990-T Elective Payment: File Form 8868 Before the Deadline
Since the enactment of the Inflation Reduction Act of 2022, many tax-exempt organizations have been able to receive a cash refund from the IRS for clean-energy and other business credits that traditionally only for-profits could use. The mechanism is the “elective payment” (also called “direct pay”) election under Internal Revenue Code §6417. But that election has a strict procedural rule: it must be made on a timely-filed Form 990-T, including any extension. For calendar-year exempt organizations, tax year 2025 returns are due soon, and the 990 T elective payment election lives or dies with Form 8868.
At SW Accounting & Consulting Corp, we prepare returns for California nonprofits, churches, tribal enterprises, and Section 501(c) organizations investing in solar, EV charging, and other qualifying property. This piece walks through what the IRS is reminding filers to do now, why the extension matters, and the short checklist to follow before the original due date.
What is the 990 T elective payment election, and who can make it? 🧾
It is a statutory election under IRC §6417 that lets tax-exempt entities treat certain business tax credits as a payment of tax — effectively converting non-refundable credits into a refund.
Eligible “applicable entities” include tax-exempt organizations described in Section 501(a), state and local governments, Indian tribal governments, Alaska Native Corporations, the Tennessee Valley Authority, and rural electric cooperatives. The credits eligible for direct pay include the Investment Tax Credit under §48 (and its successor §48E), the Production Tax Credit under §45 (and its successor §45Y), the alternative fuel vehicle refueling property credit under §30C, the commercial clean vehicle credit under §45W, the carbon oxide sequestration credit under §45Q, and several others enumerated in §6417(b).
For an exempt organization, the election is made on Form 990-T (Exempt Organization Business Income Tax Return) with the required credit forms attached — typically Form 3800 (General Business Credit) and the underlying credit-specific forms (for example, Form 3468 for the ITC). The IRS also requires a pre-filing registration through the IRA/CHIPS Pre-Filing Registration Tool to obtain a registration number before the election is claimed on the return.
Why does the IRS say you must file Form 8868 to extend? ⏰
Because §6417 requires the election on a return filed by the original due date, including extensions — and an unextended late return kills the election entirely.
In its recent exempt-organization guidance, the IRS reminded filers that “an elective payment election must be made on a return filed by the due date for the return, including extensions.” For tax year 2025, the IRS is directing all exempt organizations filing Form 990-T — including those making the elective payment election — to use Form 8868 to request an automatic 6-month extension. A properly completed and timely filed Form 8868 gives you an additional six months after the normal due date to file Form 990-T.
The important word is timely. Form 8868 must be filed by the original due date of Form 990-T. If it is filed late — even by a day — the extension is not granted, the ultimate Form 990-T is treated as untimely, and the §6417 election is not valid. The IRS has taken a firm procedural view: no timely return, no election, no direct-pay refund for that credit.
When exactly is Form 8868 due for tax year 2025? 📅
The 8868 is due on the same date as your Form 990-T — and that date depends on your organization type and tax year end.
General Form 990-T due dates (see the “When to File” section of the Instructions for Form 990-T for authoritative rules):
- Employees’ trusts described in §401(a), IRAs, Roth IRAs, Coverdell ESAs, Archer MSAs, and HSAs — the 15th day of the 4th month after the tax year end (for a calendar year: April 15).
- All other Form 990-T filers, including §501(c) organizations and state colleges and universities — the 15th day of the 5th month after the tax year end (for a calendar year: May 15).
- Extension via Form 8868 — an additional six months. For a calendar-year §501(c) organization that is a Form 990-T filer, that pushes the extended due date to November 15, 2026.
Because those are moving targets when the 15th falls on a weekend or holiday, always verify the exact date against the current-year Form 990-T instructions on IRS.gov before you rely on it.
What does the IRS want on Form 8868 — and how do you e-file it? 📥
Form 8868 is a one-page automatic extension request. For tax year 2025, the IRS is directing all Form 990-T extension requests through Form 8868 — there is no separate form for elective payment filers.
Key items to get right:
- Identify the correct return. Check the box for Form 990-T specifically. If you mismark the return type, the extension may not be treated as extending Form 990-T.
