On Oct. 11, 2024, the IRS issued Revenue Procedure 2024-39 (Rev. Proc.) which grants certain applicable entities that are making an elective payment election an automatic six-month extension to file an original or superseding Form 990-T, Exempt Organization Business Income Tax Return.

Initially, to take advantage of elective payment provisions, applicable entities were required to file a timely extension request, otherwise, they could not take advantage of the credit.

The Rev. Proc. provides the following:

1. Granting an automatic six-month extension to file a Form 990-T from the original due return date to make the elective payment election, in lieu of filing Form 8868, Application for Extension of Time to File an Exempt Organization.
2. The Rev. Proc. temporarily waives the requirement to electronically file Form 990-T to submit elective payment election, allowing applicable entities to make an elective payment election on a paper-filed Form 990-T if they follow certain procedural requirements, as detailed in the Rev. Proc. Paper filing is now available to all applicable entities; however, the IRS “strongly encourages electronic filing of returns to ensure more efficient processing of elective payment elections” as noted in the Rev. Proc.
3. The relief pertains to applicable entities for a taxable year ending on any day from Dec. 31, 2023 through Nov. 30, 2024.
4. A procedure if an applicable entity entitled to this extension relief receives a notice that their election was ineffective due to filing after the initial statutory due date.

Filing considerations

We encourage organizations to be aware that:

1. Entities that may have missed their extension are no longer precluded from taking advantage of elective pay.
2. Electronic filing is temporarily waived for purposes of filing a Form 990-T to make an elective payment election.
3. If an applicable entity’s due date has not passed, we would recommend filing the extension to avoid erroneous rejection.
4.  If an applicable entity must otherwise File Form 990-T to pay tax, it must file an extension to avoid penalties.

What does CohnReznick think?

We believe applicable entities should consider filing if they initially were thought to have missed an opportunity to take advantage of elective payment under the Inflation Reduction Act (IRA). Initial obstacles of extension filings and electronic filing requirements are temporarily waived affording applicable entities the ability to take advantage of elective pay if they meet the criteria. We recommend filing electronically, if possible, as the IRS strongly suggests this.