Reg. § 1.6417-6 Special rules.

(1) In general In the case of any elective payment amount that the IRS determines constitutes an excessive payment, the tax imposed on such entity by chapter 1, regardless of whether such entity or taxpayer would otherwise be subject to chapter 1 tax, for the taxable year in which such determination is made will be increased by an amount equal to the sum of—

(2) Reasonable cause The amount described in paragraph (a)(1)(ii) of this section will not apply to an applicable entity or electing taxpayer if the applicable entity or electing taxpayer demonstrates to the satisfaction of the IRS that the excessive payment resulted from reasonable cause.

(3) Excessive payment defined For purposes of this section, the term excessive payment means, with respect to an applicable credit property for which an elective payment election is made under § 1.6417-2(b) for any taxable year, an amount equal to the excess of—

(4) Example This example illustrates the principles of this paragraph (a). B, an instrumentality of State M, places in service in 2023 facility F, which is eligible for the energy credit determined under section 48. B properly completes the pre-filing registration as an applicable entity that will earn the energy credit from F in accordance with § 1.6417-5, and receives a registration number for F. B timely files its 2023 Form 990-T, properly providing the registration number for F and otherwise complying with § 1.6417-2(b). On its Form 990-T, B calculates that the amount of energy credit determined with respect to F is $100,000 and that the net elective payment amount is $100,000. B receives a refund in the amount of $100,000. In 2025, the IRS determines that the amount of energy credit properly allowable to B in 2023 with respect to F (as determined pursuant to § 1.6417-2(c) and (e) and without regard to the limitation based on tax in section 38(c)) was $60,000. B is unable to show reasonable cause for the difference. The excessive payment amount is $40,000 ($100,000 treated as a payment−$60,000 allowable amount). In 2025, the tax imposed under chapter 1 on B is increased in the amount of $48,000 ($40,000 + (20% * $40,000).)

(1) In general Rules similar to the rules of section 50 (without regard to section 50(b)(3) and (4)(A)(i)) apply for purposes of this section.

(2) Reporting recapture Any reporting of recapture is made on the annual tax return of the applicable entity or electing taxpayer in the manner prescribed by the IRS in any guidance, along with supplemental forms such as Form 4255, Recapture of Investment Credit.

(3) Example This example illustrates the principles of this paragraph (b). In December 2023, G, a government entity, places in service P, which is energy property eligible for the energy credit determined under section 48 (section 48 credit). G properly completes the pre-filing registration in accordance with § 1.6417-5 as an applicable entity to make an election under section 6417 for 2023. G timely files its 2023 Form 990-T in 2024, properly making the elective payment election in accordance with § 1.6417-2 for a section 48 energy credit determined with respect to P. On its Form 990-T, G properly determines that the amount of section 48 credit determined with respect P is $100,000 and that its net elective payment amount is $100,000. The IRS sends G a $100,000 refund. Pursuant to section 50(c), G reduces its basis in P by $50,000. In July 2025, P ceases to be investment credit property with respect to G. Because this occurs before the close of the recapture period set forth in section 50, section 50(a)(1)(A) provides that the tax under chapter 1 for 2025 is increased by the recapture percentage of the aggregate decrease in the credits allowed under section 38 for all prior taxable years that would have resulted solely from reducing to zero any credit determined under subpart E of part IV of subchapter A of chapter 1 with respect to such property. Because P ceased to be investment credit property within 2 full years after P was placed in service, section 50(a)(1)(B) provides that the recapture percentage is 80%. G must properly report the recapture event in 2025, paying an $80,000 tax. Because G is a government entity, G reports the recapture event on a Form 990-T or any Form provided in further guidance, along with supplemental forms such as Form 4255, Recapture of Investment Credit. G's basis in P is increased by $40,000.