- Use the correct employer identification number (EIN). Filing under a related entity’s EIN — a common error — can invalidate both the extension and the election.
- Estimate and pay any balance due. If any UBIT or excise tax is owed, remit it with Form 8868.
- E-file where required. Most Form 990-series returns and Form 8868 are subject to mandatory electronic filing under IRS rules. Confirm that your software or preparer is transmitting the 8868 electronically and retain the acknowledgment.
Complete rules and the current form are available at About Form 8868 on IRS.gov, and the underlying return instructions are at About Form 990-T.
What happens if the extension is filed late? 🚫
You do not get a second bite — the §6417 election is generally lost for that credit for that tax year.
The Internal Revenue Code and the §6417 regulations condition the elective payment on the election being made on a timely-filed return. Absent narrow relief such as the IRS’s automatic 6-month extension under Treas. Reg. §301.9100-2 (available in limited circumstances for regulatory elections), a late Form 990-T generally cannot cure a missed §6417 election. Practical implications for a first-time direct-pay filer:
- Cash refund from the IRS for that year is forfeited.
- The credit itself is generally non-refundable for an exempt filer — so the missed election is not offset by another mechanism.
- If the property was placed in service in 2025, the election is a one-year window — there is no “make it next year” option for the 2025 credit.
Elective payment extension checklist at a glance 📊
| Step | Action | Deadline |
|---|---|---|
| 1 | Complete IRA pre-filing registration for each credit property | Before filing Form 990-T |
| 2 | File Form 8868 to extend Form 990-T | Original 990-T due date |
| 3 | Pay any UBIT / excise tax due with the extension | Original 990-T due date |
| 4 | File Form 990-T with Form 3800 and required credit forms; enter the registration number | Extended due date (6 months later) |
| 5 | Retain acknowledgments (e-file, registration, payment) | Statute of limitations |
📌 Key Takeaways
- The 990 T elective payment election under §6417 must be made on a timely-filed Form 990-T.
- For TY 2025, the IRS is directing all Form 990-T filers to use Form 8868 for an automatic 6-month extension.
- An extension of time to file is not an extension of time to pay.
- A late or missed Form 8868 generally forfeits the direct-pay refund for that tax year.
Frequently Asked Questions ❓
Q. Does every exempt organization filing Form 990-T for 2025 need Form 8868?
Only if it needs more time to file. But if it needs an extension and wants to preserve the §6417 elective payment election, Form 8868 is now the required vehicle for tax year 2025 Form 990-T extensions.
Q. Can I file Form 8868 after the original due date if I acted in good faith?
Generally no. Form 8868 must be filed on or before the original due date of Form 990-T. Late Form 8868 does not create a valid extension, and the §6417 election on a late Form 990-T is generally forfeited.
Q. What credits qualify for the §6417 elective payment?
The credits enumerated in IRC §6417(b) — including §30C, §45, §45Q, §45U, §45V, §45W, §45X, §45Y, §45Z, §48, §48C, and §48E — subject to the statutory and regulatory requirements for each.
Q. Do I still need the IRA pre-filing registration if I extend?
Yes. The registration number obtained through the IRS’s IRA/CHIPS Pre-Filing Registration Tool must be reported on Form 990-T when the return is ultimately filed — extension or not.
Q. Does Form 8868 extend the time to pay any tax owed with Form 990-T?
No. Form 8868 extends the time to file only. Any UBIT or other tax due on Form 990-T must be paid by the original due date; unpaid balances can accrue interest and penalties.
Q. Where should I look for the authoritative rules?
See About Form 990-T and About Form 8868 on IRS.gov, the current-year Instructions for those forms, and the IRS’s Charities and Nonprofits pages for elective payment guidance.
If your organization placed clean-energy or other §6417-eligible property in service in 2025 and you are still gathering documentation, the safest single step you can take right now is to file Form 8868 before your original Form 990-T due date. If you would like a review before you submit, contact SW Accounting & Consulting Corp. Primary sources: IRS — About Form 8868, IRS — About Form 990-T, IRC §6417 (Inflation Reduction Act, P.L. 117-169), and the IRS Charities and Nonprofits homepage.
