQs for compliance.
Additional Resources for Territorial Governments
For deeper insights:
- Download Publication 5817-B directly from the IRS website.
- Review Publication 5817-G for credit details.
- Visit IRS.gov/cleanenergy for tools and webinars.
- Explore elective pay FAQs for territories-specific guidance.
By navigating these provisions, U.S. territorial governments can advance clean energy goals despite evolving tax landscapes. Consult a tax professional for personalized advice.